Maybe you do have a lot of money

Politics, Retirement, Social Security 7 comments

I few weeks ago I wrote this post; I have a lot of money. A regular reader commented as follows:

I retired at 55 [to a home-based part time job] with a lesser nest egg. Seven years later… I took early SS… and still do not touch my nest egg…which continues to grow.

I live very well on less than $15000 a year because I own my home, have no debt and live in a less expensive part of the country.

My simple lifestyle might not suit everyone… but it is the lifestyle I prefer even when I was working full time. It depends which is more important to you… living high off the hog… or living free.

The point of my original post was to demonstrate that $400,000 as your retirement nest egg was not all that much based on what income it could generate. My perspective is from the Northeast and that in retirement one would like to maintain an active life. Apparently my perspective is distorted as you can see from the above comment. And why not, living where I do, the property taxes on my modest 85-year old house on a 50×120 lot are equal to the less than (slightly) $15,000 this person lives on in his own home. 

But what is really interesting is this individual’s perspective. He or she is virtually living in poverty (guidelines $11,770 one person $15,930 two people), but doing okay and happy it appears. Politicians would use this case to point out the flaws in our system. The need for more of this or that benefit. Of course, we don’t know if the commenter has given us the full story either. 

At the same time, his perspective of “high off the hog” are what me and my neighbors require to pay our property taxes, which by the way are mostly insensitive to income level. 

My perspect of living free is not worrying about the next bill coming due, traveling when and where I want and spending  as much time with grandchildren as possible. His perspective and yours may be quite different. 

So, how much money is enough … in retirement?  That’s only for you to know which points out one of the key factors in retirement planning. How do you want to live those years … and where‼️ Financial planning is critical, but it’s only part of the equation. 

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7 comments

  1. This certainly does point up a flaw in the government’s broad brush approach to defining poverty on an income based method. Poverty should be defined on a quality of life basis although I have to admit it would be hard to do without someone from the government making assumptions and judgement calls on a particular lifestyle. When you think back to your days as a child, you didn’t think you were impoverished because you didn’t have the things that technology has provided in the last 50 years which today are deemed to be indispensable for everyone regardless of income strata.

    How you live in retirement has as much to do with your expenses as it does with your income. I worked and lived in the high income/highly taxed northeast part of the country during my working and asset accumulating years. During that time my wife and I worked, we paid off a mortgage; we maxed out any available tax deferred savings and found ways to put away additional savings on top of that. Putting money in mutual funds and riding out a number of market corrections helped a lot too.

    In retirement we transferred the equity in our home by selling it and buying a home in a low tax state in the south. Along with the reduced expenses of real estate taxes there are other benefits in retirement such as no more FICA taxes, greatly reduced motor fuel and bridge toll expenses which can be considerable when commuting in the northeast; home heating fuel in the south is negligible as is the amount you spend on clothing and dry cleaning. Yes, I use an air conditioner more now than I did in the northeast but my electric bill for all my needs averages $70 per month, and that includes air conditioning, due to inexpensive electric.

    How you live in retirement is all about choices. We get to travel up north a few times a year to see the kids and grand-kids and thanks to SKYPE we stay in touch very often. Some people don’t want to leave their nest to be near family but you have no guarantee that the family won’t leave you due to job mobility. Some folks might not want to pull up stakes because they will miss being near some center of culture, but for me, I rarely went to Broadway plays or museums when I lived nearby so the decision to move was easy.

    Having said all this, I don’t think I could live on $15’000 a year without severely cutting back on discretionary expenses but you might need less than you think in retirement if you do it right.

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  2. The tax in Poulsbo, WA (across Puget Sound from Seattle) for an average 4 bedroom 35 year old house on a 10,000 sq ft. lot is about $2,800/yr. This does not include water and garbage pick-up which is an additional $1,400/yr. Washington state has no income tax, but does have a sales tax which in Seattle is 9.5%, a little lower in surrounding counties.

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    1. I can do you one better. Four bedroom, three bath house living room, family room, deck on .38 acres in Chatham, Ma property taxes just under $2,000.

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  3. Last week at work we were discussing whether or not we made a mistake doing all the right things saving for retirement. My co-workers and I are expecting to have 80-100% of our salary in retirement between our pension, 401Ks, private investments, etc.. Our concern was medical. In my case if I paid full freight and had to buy own medical insurance and pay full price for the drugs that my wife and I are on, we are looking at a $43,210 bill. Add this to the income taxes, property and other taxes of $33,800, it is about $11,000 more than I expect to get in retirement. I too will have my house paid off before I retire at 55 (if I retire). My point is we figured out that we are going to make too much money in retirement to get government help, we have assets which liens can be place on and are only one illness away from losing everything for the surviving spouse. Now lucky for us we are not paying full medical insurance tab but the new hires at my company will have to pay the whole thing. There is no way they can retire until they can get Medicare at 65. A predict a few, due to health reasons, will have no insurance between the time that health issues will prevent them from working and getting Medicare.

    There is something to be said being able to live on $15k a year. In New Jersey the government billed me for more that $8k in property and income taxes alone plus 7% in sale taxes. At least they don’t tax food sales yet. Facing those kind of numbers, I do not think I’ll be living high off the hog either but I know that I will be better off than a few others in this state. It makes you almost want to move to a 3rd world country to live like a king. I wonder what a witch doctor charges?

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      1. Except I all ready know that it is very doubtful that I will live to be 70. I thought I was going to live as long as my relatives who still have not died in their late 80’s and early nineties. My cousin’s husband only just made it to 65 and he had the same chronic disease condition as I got. There is something to be said about living in moment and if I did that with my luck I’d live to be 100. The good thing is that since 10th grade I realized that life is fatal and there are no winners, therefore I have lived a full life without regretting anything except drinking too much once or twice when I was young. Hangovers are a wonderful teacher.

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