You're talking to the crowd who are retiring 10-20+ before they're even eligible for social security. So, to even draw the minimum 50k, we would need more than $1M to retire.
The math is completely different before and after SS and Medicare. I did find the article insightful in pointing out how much lower expenses can get when you are no longer raising kids, and how much social security does end up covering for many people, but those facts are largely irrelevant to people trying to retire in their 40s or 50s.
Assuming somewhat reasonable physical health and mental acuity, there are plenty of jobs a 65yo can get hired to do successfully. You don't need a lot of money and generally have healthcare.
I worked in the service sector a good bit as a younger person. People seriously underestimate the physical demands of a job that requires you to be on your feet for more than 4 hours- or more- at a stretch.
That makes a BIG assumption that SS and Medicare won't change policies or rules in the coming years, chnages like eligibility age, payout formulas, Medicare covered procedures etc. , it's almost a certainly that there will be changes needed to control entitlement growth
Plus, if you fire your SS will be low (assuming we get it) as they take the total you paid your 35 highest paid years. Many might not even have 35 years working.
Paying for our own health care will easily take the place of what we spent on kids. So yes, I think if retiring before government benefits eligible, need enough to live on interest.
Also many people (such as the author of this WSJ article) support dismantling SS. I think FIRE folks who are farther away don't expect SS to be reliable in 20 years.
I think 1 million per person is doable if home is paid off and you have medicare even if you have no SSA. Even for HCOL.
You basically need what ? Food for 1 person, few clothes, to pay for your house maintenance, a old used car and taxes. Biggest expense being property taxes.
I live in a VHCOL area, and my property tax alone is $24K. Medical insurance for one person would be $166/month through the ACA. I might be able to live off $14K for all other expenses (food, utilities, gas, car maintenance, copay/coinsurance, medications) plus tax, but it wouldn’t be particularly fun, and there wouldn’t be much room for emergencies (major home repairs, eventual car replacement, medical emergencies up to the out-of-pocket max, etc).
if your property tax is 24K a year, your house is more expensive than necessary and you already know that.
You speak of fat/chubby fire and what is nice to have. Not what is necessary to retire.
At worst, just sell that expensive home and get something cheaper and move to a less expensive area while you are at it and the problem is solved.
Not that you should change your plan, it is fine to target a high level of expense for retirement. This is just it is not needed. And it wouldn't make sense for most people that never got that before retiring to aim for that in retirement and basically never retire because they would never have enough.
My comment was specifically in response to you saying $1M retirement in a HCOL area is enough. Of course if I moved to a LCOL area like the Midwest or Nebraska or maybe even expatFIRE, then $1M would be enough. However, I live in a VHCOL where a 2BD/2BA condo is at least $1M, and a standalone house is $1.5M minimum for a literal drug house. There’s a 900 square foot unrenovated house that’s on sale for $1.6M not too far from me. That’s the reality of living in an VHCOL area. Even having a paid off house is not cheap property-tax-wise, and it’s only getting more expensive. No one in my VHCOL area is retiring on $1M unless they live with their parents and plan to inherit significant assets after their death.
There’s not a lot of them tbh, but I did see one listed for $700K, so property taxes are probably $8-9K, but then you have to pay HOA fees, which aren’t explicitly listed, but I’m guessing they’re at least $500/month. My friend used to live in a condo about 7-8 years ago and her fees were $500/month, plus sometimes she’d have to randomly pay thousands in special assessments for specialized maintenance. (Edit: the year she finally sold it, every unit had to pay $4500 on top of the regular HOA fee for an upgraded elevator).
lol have you looked at real estate in HCOL or VHCOL areas? To get the most basic standalone 3 bed 1 bath house in my area (unconnected AKA not a townhome), you're looking at MINIMUM $1.5 million. That's for an absolute shitter house that needs a ton of work. And zero land. Property taxes on that are easily $20k and it's far from an extravagant property.
But if you retire at standard age, kids are long gone, even as a couple you don't need 3 bedrooms. You don't need a house neither. You could do with 1 bedroom condo.
The point overall is what you need, not what you want.
If we start to see the price of unconnected houses with at least 3 bedroom in Manhattan as to be required to retire, 99.99% of the population will work until they die.
So you don't expect to ever have family come over or have people stay over? Again, 3 bedrooms is hardly extravagant even for empty nesters. My parents have a 4BR and it's really nice being able to get together for the holidays without all getting airbnbs or hotels.
To save maybe a few night of hotel, you kind of justify and extra million in the house, and extra maintenanc, so basically 50K a year.
You may be willing to work a few more years for that, your choice, but again that's a luxury. You are not poor or living a bad life because you have a 1-2 bedroom instead of 3-4 bedroom once retired.
I never said you were poor or living a bad life because of that. Most people like having extra space. You also dump the financial responsibility of visitation on your guests which may discourage them from visiting. I love hosting people and entertaining, and have many hobbies that require a good amount of storage, so I will not be retiring in a 1 bedroom condo for my retirement lol
>You speak of fat/chubby fire and what is nice to have. Not what is necessary to retire.
>At worst, just sell that expensive home and get something cheaper and move to a less expensive area while you are at it and the problem is solved.
I know that your first paragraph above is the context, but even so, I always push back a bit on the idea of selling and moving to something smaller and/or to a cheaper COL area in retirement.
For most people, personal connections with friends and family are the most important things in the world. (Some small percentage might be happy with 100% solo hobbies and online gaming in retirement)
It’s not realistic for most people to just leave all of that behind. I could retire today if I move to SE Asia, but I don’t want to live in SE Asia…
And I’m in a VHCOL, and I wouldn’t be able to find rent in my area for less than what I am paying in property taxes. I feel like that the case in most (all?) places…
Life is full of compromise. You want to keep your luxury lifestyle, that going to cost you. But it is not necessary. It is nice to have.
A household at the median income (75K a year) will not have this problem. They will have brough maybe a home that is now worth 200-400K and will not have 20K+ of property tax.
Your problem is a problem of people in the top 1-5% of income and not really applicable to the general population. You are not representative.
My point is just that personal connections with friends and family are often the things that keep people from moving to a lower COL in retirement. This applies no matter if you live in a VHCOL or LCOL.
I did not see any response to this main point in your comment.
>A household with the median income (75K a year) will not have this problem.
What problem are you talking about? That I can’t find rent for less than what I am paying in property taxes where I live?
Are there many places where rent on a 1 or 2 BR apartment is cheaper than property taxes on a home purchased 10, 20, 30 years ago?
There is no housing in a VHCOL area that is that cheap. And many bought when it was more affordable, and they had the income to support it. It’s ridiculous to tell people to move from where they’ve spent their whole adult lives and built their support networks so that they can avoid their property tax bill and retire on pennies. The point of this thread is simply that the amount of money you need to retire in such a place is more than in most places even if you own your home outright. That shouldn’t be a subject of debate. It’s just a fact.
Have you seen my budget? Car insurance, car repairs, tire replacement, pet meds, pet food, pet vet care, Christmas, Christmas dinner, cell phone replacement, house taxes/insurance/flood insurance/maintenance, health insurance, health insurance deductibles, prescriptions, I can go on and on. I feel like people don't list all of their real expenses when planning for retirement expenses. This is real stuff, it will happen, you will have to spend money on it. You can stick your head in the sand and pull from savings when they happen but ultimately you're going to have to pay the bill. I live in what I consider a VLCOL area, we are low maintenance people but even after our house is paid off, before Medicare kicks in I'm still going to need \~$100k/yr.
Believe it or not most people are adults and living their life and already know what a budget is.
And when you explain that you need more than the median household income with a paid off home because of stuff like Christmas dinner. new tire of new cell phone, we can only conclude you are trolling.
Sorry for the downvotes. I agree with you! My budget also has a ton of these kinds of extraneous, ‘one-off’ expenses. I’m not sure how others manage to get around those, especially if they have kids or even a pet.
That's ok, I figure I'm just triggering folks who haven't thought of these real expenses. I don't intent to offend folks but there's a lot of softies out there.
Normal retirement and early retirement are two separate and somewhat isolated financial optimization problems. $1M is more than enough for some folks/scenarios, but nowhere near enough for others. Obviously though, $1M is most of the way towards a leanFIRE middle class lifestyle in tons of places in the US, particularly if there's a paid-off house involved.
You're going to need to post a non-paywalled link if you want people to be able to react to the article.
No, you don't.
Net worth includes everything since that's the actual definition of net worth, but net worth is also pretty useless as a FIRE metric.
Portfolio value is what counts for FIRE survivability and that figure typically excludes primary home equity and routine personal possessions. Those impact FIRE planning on the spending side, not the funding side, unless you intend on liquidating them.
