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I don't see that quality of life is very tightly coupled with cash flow once you're well above poverty level. Driving a full size European luxury sedan doesn't double my quality of life over driving a stripped Hyundai Accent. Owning a 3,000 square foot house doesn't double my quality of live over owning a 1,000 square foot house. A Europe trip flying first class & staying in luxury hotels doesn't double my quality of life over flying on a discount carrier & doing AirBnB. I get the same pleasure sailing a 50 year old day sailer as a 50 foot yacht with 20x the ownership costs. Once you're at that level well above poverty level, you can control your expenses and maintain a similar lifestyle.
When I did all this math a decade ago at age 50, I looked at what my Social Security income would be, what my portfolio projected to be, and slashed costs then to make the math work. The house shrank to 992 square feet. The boat shrank to 22 feet. I'll eventually shrink the skiing thing I do to control that expense and free up the capital. I can maintain the same lifestyle I've had my whole adult life on less than half the cash flow I've always had. If I run out of money, I'm career high income so my defer-to-age-70 Social Security check will fund a slightly dialed back version of my lifestyle.
I think that's what most people do. At some point, you are forced to do a "you are here" with your personal finances and adjust your life for that cash flow.
Most people are going to need more money than they realize. It's not necessarily about driving a European car or living in a large house (although there's nothing wrong with that if that's what you desire). It's also about having enough to take care of yourself in your later years. The reality is that if people live long enough, they are going to need assistance, some more than others, and it is going to be expensive. Try pricing assisted living, private nursing, skilled nursing, memory care, CCRCs. LTCI likely won't completely cover costs. A million dollars is not going to go very far if you need assistance/care for a long period of time. I have known several older people who were in this position. Very active, alert, but as they grew older, needed care for an extended period of time. Never in a million years would they have thought they would have been in this position. It's human nature to think it will never happen to us, but the reality is that many older people do require some sort of assistance, and it's not cheap. You cannot always depend on your children; most don't have the mindset we do. And even if they would look after you, do you really want to place that burden on them?
Unless of course, I get to the end of the rainbow and the masses vote together to get Congress to means test social security or raise taxes on those of us who did prepare properly. Or the government continues to create money to monetize the cost of bread and circuses and the value of my nest egg is eroded.
To me, those are real risks to my “personal finance”.
None of us have a good crystal ball.
With every financial decision I make, I hear my grandparents talking about what happened to them in the 1930s. Will that happen again? I have no idea. But if I do not prepare for it, all my ancestors will climb out of their graves to beat me.
I can't see the reasoning about how you'd need less money during retirement than you do any other time, I would think it's quite the opposite actually.
I agree. That was my planning assumption. And that is exactly how it has worked out.
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Originally Posted by JonathanLB
Most people who work regular jobs don't get to travel as much as they may like, so you may want more money for traveling. You also have to fill your days with activities, and for many people Netflix and TV are great options after 8 long hours of work, but if you're free all day, you may want to go play some golf or go fishing or watch some live sports events or whatever it is you personally like doing.
That was my thinking, and that is how life has worked out for me. I don't play golf - but I do ski 80+ days each winter, and have an unreasonably large quiver of skis.
Quote:
Originally Posted by JonathanLB
I work from home so there's no functional difference between my life right now and my life if I were to "retire." I can't think of a single thing that would be cheaper for me if I declared myself retired tomorrow, financially, but obviously at age 35 if I did that, I think I'd get some awkward conversations from people I know about what exactly I intended to do for the next however many decades.
I'm of the opinion you never really retire; you change what you do, and you still need a place to do it.
In retirement, my largest expense has always been my federal income tax obligation. That's the price I pay to live in a civilized society, and I don't begrudge it. There is a bit of planning involved in ensuring I have cash on hand to write the checks for estimated payments each year. In my case, I always pay prior year's tax for the safe harbor provision.
Aside from that, my 2nd largest is philanthropic activities, but that varies by year.
While some of you are busy working, working, working your life away to get the magic 1 million dollar mark --- two people I recently met, died early. A woman in one of my hiking groups died at 59 and a guy who I met through business, died at 50.
While some of you are busy working, working, working your life away to get the magic 1 million dollar mark --- two people I recently met, died early. A woman in one of my hiking groups died at 59 and a guy who I met through business, died at 50.
It is possible to enjoy life AND save for retirement.
It is possible to enjoy life AND save for retirement.
Sure there is, but you'll work a lot harder and a lot longer if you think you need $1,000,000 in the bank which is a number that most of us can never, and will never obtain.
I don't see that quality of life is very tightly coupled with cash flow once you're well above poverty level. Driving a full size European luxury sedan doesn't double my quality of life over driving a stripped Hyundai Accent. Owning a 3,000 square foot house doesn't double my quality of live over owning a 1,000 square foot house. A Europe trip flying first class & staying in luxury hotels doesn't double my quality of life over flying on a discount carrier & doing AirBnB. I get the same pleasure sailing a 50 year old day sailer as a 50 foot yacht with 20x the ownership costs. Once you're at that level well above poverty level, you can control your expenses and maintain a similar lifestyle.
When I did all this math a decade ago at age 50, I looked at what my Social Security income would be, what my portfolio projected to be, and slashed costs then to make the math work. The house shrank to 992 square feet. The boat shrank to 22 feet. I'll eventually shrink the skiing thing I do to control that expense and free up the capital. I can maintain the same lifestyle I've had my whole adult life on less than half the cash flow I've always had. If I run out of money, I'm career high income so my defer-to-age-70 Social Security check will fund a slightly dialed back version of my lifestyle.
I think that's what most people do. At some point, you are forced to do a "you are here" with your personal finances and adjust your life for that cash flow.
It’s been my observation that the people who need the full size luxury sedan and yacht are the ones that care about keeping up appearances. I don’t get any extra pleasure out of a BMW than a Honda. In fact, it’s more stressful because I get freaked out over dings, etc.
I’m glad I have the option to drive any car I want, but it’s just that....an option. Doesn’t increase my happiness.
Sure there is, but you'll work a lot harder and a lot longer if you think you need $1,000,000 in the bank which is a number that most of us can never, and will never obtain.
but if it turns out you were wrong and under estimated your needs , if you think it is hard finding a job or working at 62 try it at 82 .sometimes working a bit longer may be the silver bullet for an under funded retirement that may give you a lifetime of stress sweating every unexpected expense.
yeah , i know the drill , not everyone can work , but then this would not apply to them
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