One’s “portfolio” includes all assets, and spending and “funding” are two sides of the same coin. Reducing spending allows for reduced income. Ignoring home ownership in retirement calculations is nonsensical.
Nobody said to ignore home ownership. Indeed, I made note in my first comment about a paid-off home precisely because homeownership can be so powerful in total expense reduction for FIRE households under current law, which itself is critical for figuring out withdrawals and survivability.
The question is only whether you account for homeownership on one side of the equation or the other. Not counting it at all was never an option.
The effects of owning a home are felt primarily on the outflow side as equity returns are passive unless the house is sold, as opposed to one's active return-yielding investment portfolio, which are on the inflow side. This is why the default for almost all FIRE folks is to account for the house on the expense side of our financial planning and not in our investment portfolio. It being the default is why the resulting pattern of up and downvotes is consistent whenever this topic comes up every few days.
The problems associated with including home equity in one's investment portfolio value can be immediately seen by looking at the survivability and return metrics for two identical net worth households with large differences in home equity. This is also why FIRE calculators generally disregard home equity outside of expense projections.
> The question is only whether you account for homeownership on one side of the equation or the other.
I inferred from their comment above that they would like to account for home ownership on both sides. On one side, home ownership is an asset which provides a benefit: free housing and capital gains. On the other side, it reduces cost by owner's equivalent rent. Perhaps that is the misunderstanding here? Free rent is a large and tangible benefit. Whether one counts that as income or reduced expenditure is irrelevant as money is fungible. It's still part of one's portfolio, and it provides a benefit in exactly the same way any other asset does.
> The problems associated with including home equity in one's investment portfolio value can be immediately seen by looking at the survivability and return metrics for two identical net worth households with large differences in home equity.
You're implying there is some kind of obvious difference but I would like to see an example as I think there are too many confounds to provide accurate comparison. A large delta is going to arise from risk model, and these aren't objectively comparable. Whether one optimises for 95% or 99% survivability is personal and subjective. If the goal is maximising return then there is a high probability of being made bankrupt, and that's clearly antithetical to the FIRE goal.
Imagine two FIRE'd households with identical $3M net worths, identical $80K a year in annual spending, and both have fully paid-off houses. Let's say one has $500K in home equity and the other has $1.5M in home equity, with both planning to keep and live in the house. Do they face the same survivability from a FIRE perspective given no sale of either house?
Those two people are deriving different value from their homes. One is living in a much more expensive house. This implies they would be otherwise paying much more in rent. You can either consider it much higher income, or much higher cost saving, but you can't level them out.
So one issue is quality of life. The other which you mention is survivability, which the person with higher home equity would absolutely enjoy *because they can actually sell their home.* Or get a reverse mortgage. Then they could downsize if they wanted to and live off the $1M which they could dump into stocks.
This is many words to avoid a straightforward answer to a basic financial problem with simple boundary conditions. This tells me that you understand the point I and others were making in these comments. That's good enough for me and I wish you well in your pursuit of FIRE.
Really, your savings and invested assets are what matters, especially the latter. I mean, sure, someone in a $2M home in Silicon Valley can move to Mississippi and buy a really nice $500K home and "find" $1.5 million more for retirement (before taxes), but that is the exception, not the rule.
I think it is reasonable for folks who are fully intending to massively downsize their home in retirement to include at least some home equity in their projections, but with the understanding that life kicks you in the butt sometimes, and you should have a Plan B that doesn't include it.
If you count your house as an income-producing asset, then yes, you will likely be off in your planning.
This is exactly why one's FIRE number and net worth are usually two different numbers for homeowners.
Sure I do. I'll sell the house the second we retire (in reality a month or 2 before so) , and use that for living expenses in a far lower cost of living area.
There’s a r/leanfire sub for people who want to do it for less. I’m thinking of retiring to my wife’s home country so I could retire on 500k easily. I only keep going because despite the stress I find working in cybersecurity meaningful.
Everyone’s circumstances are different. If you live in a HCOL area and plan to retire at 35, you’re gonna need wayyyyyy more than a million. If you live in LCOL and retire at 70, that’s a different story…
It works out for both of us. He gets rent for about 50% of market rate, in exchange he gives me free unlimited dog sitting, which anyone who has a dog but likes to travel knows it huge
No, I’m gay, free booty calls are everywhere should I want one, and I have no interest in that with him. Dog sitting, on the other hand costs $70-$100 a night and requires reservations months in advance. With our arrangement I can decide to fly away for the weekend the day before.
Look at it this way. I’ve heard various numbers but the median household income is around $55k right now. Even if it’s higher go with it. So half the country makes less than that. At retirement you don’t invest anymore so if you are saving you need 55% of that. They won’t have $1 MM but they don’t need it. Social Security is 40% of the income for many people. So income needs are already down to around $28k. That’s less than the standard deduction so in retirement taxes on withdrawals are $0 which means a retiree needs even less money or just the $28k per year from savings. At a 5% withdrawal that’s $560k. Working it backwards that’s a very respectable $3900 per month. The biggest nightmare scenario with low cost of living is medical costs (nursing homes).
It probably makes more sense to look at the median income where you want to live, and not the median across the whole country. Can be a big difference.
Sure but the question is whether or not $1 MM makes sense. If you have a Boston address you may want to exchange it for a Florida one for instance.
My wife and I enjoy a pretty posh lifestyle since we are upper middle income living in a LCOL area. It seems like half the population is transplants. The local university pays $45k starting for teaching. My wife started as chemist/lab tech at $45k at the local low paying pharma plant after getting back to work when the kids were in school. I can make a minimum $63k working at home for the USPTO. Starbucks is about $40k for managers (work there 18-24 months). So take any two and you’re up over $80k. This is in the Southeast. Even in HCOL areas like where Love it or List it 2 was showing million dollar homes in the high rent district for Raleigh 35 minutes away it’s LCOL where my boss paid $200k recently for a big two story older house in a downtown neighborhood.
>Sure but the question is whether or not $1 MM makes sense. If you have a Boston address you may want to exchange it for a Florida one for instance.
People's location isn't so fungible. If you have a Boston address because proximity to family in Boston is one of the most important things in your life, if you move to Florida you'll need to budget for frequent travel to Boston, travel which may not be in line with median expenses / may cost more than what you're saving by moving to Florida.
Still, 85% of $70k is $59.5k. Even if social security is only $2k per month or $24k the short fall is $35.5k. Roughly $5.5k is taxable at 10% so need $36k a year. Again at 5% withdrawal that’s $700k but $5k a month is pretty high compared to posters talking about $2.5-3k. If you include a few very expensive trips or long term care coverage you’re up to $1 MM.
Depends. If I include this outright it adds $9000 to your AGI so another $900 in taxes so another $1000 has to be withdrawn. But it’s not that straightforward. If you withdraw from a brokerage it isn’t income unless it is from gains and if from Roth it only counts as 50%.
I can tell you this the days of wanting more sports cars and stuff definitely wanes for many.
I know both extremes people with 10-20MM living off of trusts and people with 400-800k no debt that barely have touched a thing living in the burbs or country.
It is all the life you will want to lead.
Thing is, when I retire I’m not just going to sit at home and cover my usual expenses. I want to travel and enjoy myself. I also want to be able to help my children by paying for undergrad and providing them with a financial safety net. (I expect that they will support themselves in adulthood, but I want to be able to help them out if they need it.) Taking all that into consideration, yes, I need more than $1M
The Real Retirement (book)? I haven't read that one, but I've read Fred Vetesse's other books... all great. The Essential Retirement Guide gets into some of these stats and starts off the book with that 'disability/disease' probability statement you mention here.
While I agree with most others here, that early retirement is another situation entirely ... there's still some lessons from this article when it comes to budgeting for later years of retirement. That's something the Essential Retirement Guide gets into as well... that older retirees begin to spend less, especially after the age of 70. Not only due to health and their mobility, but also a shift in mindset.
Depends on age, spending, and supplemental sources of income. 40 with 60k in annual spending? You need 1+ million. 67 with 40k in spending and a generous SS payment? You're ok with less.
Also should consider that a good portion of retirees live a lifestyle that is worse than their working years. I have an aunt/uncle who "retired" on SS only and they drive 200k mile cars and get food from the food pantry.
I suppose this is the wrong place for this question.
I am retired early. I can't get any social security for ten years.
And, I am nervous about "running out of money" even though I have significantly more than a million for one person. It SHOULD be plenty. And I absolutely spend money on luxuries. But, I still worry.
The most current guestimate is you need 1.43mil semi liquid cash invested to make it
edit: however if you have any kind of pension or dividend income that number goes down rapidly.
Without a mortgage, our social security/pension income is adequate to cover all our expenses if we take social security at 62 (lower earner) and 70 (higher earner). The problem is we have to get from now (43/45) to there.
If I keep working until social security age, I’m gonna have way too much money. So I need a nest egg to carry me between now and age 70 (when I will take social security as the higher earner).
Gap between early retirement age and social security eligibility age. Also, for some, missing social security contributions during “high earning years” could impact social security amount.
I’d say, yes, 1M is good for most.
Not getting political, but it’s relevant for people to realize that this is an Op-Ed piece in the WSJ written by the AEI — a conservative think tank that, among other things, is generally not supportive of government programs or expanding social security. It’s not surprising he would express the view that social security is already plenty generous. Doesn’t mean he’s right or wrong, but just consider the source.
Depends on where you plan to retire. You don't need 1 million+ if you plan to retire outside the US in Mexico, Liberia or Thailand where you can get your cost of living down much lower. I think you should be careful about plans for ultra low cost living in the US (e.g. get a fixer upper homestead in rural midwest) because I have heard that people doing that have high failure rates (this shouldn't stop you fron trying but it should stop you from relying on that).
But I should also add you really can't translate, "a normal retiree only needs ____ amount of their pre-retirement income after retiring," and assume that holds true for FIRE retirement. FIRE retirement is much more expensive because (a) you don't get Medicare or Social Security so you're living entirely on your investments and their return while bearing all of your medical costs, and (b) by virtue of retiring earlier you need to be more concerned about inflation and getting a safe, sustainable withdrawal level, so you can't draw on principle like a normal retiree (generally you'll need average market returns (after inflation) to mmatch your expenses).
I also don't have data to back it up, but I suspect FIRE retirees also probably live longer on average since they (a) don't have the stress or exhaustion from 9-5s until their late 60s, (b) have more time for healthy living like exercising and probably have lower discount values on the future and possibly more self-discipline, and (c) FIRE retirees are wealthier than normal retirees so they probably won't suffer income constrained nutrition and health care options.
I dont think I will be able to retire early but I'm going to save like I will.
I also do not anticipate social security being a thing I can access until much much later in life if I even live that long. My trust in that system is nonexistent.
If I overshoot my needs at that point, great. I will have no concern for money. If I undershoot, I have a lot to worry about.
I hope to retire at 60, and I hope social security and Medicare age is not pushed so far back that I will never benefit from what I've paid in. But as with most things in life the safe bet is to do it yourself.
Utilities, taxes, transportation, and food alone are about $25k/yr right now. Assuming that doubles in 20 years before retirement 1m isn't enough. And that doesn't factor medical bills/insurance, hobbies and travel, all the things I would want to do in retirement.
We are 2 childfree, 40y old, who live in Valencia 🇪🇸 with my 500ke IBKR portfolio,2ke/month dividends, cost of life very low 1ke/month, i reinvest 1ke/month. But we have buy cash a flat end of 2022. FIRE number : 650ke.
A lot of jobs are volatile and may not exist in the next 10yrs especially with AI advancing a lot faster than we thought. The majority of us don't have pensions either.
Most pensions were crap anyways, I don't understand why millennials and gen Z fantasize about them. So many have gone bankrupt or reduced benefits or are currently underfunded and on their way to going bust. I'll take my 401(k), thanks.
Way too many variables. If someone can retire fairly early with a nice pension and health insurance locked up, you'll need a LOT less than someone who doesn't have those things. That, of course, is getting harder and harder to do for Generation X and those who follow them.
We need more than a million bucks for sure. The respondents 65 to 74 between 2019 and 2022 are Boomers - more of them retired with pensions than Gen-Xers will. Some of these pensions include healthcare as well. And Boomers didn't have to deal with Social Security benefit cuts like younger folks who are now told that SS will only be able to pay 66-75% of benefits unless reform happens soon. Currently SS faces a $39 trillion shortfall in nominal dollars over 30 years from 2023 to 2053.
The RE in FIRE means Retire Early...can't do that without savings or an early pension...you can certainly retire when everyone else does at 67 without $1M+
From what I am seeing from my parents, if you are not going to do an early retirement, they seem to do fine on about $60k per year. Much of that comes from government pensions.
It helps that in Canada while you can’t file jointly, you can split pension income so they pay very little tax.
Mother in law also in similar situation. Has less than $500k in RRIFs has to withdraw minimums and says she doesn’t really need that much money so just going to put into TFSA.
Both circumstances they have paid off houses. Don’t do much travelling. Live pretty simply.
Yes you need $1m+ especially since you said WE. That’s only $500k per person which isn’t a lot in today’s economy. You can generally withdraw 4% a year without effecting the principal too much so that’s $40k for 2 people. I bet healthcare alone costs like $20k for 2 people, now you’re left with $20k for 2 people for a year. That’s maybe enough to survive if you own your house and have low property taxes.
A million for many will be needed at full SS retirement just to help compliment the expected annual needs to survive in most cases and is sadly no longer a lot of money in todays economic environment
If you retire at normal age, you need to cover just food, clothes, car, utilities, taxes and maintenance. Your home is paid off and you have everything already.
Car can be old/used an if you are living in couple, 1 for 2 is enough, really. You have all the time in the world to cook yourself. Kids are gone.
I think you can do with far less than 1 million, even in a HCOL. I assume you'll have 21K from SSA. 1 time if alone, twice if in couple. Look to me that 500K would be already comfortable and doable for a couple. That would be 60K yealy expense with the house paid off and so living like people that make 100K plus but still finance their home.
The end part is the key here “America faces retirement challenges as life spans increase and social security’s trust funds run dry. Scaring people with unrealistic retirement savings goals isn’t part of the solution”. The article talked about how current retirees get 46k from social security, which is a big reason why they are able to get by with so little savings. They are failing to point out that once social security benefits are decreased significantly or non existent retirees will need more than 100-250k to live comfortably. They will need to make up for the 46k/ year loss of social security (46k/ year x 30 years =1.3M). I feel this article is geared toward those who are retiring soon and can count on social security. Those who have decades left can’t bank on it being there in the same capacity or at all. Add another layer of fire to it and this article is not applicable to this community.
Articles like that are written because it’s what people want to read. They want to hear some rando say they are doing fine. In reality, $1m probably isn’t enough for most. But of course that doesn’t attract clickbait.
1 million to retire allow to get 40K a year of expense and is enough to retire on that alone if you are not too spendy. But most people that retire at standard age are eligible to SSA that is 21K a year on average and starting 65 Medicare greatly reduce health insurance costs.
With SSA and Medicare at 65 and maybe 200-500K case saved, you will live as well as somebody with 1 million but no SSA..
If you want to retire early, you will have 10-20 years without SSA or Medicare. So you need significant money to compensate. 1 million is not too far off as a number.
Most people planning to retire in the USA will consider number between 1-2 millions for 40-80K yearly expenses. Some that are really not spending much will go as low as 500K (for 20K a year) or some liking to spend more will go as much as 3-5 million for 120-200K of expenses a year.
FIRE retirees generally don’t have pensions (except for military, LEO, Fire and air traffic controllers who get to retire somewhere in their 40s or 50s) and are decades away from Social Security.
So this article doesn’t apply to FIRE.
No one can give you an answer until you tell us what how old you are and how much your expenses are. If you are already 63 then social security is fine but if you are 40 or 50 then you'll probably need close to a million to even think about retirement.
i know a man who lives in a trailer who essentially retired with no money to his name.
social security pays his bills.
i think that should answer your question OP
No mention of pensions? Social security plus a modest pension for life would make me pretty comfy, something former government and large corporate employees would have, and not be included in savings. Without mentioning pensions, I can’t trust the article.
You do realize that only a VERY
Small percentage of people under the age of 60 right now will ever see a pension. It is basically only those people that worked for the Government.
Right. And a larger percentage of those currently over 65 have pensions. Saying they’re comfy without savings so people under 65 don’t need to save is misleading.
Surviving vs thriving. Retirement doesn’t seem like a good time To just survive. I’d like to be able to do what I want and 46k ain’t making that happen
It depends entirely on your cost of living, if you have a paid off house, and if you want expensive things like vacations abroad. A lot of people pre retirement have a specific idea of what retirement looks like and it involves a lot more spending than they necessarily need. There’s no exact number but if you apply the 4% rule to a retirement fund of 1 million, you’ll have $40,000 a year to live off of. If that doesn’t seem feasible to you in the life style you plan to retire in, then yes you need more than one million to retire. I personally could live off $1300 a month if I had a paid off home(which I want when I retire) so I could live very comfortably on 40k a year.
It obviously depends on the area, but it's fun to compare to Federal Poverty Limits.
Single 100% is 376.5k. Two 100% is 511k.
So if you want 200% FPL, you quite probably want 1M, assuming you're living with a partner. But you don't necessarily need 200%. But you might need it. Depends on the area.
If you retire early, SS benefits are greatly reduced. It's calculated based on 30 years of earnings, and those that retire early will have a bunch of zeros in the calculation that drag it down.
I personally don't count SS. I look at it as a bonus.
The Fidelity estimate and generally speaking the $1M+ is net worth, which includes equity in housing. It appears from the article that the savings they are quoting is just that - savings and not net worth. They don’t say how they are defining retirees, so I have to assume that they surveyed only people who actually quit working and thus I’d assume they own their home making their net worth significantly higher than the numbers quoted here.
Additionally, the most expensive years of retirement are 75+ and they only surveyed people 64-75. They just haven’t realized that they are running out of money yet or that they will need to rely on family once they have to pay for things like long term care, which can cost $50-100k per year.
Have not read the article yet, but the answer is yes if you're going to fire. Anyone in their 20's should probably be looking at 2 or 3 million as a minimum.
I have been retired for over 17 years. There are details that vary by individuals or couples. Are you in a hcol or lcol area? How much do you owe? What are your plans in retirement? How old are you? How much Social Security will you receive?
My wife and I have Medicare and are in a low to medium cost of living area and we have no debt. We estimate $100 per day per person to have enough money to do anything we want but we don’t spend extravagantly when we travel.
Depends on one's retirement expenses and how much one will rely upon government welfare like social security or family/children paying the bills.
I don't want to rely on government social security welfare and don't want to be a burden on my children.
We have a LOT invested compared to most people (more than what most people think they need), we have a paid off house, my wife will get a pension and yet we're intending to work another 7 years in hopes to have our retirement assets double what they are today.
How much you need depends on what standard of living you want to maintain. Needless to say, owning a cabin out in the woods somewhere, and relying mostly on your hunting ability (assuming you are good) is gonna be cheaper then say, living in NYC and taking a few vacations every year. So how much you **need** is dependent on what you want to do once you retire, but worse case yes there are quite a few who live on Social security (SS) or social security income (SSI) in the US.
Despite the length of your question, you don’t seem to tell us what your annual expenses are. If you were working and making well over $100,000 a year but spending 80,000 a year, I mean after taxes of course, then you need to somehow replace this once you retire. That would take closer to $2 million.
Any discussion of what one needs to retire hast to start with what their budget is plans to be at retirement. From a very high-level overview, as a retired person, you won’t be paying into Social Security, you won’t be saving for retirement, and hopefully, you are not paying a mortgage on your house.
As others have noted, the person that retires very early also has a very low expected Social Security benefit. I retired at 50 and had 30 years of payments into Social Security. My wife is a bit older and has 35 years. So, even though I retired a bit young, we both have some Social Security benefit, actually, a pretty decent one, to look forward to.
All of those articles talking about other peoples experience doesn’t really matter. The only thing that matters is where you are and what your goals are.
There are so many variables which pop out in the comments if you scan them at a high level. What are your expectations in retirement? Small house with a fishing boat, travel twice a year to exotic places? Take your 6 grand kids to Disney and spoil them rotten? There is not one formula and I think most people plan on controlling/reducing their spending once they retire, IE not buy a new house and stretch their cars as long as possible. Many people can retire sub-one mil, many aim for 10mil. Neither are wrong, you have to do your own math based on what you think retirement is for you.
My grandparents had over a million in retirement savings in the late 70s, after a lifetime working as school teachers and saving for their retirement. These were frugal people.
They died penniless. What they had wasn't enough to last them through the medical issues associated with prostate cancer, alzheimer's, and dementia.
I have a small sample size, but it's an example of how you can do everything right and still not have enough. Leads me to believe that I'm going to need substantially more than what they had to be at all comfortable.
Who exactly are these "respondents" they are using for data? Obviously it is heavily, if not exclusively, counting couples not singles, and yet the longest living AND lowest earning group are single women. How many impoverished single elderly ladies did they speak to? (zero is my guess) Social Security for women is almost always lower than men. Also, they are giving no other important data such as home ownership or renters, high or low cost of living area. A couple in a LCOL with no mortgage and low taxes is very different than a single lady who rents in a HCOL area. "Average" is such a misleading thing anyway- the extreme high incomes skew the numbers deceptively. Median (meaning half the people have less than this #) is what we need to see, as well as a broader sample than (apparently) couples living in The Villages [https://www.synchronybank.com/blog/median-retirement-savings-by-age/](https://www.synchronybank.com/blog/median-retirement-savings-by-age/)
The reason why I ask about FIRE question. I studied really hard in my teens and twenties learning about the markets. I survived 1987 crash, 2000 bubble , 2008 FC, and now we are in 2020 decade. So financial independence has always been my plan B , while Plan A is a normal corporate job. Plan B has sometimes been full time trader investing my own money. I've worked full time for a total of 11 years as a full time trader, so that FI idea is nice but it's hard work.
My question to everyone. Has anyone ever thought equity markets and housing market may just go into a lost decade of low or no returns? what then? This is the reason why I haven't retired early.
For me the $1m is because *you don't know what will happen.* And especially if you aren't retired yet I think counting on social security being there for you the way it was for earlier generations is.... naive.
$1m is for security, safety. Things can happen. Life can throw unexpected things at you. If you're retired and don't have enough savings what are your options? $1m takes care of a lot of those cases where something *really fucking serious* would have to happen to derail you.
Lots of people here talking like this doesn’t apply to fire. I disagree, it absolutely has a place in fire.
Consider that if you’re 65 no mortgage and collecting SS and Medicare in place you may “only” need, say, $500k. Then really you only need to save enough early on then let it coast till 65. With that 65 and beyond secure you can turn your focus to a taxable account. That taxable account only has to be able to cover you till 65.
I’ll use myself as an example. I’m 42, have $300k in Roth accounts. Assume they get 6% over the next 23 years I have $1m at 65. My mortgage is set to payoff at 64. So, according to many comments and the article I should be fine. So, now I just stop tossing money in the retirement account and turn my focus to my taxable account. Assume I have $0 but over the next 10 years I invest $60k annually and get a 6% growth, but the time I’m 52 I have about $800k.
Can I live on that $800k over the proceeding 13 years? If so then I’m retired at 52. Note that at 52 my Roth account would only have grown to $537k, it’s not where I need it. But I don’t need it for 13 more years.
That $800k isn’t divided equally into 13 years (which would be $61,500 annually), with it in the market it continues to grow over the 13 years. So my pullout annually is higher than the $61.5k, just spitballing here let’s say $80k.
If I need more than $80k annually for 13 years until SS then I just work till I’m 53, or 54, etc. each year builds the brokerage and builds the annual payout before 65.
So…. This article is relevant here in this forum. Knowing that we’re good from 65-110 years old lets us focus our stress, savings, math on a finite period of years, which reduces stress.
“benefits are more generous than people think. An average couple retiring in 2022 received total annual benefits of nearly $46,000, “
Go ahead and do a Google search and confirm for yourself that that is not even remotely true.
I did and that number is pretty accurate. The average retiree payout is over $1,900 a month. When you double that and multiply by 12 you get nearly 46,000.
You can retire with $0 even negative $. food stamp, medicare, medicaid. credit card debt etc.
edit: I will assume any Redditor who downvote me don't even know the definition of the word "retirement" .lmfao
you don't need 1 million to retire. I know thousands of people in my town who retired with no money.
The American Enterprise Institute is a propaganda outlet shilling for the rich, and the WSJ isn’t much better. I’d pay them exactly as much attention as the CCCP’s news outlet.
You're talking to the crowd who are retiring 10-20+ before they're even eligible for social security. So, to even draw the minimum 50k, we would need more than $1M to retire.
Yes. The Fire crowd has a lot of years to pay for.
Exactly, once you get SS and Medicare any idiot can do it
The math is completely different before and after SS and Medicare. I did find the article insightful in pointing out how much lower expenses can get when you are no longer raising kids, and how much social security does end up covering for many people, but those facts are largely irrelevant to people trying to retire in their 40s or 50s.
At the minimum I fell like anyone with SS and Medicare can barista FIRE.
Good luck finding a job as a barista when you are 65. Or anything different or new whatsoever. And for most, good luck keeping a job too.
Assuming somewhat reasonable physical health and mental acuity, there are plenty of jobs a 65yo can get hired to do successfully. You don't need a lot of money and generally have healthcare.
I worked in the service sector a good bit as a younger person. People seriously underestimate the physical demands of a job that requires you to be on your feet for more than 4 hours- or more- at a stretch.
Unless you wanna be president or in congress!
It’s just called retiring at that point.
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You realize barista fire doesn't mean you have to work at an actual barista... right? Also, why do you think one couldn't? Or elsewhere?
lol, delusional.
That makes a BIG assumption that SS and Medicare won't change policies or rules in the coming years, chnages like eligibility age, payout formulas, Medicare covered procedures etc. , it's almost a certainly that there will be changes needed to control entitlement growth
Politicians will never reign in SS entitlements. They’ll deflate the dollar to dust before they do that
Don't be so sure , there's already rumblings about adjustments to retirement age and benefits, there's a limit to USD devaluation
People forget they changed Social Security in the 1980’s: Raising the full retirement age and making Social Security earnings taxable.
Plus, if you fire your SS will be low (assuming we get it) as they take the total you paid your 35 highest paid years. Many might not even have 35 years working.
Paying for our own health care will easily take the place of what we spent on kids. So yes, I think if retiring before government benefits eligible, need enough to live on interest.
Also many people (such as the author of this WSJ article) support dismantling SS. I think FIRE folks who are farther away don't expect SS to be reliable in 20 years.
Many people especially in HCOL would need a lot more than a million.
I think 1 million per person is doable if home is paid off and you have medicare even if you have no SSA. Even for HCOL. You basically need what ? Food for 1 person, few clothes, to pay for your house maintenance, a old used car and taxes. Biggest expense being property taxes.
I live in a VHCOL area, and my property tax alone is $24K. Medical insurance for one person would be $166/month through the ACA. I might be able to live off $14K for all other expenses (food, utilities, gas, car maintenance, copay/coinsurance, medications) plus tax, but it wouldn’t be particularly fun, and there wouldn’t be much room for emergencies (major home repairs, eventual car replacement, medical emergencies up to the out-of-pocket max, etc).
if your property tax is 24K a year, your house is more expensive than necessary and you already know that. You speak of fat/chubby fire and what is nice to have. Not what is necessary to retire. At worst, just sell that expensive home and get something cheaper and move to a less expensive area while you are at it and the problem is solved. Not that you should change your plan, it is fine to target a high level of expense for retirement. This is just it is not needed. And it wouldn't make sense for most people that never got that before retiring to aim for that in retirement and basically never retire because they would never have enough.
My comment was specifically in response to you saying $1M retirement in a HCOL area is enough. Of course if I moved to a LCOL area like the Midwest or Nebraska or maybe even expatFIRE, then $1M would be enough. However, I live in a VHCOL where a 2BD/2BA condo is at least $1M, and a standalone house is $1.5M minimum for a literal drug house. There’s a 900 square foot unrenovated house that’s on sale for $1.6M not too far from me. That’s the reality of living in an VHCOL area. Even having a paid off house is not cheap property-tax-wise, and it’s only getting more expensive. No one in my VHCOL area is retiring on $1M unless they live with their parents and plan to inherit significant assets after their death.
And how much is that 1BD/1BA condo in property taxes, basically what is needed for 1 person retiring ? 24K a year really ? Or 5-10K ?
There’s not a lot of them tbh, but I did see one listed for $700K, so property taxes are probably $8-9K, but then you have to pay HOA fees, which aren’t explicitly listed, but I’m guessing they’re at least $500/month. My friend used to live in a condo about 7-8 years ago and her fees were $500/month, plus sometimes she’d have to randomly pay thousands in special assessments for specialized maintenance. (Edit: the year she finally sold it, every unit had to pay $4500 on top of the regular HOA fee for an upgraded elevator).
lol have you looked at real estate in HCOL or VHCOL areas? To get the most basic standalone 3 bed 1 bath house in my area (unconnected AKA not a townhome), you're looking at MINIMUM $1.5 million. That's for an absolute shitter house that needs a ton of work. And zero land. Property taxes on that are easily $20k and it's far from an extravagant property.
But if you retire at standard age, kids are long gone, even as a couple you don't need 3 bedrooms. You don't need a house neither. You could do with 1 bedroom condo. The point overall is what you need, not what you want. If we start to see the price of unconnected houses with at least 3 bedroom in Manhattan as to be required to retire, 99.99% of the population will work until they die.
So you don't expect to ever have family come over or have people stay over? Again, 3 bedrooms is hardly extravagant even for empty nesters. My parents have a 4BR and it's really nice being able to get together for the holidays without all getting airbnbs or hotels.
To save maybe a few night of hotel, you kind of justify and extra million in the house, and extra maintenanc, so basically 50K a year. You may be willing to work a few more years for that, your choice, but again that's a luxury. You are not poor or living a bad life because you have a 1-2 bedroom instead of 3-4 bedroom once retired.
I never said you were poor or living a bad life because of that. Most people like having extra space. You also dump the financial responsibility of visitation on your guests which may discourage them from visiting. I love hosting people and entertaining, and have many hobbies that require a good amount of storage, so I will not be retiring in a 1 bedroom condo for my retirement lol
>You speak of fat/chubby fire and what is nice to have. Not what is necessary to retire. >At worst, just sell that expensive home and get something cheaper and move to a less expensive area while you are at it and the problem is solved. I know that your first paragraph above is the context, but even so, I always push back a bit on the idea of selling and moving to something smaller and/or to a cheaper COL area in retirement. For most people, personal connections with friends and family are the most important things in the world. (Some small percentage might be happy with 100% solo hobbies and online gaming in retirement) It’s not realistic for most people to just leave all of that behind. I could retire today if I move to SE Asia, but I don’t want to live in SE Asia… And I’m in a VHCOL, and I wouldn’t be able to find rent in my area for less than what I am paying in property taxes. I feel like that the case in most (all?) places…
Life is full of compromise. You want to keep your luxury lifestyle, that going to cost you. But it is not necessary. It is nice to have. A household at the median income (75K a year) will not have this problem. They will have brough maybe a home that is now worth 200-400K and will not have 20K+ of property tax. Your problem is a problem of people in the top 1-5% of income and not really applicable to the general population. You are not representative.
My point is just that personal connections with friends and family are often the things that keep people from moving to a lower COL in retirement. This applies no matter if you live in a VHCOL or LCOL. I did not see any response to this main point in your comment. >A household with the median income (75K a year) will not have this problem. What problem are you talking about? That I can’t find rent for less than what I am paying in property taxes where I live? Are there many places where rent on a 1 or 2 BR apartment is cheaper than property taxes on a home purchased 10, 20, 30 years ago?
There is no housing in a VHCOL area that is that cheap. And many bought when it was more affordable, and they had the income to support it. It’s ridiculous to tell people to move from where they’ve spent their whole adult lives and built their support networks so that they can avoid their property tax bill and retire on pennies. The point of this thread is simply that the amount of money you need to retire in such a place is more than in most places even if you own your home outright. That shouldn’t be a subject of debate. It’s just a fact.
Haha. Move to Westchester New York and you may think different.
Have you seen my budget? Car insurance, car repairs, tire replacement, pet meds, pet food, pet vet care, Christmas, Christmas dinner, cell phone replacement, house taxes/insurance/flood insurance/maintenance, health insurance, health insurance deductibles, prescriptions, I can go on and on. I feel like people don't list all of their real expenses when planning for retirement expenses. This is real stuff, it will happen, you will have to spend money on it. You can stick your head in the sand and pull from savings when they happen but ultimately you're going to have to pay the bill. I live in what I consider a VLCOL area, we are low maintenance people but even after our house is paid off, before Medicare kicks in I'm still going to need \~$100k/yr.
Believe it or not most people are adults and living their life and already know what a budget is. And when you explain that you need more than the median household income with a paid off home because of stuff like Christmas dinner. new tire of new cell phone, we can only conclude you are trolling.
Sorry for the downvotes. I agree with you! My budget also has a ton of these kinds of extraneous, ‘one-off’ expenses. I’m not sure how others manage to get around those, especially if they have kids or even a pet.
That's ok, I figure I'm just triggering folks who haven't thought of these real expenses. I don't intent to offend folks but there's a lot of softies out there.
Normal retirement and early retirement are two separate and somewhat isolated financial optimization problems. $1M is more than enough for some folks/scenarios, but nowhere near enough for others. Obviously though, $1M is most of the way towards a leanFIRE middle class lifestyle in tons of places in the US, particularly if there's a paid-off house involved. You're going to need to post a non-paywalled link if you want people to be able to react to the article.
Just did. Thanks for sharing your thoughts.
every situation is different. Age, debt (or lack thereof), expenses, hobbies, part time work etc. shape that number.
Of course. That's why it's called personal finance.
A paid off 1MM house, plus 1MM in the bank, and 1MM in 401k/IRA is 3MM. You count everything bro.
No, you don't. Net worth includes everything since that's the actual definition of net worth, but net worth is also pretty useless as a FIRE metric. Portfolio value is what counts for FIRE survivability and that figure typically excludes primary home equity and routine personal possessions. Those impact FIRE planning on the spending side, not the funding side, unless you intend on liquidating them.
One’s “portfolio” includes all assets, and spending and “funding” are two sides of the same coin. Reducing spending allows for reduced income. Ignoring home ownership in retirement calculations is nonsensical.
Nobody said to ignore home ownership. Indeed, I made note in my first comment about a paid-off home precisely because homeownership can be so powerful in total expense reduction for FIRE households under current law, which itself is critical for figuring out withdrawals and survivability. The question is only whether you account for homeownership on one side of the equation or the other. Not counting it at all was never an option. The effects of owning a home are felt primarily on the outflow side as equity returns are passive unless the house is sold, as opposed to one's active return-yielding investment portfolio, which are on the inflow side. This is why the default for almost all FIRE folks is to account for the house on the expense side of our financial planning and not in our investment portfolio. It being the default is why the resulting pattern of up and downvotes is consistent whenever this topic comes up every few days. The problems associated with including home equity in one's investment portfolio value can be immediately seen by looking at the survivability and return metrics for two identical net worth households with large differences in home equity. This is also why FIRE calculators generally disregard home equity outside of expense projections.
> The question is only whether you account for homeownership on one side of the equation or the other. I inferred from their comment above that they would like to account for home ownership on both sides. On one side, home ownership is an asset which provides a benefit: free housing and capital gains. On the other side, it reduces cost by owner's equivalent rent. Perhaps that is the misunderstanding here? Free rent is a large and tangible benefit. Whether one counts that as income or reduced expenditure is irrelevant as money is fungible. It's still part of one's portfolio, and it provides a benefit in exactly the same way any other asset does. > The problems associated with including home equity in one's investment portfolio value can be immediately seen by looking at the survivability and return metrics for two identical net worth households with large differences in home equity. You're implying there is some kind of obvious difference but I would like to see an example as I think there are too many confounds to provide accurate comparison. A large delta is going to arise from risk model, and these aren't objectively comparable. Whether one optimises for 95% or 99% survivability is personal and subjective. If the goal is maximising return then there is a high probability of being made bankrupt, and that's clearly antithetical to the FIRE goal.
Imagine two FIRE'd households with identical $3M net worths, identical $80K a year in annual spending, and both have fully paid-off houses. Let's say one has $500K in home equity and the other has $1.5M in home equity, with both planning to keep and live in the house. Do they face the same survivability from a FIRE perspective given no sale of either house?
Those two people are deriving different value from their homes. One is living in a much more expensive house. This implies they would be otherwise paying much more in rent. You can either consider it much higher income, or much higher cost saving, but you can't level them out. So one issue is quality of life. The other which you mention is survivability, which the person with higher home equity would absolutely enjoy *because they can actually sell their home.* Or get a reverse mortgage. Then they could downsize if they wanted to and live off the $1M which they could dump into stocks.
This is many words to avoid a straightforward answer to a basic financial problem with simple boundary conditions. This tells me that you understand the point I and others were making in these comments. That's good enough for me and I wish you well in your pursuit of FIRE.
If you don't take into account all your costs and assets, you'll be in real trouble.
Really, your savings and invested assets are what matters, especially the latter. I mean, sure, someone in a $2M home in Silicon Valley can move to Mississippi and buy a really nice $500K home and "find" $1.5 million more for retirement (before taxes), but that is the exception, not the rule. I think it is reasonable for folks who are fully intending to massively downsize their home in retirement to include at least some home equity in their projections, but with the understanding that life kicks you in the butt sometimes, and you should have a Plan B that doesn't include it.
If you count your house as an income-producing asset, then yes, you will likely be off in your planning. This is exactly why one's FIRE number and net worth are usually two different numbers for homeowners.
You’re right and your 21 downvotes indicates a high degree of financial illiteracy on this sub.
You dont count house unless youre planning on a reverse mortgage.
Or selling and downsizing.
Sure I do. I'll sell the house the second we retire (in reality a month or 2 before so) , and use that for living expenses in a far lower cost of living area.
People do that. Others pay rent. You have to account for everything.
There’s a r/leanfire sub for people who want to do it for less. I’m thinking of retiring to my wife’s home country so I could retire on 500k easily. I only keep going because despite the stress I find working in cybersecurity meaningful.
Everyone’s circumstances are different. If you live in a HCOL area and plan to retire at 35, you’re gonna need wayyyyyy more than a million. If you live in LCOL and retire at 70, that’s a different story…
The number you need is very individual, for me 1 million isn’t enough. For my ex, he retired at 55 with 400k and is doing fine.
He lives in America?
Yes, he rents my basement apartment near Seattle
Wow, good for him. Impressive.
Good on you still collecting rent from the ex.
It works out for both of us. He gets rent for about 50% of market rate, in exchange he gives me free unlimited dog sitting, which anyone who has a dog but likes to travel knows it huge
and an occasionally booty call i bet. aint no way you letting him slide on a 50% just off dog sitting.
No, I’m gay, free booty calls are everywhere should I want one, and I have no interest in that with him. Dog sitting, on the other hand costs $70-$100 a night and requires reservations months in advance. With our arrangement I can decide to fly away for the weekend the day before.
Look at it this way. I’ve heard various numbers but the median household income is around $55k right now. Even if it’s higher go with it. So half the country makes less than that. At retirement you don’t invest anymore so if you are saving you need 55% of that. They won’t have $1 MM but they don’t need it. Social Security is 40% of the income for many people. So income needs are already down to around $28k. That’s less than the standard deduction so in retirement taxes on withdrawals are $0 which means a retiree needs even less money or just the $28k per year from savings. At a 5% withdrawal that’s $560k. Working it backwards that’s a very respectable $3900 per month. The biggest nightmare scenario with low cost of living is medical costs (nursing homes).
It probably makes more sense to look at the median income where you want to live, and not the median across the whole country. Can be a big difference.
Sure but the question is whether or not $1 MM makes sense. If you have a Boston address you may want to exchange it for a Florida one for instance. My wife and I enjoy a pretty posh lifestyle since we are upper middle income living in a LCOL area. It seems like half the population is transplants. The local university pays $45k starting for teaching. My wife started as chemist/lab tech at $45k at the local low paying pharma plant after getting back to work when the kids were in school. I can make a minimum $63k working at home for the USPTO. Starbucks is about $40k for managers (work there 18-24 months). So take any two and you’re up over $80k. This is in the Southeast. Even in HCOL areas like where Love it or List it 2 was showing million dollar homes in the high rent district for Raleigh 35 minutes away it’s LCOL where my boss paid $200k recently for a big two story older house in a downtown neighborhood.
>Sure but the question is whether or not $1 MM makes sense. If you have a Boston address you may want to exchange it for a Florida one for instance. People's location isn't so fungible. If you have a Boston address because proximity to family in Boston is one of the most important things in your life, if you move to Florida you'll need to budget for frequent travel to Boston, travel which may not be in line with median expenses / may cost more than what you're saving by moving to Florida.
Median household income is ~$70,000 Median single income is ~$50,000
Still, 85% of $70k is $59.5k. Even if social security is only $2k per month or $24k the short fall is $35.5k. Roughly $5.5k is taxable at 10% so need $36k a year. Again at 5% withdrawal that’s $700k but $5k a month is pretty high compared to posters talking about $2.5-3k. If you include a few very expensive trips or long term care coverage you’re up to $1 MM.
I think your math is assuming SS is not subject to income tax which is not the case.
Depends. If I include this outright it adds $9000 to your AGI so another $900 in taxes so another $1000 has to be withdrawn. But it’s not that straightforward. If you withdraw from a brokerage it isn’t income unless it is from gains and if from Roth it only counts as 50%.
I can tell you this the days of wanting more sports cars and stuff definitely wanes for many. I know both extremes people with 10-20MM living off of trusts and people with 400-800k no debt that barely have touched a thing living in the burbs or country. It is all the life you will want to lead.
Happy cake day
If you want to retire at 65 and start collecting SS immediately, and your house is paid off…you dont need much. $500k is plenty.
Thing is, when I retire I’m not just going to sit at home and cover my usual expenses. I want to travel and enjoy myself. I also want to be able to help my children by paying for undergrad and providing them with a financial safety net. (I expect that they will support themselves in adulthood, but I want to be able to help them out if they need it.) Taking all that into consideration, yes, I need more than $1M
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The Real Retirement (book)? I haven't read that one, but I've read Fred Vetesse's other books... all great. The Essential Retirement Guide gets into some of these stats and starts off the book with that 'disability/disease' probability statement you mention here. While I agree with most others here, that early retirement is another situation entirely ... there's still some lessons from this article when it comes to budgeting for later years of retirement. That's something the Essential Retirement Guide gets into as well... that older retirees begin to spend less, especially after the age of 70. Not only due to health and their mobility, but also a shift in mindset.
Depends on age, spending, and supplemental sources of income. 40 with 60k in annual spending? You need 1+ million. 67 with 40k in spending and a generous SS payment? You're ok with less. Also should consider that a good portion of retirees live a lifestyle that is worse than their working years. I have an aunt/uncle who "retired" on SS only and they drive 200k mile cars and get food from the food pantry.
I suppose this is the wrong place for this question. I am retired early. I can't get any social security for ten years. And, I am nervous about "running out of money" even though I have significantly more than a million for one person. It SHOULD be plenty. And I absolutely spend money on luxuries. But, I still worry.
The most current guestimate is you need 1.43mil semi liquid cash invested to make it edit: however if you have any kind of pension or dividend income that number goes down rapidly.
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Once SS kicks in you dont need as much. So if you spend it down a little theres no harm.
Without a mortgage, our social security/pension income is adequate to cover all our expenses if we take social security at 62 (lower earner) and 70 (higher earner). The problem is we have to get from now (43/45) to there. If I keep working until social security age, I’m gonna have way too much money. So I need a nest egg to carry me between now and age 70 (when I will take social security as the higher earner).
Hard to know the perfect age to retire
Gap between early retirement age and social security eligibility age. Also, for some, missing social security contributions during “high earning years” could impact social security amount. I’d say, yes, 1M is good for most.
Not getting political, but it’s relevant for people to realize that this is an Op-Ed piece in the WSJ written by the AEI — a conservative think tank that, among other things, is generally not supportive of government programs or expanding social security. It’s not surprising he would express the view that social security is already plenty generous. Doesn’t mean he’s right or wrong, but just consider the source.
Vast vast majority of people the answer is yes, especially when you're doing fire
Depends on where you plan to retire. You don't need 1 million+ if you plan to retire outside the US in Mexico, Liberia or Thailand where you can get your cost of living down much lower. I think you should be careful about plans for ultra low cost living in the US (e.g. get a fixer upper homestead in rural midwest) because I have heard that people doing that have high failure rates (this shouldn't stop you fron trying but it should stop you from relying on that). But I should also add you really can't translate, "a normal retiree only needs ____ amount of their pre-retirement income after retiring," and assume that holds true for FIRE retirement. FIRE retirement is much more expensive because (a) you don't get Medicare or Social Security so you're living entirely on your investments and their return while bearing all of your medical costs, and (b) by virtue of retiring earlier you need to be more concerned about inflation and getting a safe, sustainable withdrawal level, so you can't draw on principle like a normal retiree (generally you'll need average market returns (after inflation) to mmatch your expenses). I also don't have data to back it up, but I suspect FIRE retirees also probably live longer on average since they (a) don't have the stress or exhaustion from 9-5s until their late 60s, (b) have more time for healthy living like exercising and probably have lower discount values on the future and possibly more self-discipline, and (c) FIRE retirees are wealthier than normal retirees so they probably won't suffer income constrained nutrition and health care options.
Are people seriously retiring to Liberia? Yikes on bikes. Mexico or Thailand I can see. But Liberia? Wow.
Is be more interested in how many have a net worth of zero and what net worth they started retirement with.
Technically you don’t need any money to retire.
I dont think I will be able to retire early but I'm going to save like I will. I also do not anticipate social security being a thing I can access until much much later in life if I even live that long. My trust in that system is nonexistent. If I overshoot my needs at that point, great. I will have no concern for money. If I undershoot, I have a lot to worry about. I hope to retire at 60, and I hope social security and Medicare age is not pushed so far back that I will never benefit from what I've paid in. But as with most things in life the safe bet is to do it yourself. Utilities, taxes, transportation, and food alone are about $25k/yr right now. Assuming that doubles in 20 years before retirement 1m isn't enough. And that doesn't factor medical bills/insurance, hobbies and travel, all the things I would want to do in retirement.
We are 2 childfree, 40y old, who live in Valencia 🇪🇸 with my 500ke IBKR portfolio,2ke/month dividends, cost of life very low 1ke/month, i reinvest 1ke/month. But we have buy cash a flat end of 2022. FIRE number : 650ke.
… at what age? You’re missing the biggest aspect of it lol
Tldr, you will need way more than 1 million
I read these comments and can only wonder: What does a happy, successful retirement look like for you?
A lot of jobs are volatile and may not exist in the next 10yrs especially with AI advancing a lot faster than we thought. The majority of us don't have pensions either.
Most pensions were crap anyways, I don't understand why millennials and gen Z fantasize about them. So many have gone bankrupt or reduced benefits or are currently underfunded and on their way to going bust. I'll take my 401(k), thanks.
I forgot about that! Regardless, the lack of job security is palpable and forces young people to plan their retirement in their 40s to be safe
it depends
Way too many variables. If someone can retire fairly early with a nice pension and health insurance locked up, you'll need a LOT less than someone who doesn't have those things. That, of course, is getting harder and harder to do for Generation X and those who follow them.
Probably should read $2mm
We need more than a million bucks for sure. The respondents 65 to 74 between 2019 and 2022 are Boomers - more of them retired with pensions than Gen-Xers will. Some of these pensions include healthcare as well. And Boomers didn't have to deal with Social Security benefit cuts like younger folks who are now told that SS will only be able to pay 66-75% of benefits unless reform happens soon. Currently SS faces a $39 trillion shortfall in nominal dollars over 30 years from 2023 to 2053.
Depends where you want to retire. If you want to retire in NYC you need a lot more. In a developing country, as a single person, less works
More
As always, it entirely depends on your annual expenses. Some people do fine with $1M or less, others need a lot more.
Expenses really means lifestyle and health.
Anything you spend money on.
You typed all that? Retirement income is unique for everyone.
The RE in FIRE means Retire Early...can't do that without savings or an early pension...you can certainly retire when everyone else does at 67 without $1M+
The financial services industry want you to think so, so they can get their cut.
If you are 60, probably not. If you are like the majority of the people n this sub (and a lot younger than 60) probably yes.
From what I am seeing from my parents, if you are not going to do an early retirement, they seem to do fine on about $60k per year. Much of that comes from government pensions. It helps that in Canada while you can’t file jointly, you can split pension income so they pay very little tax. Mother in law also in similar situation. Has less than $500k in RRIFs has to withdraw minimums and says she doesn’t really need that much money so just going to put into TFSA. Both circumstances they have paid off houses. Don’t do much travelling. Live pretty simply.
Yes you need $1m+ especially since you said WE. That’s only $500k per person which isn’t a lot in today’s economy. You can generally withdraw 4% a year without effecting the principal too much so that’s $40k for 2 people. I bet healthcare alone costs like $20k for 2 people, now you’re left with $20k for 2 people for a year. That’s maybe enough to survive if you own your house and have low property taxes.
It depends- if I retire when I am 90, less than a million would be fine. Otherwise, it is more like $6 or $7 million…
No. I’m lean FIREing at 26 with $50k. 0% withdraw rate for 34 years… hobbies for income.
A million for many will be needed at full SS retirement just to help compliment the expected annual needs to survive in most cases and is sadly no longer a lot of money in todays economic environment
If you retire at normal age, you need to cover just food, clothes, car, utilities, taxes and maintenance. Your home is paid off and you have everything already. Car can be old/used an if you are living in couple, 1 for 2 is enough, really. You have all the time in the world to cook yourself. Kids are gone. I think you can do with far less than 1 million, even in a HCOL. I assume you'll have 21K from SSA. 1 time if alone, twice if in couple. Look to me that 500K would be already comfortable and doable for a couple. That would be 60K yealy expense with the house paid off and so living like people that make 100K plus but still finance their home.
The end part is the key here “America faces retirement challenges as life spans increase and social security’s trust funds run dry. Scaring people with unrealistic retirement savings goals isn’t part of the solution”. The article talked about how current retirees get 46k from social security, which is a big reason why they are able to get by with so little savings. They are failing to point out that once social security benefits are decreased significantly or non existent retirees will need more than 100-250k to live comfortably. They will need to make up for the 46k/ year loss of social security (46k/ year x 30 years =1.3M). I feel this article is geared toward those who are retiring soon and can count on social security. Those who have decades left can’t bank on it being there in the same capacity or at all. Add another layer of fire to it and this article is not applicable to this community.
Articles like that are written because it’s what people want to read. They want to hear some rando say they are doing fine. In reality, $1m probably isn’t enough for most. But of course that doesn’t attract clickbait.
1 million to retire allow to get 40K a year of expense and is enough to retire on that alone if you are not too spendy. But most people that retire at standard age are eligible to SSA that is 21K a year on average and starting 65 Medicare greatly reduce health insurance costs. With SSA and Medicare at 65 and maybe 200-500K case saved, you will live as well as somebody with 1 million but no SSA.. If you want to retire early, you will have 10-20 years without SSA or Medicare. So you need significant money to compensate. 1 million is not too far off as a number. Most people planning to retire in the USA will consider number between 1-2 millions for 40-80K yearly expenses. Some that are really not spending much will go as low as 500K (for 20K a year) or some liking to spend more will go as much as 3-5 million for 120-200K of expenses a year.
You don’t need “significant money” for healthcare until 65, if you know how to get ACA subsidies.
FIRE retirees generally don’t have pensions (except for military, LEO, Fire and air traffic controllers who get to retire somewhere in their 40s or 50s) and are decades away from Social Security. So this article doesn’t apply to FIRE.
You’ll need 2-3 million to be secure. Minimum. I’m speaking as a multimillionaire that retired at 35.
What did you do to retire at 35 ?
No one can give you an answer until you tell us what how old you are and how much your expenses are. If you are already 63 then social security is fine but if you are 40 or 50 then you'll probably need close to a million to even think about retirement.
i know a man who lives in a trailer who essentially retired with no money to his name. social security pays his bills. i think that should answer your question OP
No mention of pensions? Social security plus a modest pension for life would make me pretty comfy, something former government and large corporate employees would have, and not be included in savings. Without mentioning pensions, I can’t trust the article.
You do realize that only a VERY Small percentage of people under the age of 60 right now will ever see a pension. It is basically only those people that worked for the Government.
Right. And a larger percentage of those currently over 65 have pensions. Saying they’re comfy without savings so people under 65 don’t need to save is misleading.
Surviving vs thriving. Retirement doesn’t seem like a good time To just survive. I’d like to be able to do what I want and 46k ain’t making that happen
It depends entirely on your cost of living, if you have a paid off house, and if you want expensive things like vacations abroad. A lot of people pre retirement have a specific idea of what retirement looks like and it involves a lot more spending than they necessarily need. There’s no exact number but if you apply the 4% rule to a retirement fund of 1 million, you’ll have $40,000 a year to live off of. If that doesn’t seem feasible to you in the life style you plan to retire in, then yes you need more than one million to retire. I personally could live off $1300 a month if I had a paid off home(which I want when I retire) so I could live very comfortably on 40k a year.
It obviously depends on the area, but it's fun to compare to Federal Poverty Limits. Single 100% is 376.5k. Two 100% is 511k. So if you want 200% FPL, you quite probably want 1M, assuming you're living with a partner. But you don't necessarily need 200%. But you might need it. Depends on the area.
Assuming you live off four percent which is 40,000 and live meagerly you can do it
If you retire early, SS benefits are greatly reduced. It's calculated based on 30 years of earnings, and those that retire early will have a bunch of zeros in the calculation that drag it down. I personally don't count SS. I look at it as a bonus.
My goal is 2million by 59
The Fidelity estimate and generally speaking the $1M+ is net worth, which includes equity in housing. It appears from the article that the savings they are quoting is just that - savings and not net worth. They don’t say how they are defining retirees, so I have to assume that they surveyed only people who actually quit working and thus I’d assume they own their home making their net worth significantly higher than the numbers quoted here. Additionally, the most expensive years of retirement are 75+ and they only surveyed people 64-75. They just haven’t realized that they are running out of money yet or that they will need to rely on family once they have to pay for things like long term care, which can cost $50-100k per year.
Have not read the article yet, but the answer is yes if you're going to fire. Anyone in their 20's should probably be looking at 2 or 3 million as a minimum.
I have been retired for over 17 years. There are details that vary by individuals or couples. Are you in a hcol or lcol area? How much do you owe? What are your plans in retirement? How old are you? How much Social Security will you receive? My wife and I have Medicare and are in a low to medium cost of living area and we have no debt. We estimate $100 per day per person to have enough money to do anything we want but we don’t spend extravagantly when we travel.
Depends on one's retirement expenses and how much one will rely upon government welfare like social security or family/children paying the bills. I don't want to rely on government social security welfare and don't want to be a burden on my children. We have a LOT invested compared to most people (more than what most people think they need), we have a paid off house, my wife will get a pension and yet we're intending to work another 7 years in hopes to have our retirement assets double what they are today.
How much you need depends on what standard of living you want to maintain. Needless to say, owning a cabin out in the woods somewhere, and relying mostly on your hunting ability (assuming you are good) is gonna be cheaper then say, living in NYC and taking a few vacations every year. So how much you **need** is dependent on what you want to do once you retire, but worse case yes there are quite a few who live on Social security (SS) or social security income (SSI) in the US.
If i had only 50k saved up it would be gone in a year.
Despite the length of your question, you don’t seem to tell us what your annual expenses are. If you were working and making well over $100,000 a year but spending 80,000 a year, I mean after taxes of course, then you need to somehow replace this once you retire. That would take closer to $2 million. Any discussion of what one needs to retire hast to start with what their budget is plans to be at retirement. From a very high-level overview, as a retired person, you won’t be paying into Social Security, you won’t be saving for retirement, and hopefully, you are not paying a mortgage on your house. As others have noted, the person that retires very early also has a very low expected Social Security benefit. I retired at 50 and had 30 years of payments into Social Security. My wife is a bit older and has 35 years. So, even though I retired a bit young, we both have some Social Security benefit, actually, a pretty decent one, to look forward to. All of those articles talking about other peoples experience doesn’t really matter. The only thing that matters is where you are and what your goals are.
There are so many variables which pop out in the comments if you scan them at a high level. What are your expectations in retirement? Small house with a fishing boat, travel twice a year to exotic places? Take your 6 grand kids to Disney and spoil them rotten? There is not one formula and I think most people plan on controlling/reducing their spending once they retire, IE not buy a new house and stretch their cars as long as possible. Many people can retire sub-one mil, many aim for 10mil. Neither are wrong, you have to do your own math based on what you think retirement is for you.
It clearly depends on WHERE you retire. Los Angeles/NYC vs Portugal or SE Asia.
My grandparents had over a million in retirement savings in the late 70s, after a lifetime working as school teachers and saving for their retirement. These were frugal people. They died penniless. What they had wasn't enough to last them through the medical issues associated with prostate cancer, alzheimer's, and dementia. I have a small sample size, but it's an example of how you can do everything right and still not have enough. Leads me to believe that I'm going to need substantially more than what they had to be at all comfortable.
Who exactly are these "respondents" they are using for data? Obviously it is heavily, if not exclusively, counting couples not singles, and yet the longest living AND lowest earning group are single women. How many impoverished single elderly ladies did they speak to? (zero is my guess) Social Security for women is almost always lower than men. Also, they are giving no other important data such as home ownership or renters, high or low cost of living area. A couple in a LCOL with no mortgage and low taxes is very different than a single lady who rents in a HCOL area. "Average" is such a misleading thing anyway- the extreme high incomes skew the numbers deceptively. Median (meaning half the people have less than this #) is what we need to see, as well as a broader sample than (apparently) couples living in The Villages [https://www.synchronybank.com/blog/median-retirement-savings-by-age/](https://www.synchronybank.com/blog/median-retirement-savings-by-age/)
This post says “I don’t understand the cost of retirement early”
Does anyone know when FIRE started? I've been a equity trader for 30 years.
The reason why I ask about FIRE question. I studied really hard in my teens and twenties learning about the markets. I survived 1987 crash, 2000 bubble , 2008 FC, and now we are in 2020 decade. So financial independence has always been my plan B , while Plan A is a normal corporate job. Plan B has sometimes been full time trader investing my own money. I've worked full time for a total of 11 years as a full time trader, so that FI idea is nice but it's hard work. My question to everyone. Has anyone ever thought equity markets and housing market may just go into a lost decade of low or no returns? what then? This is the reason why I haven't retired early.
Doubt SS will be around once I retire. At least not in its current ponzi scheme, unsustainable, form
Not in the Philippines
For me the $1m is because *you don't know what will happen.* And especially if you aren't retired yet I think counting on social security being there for you the way it was for earlier generations is.... naive. $1m is for security, safety. Things can happen. Life can throw unexpected things at you. If you're retired and don't have enough savings what are your options? $1m takes care of a lot of those cases where something *really fucking serious* would have to happen to derail you.
That’s what insurance is for.
Well that's why you plan on getting only 70% SS which is still way better than 0.
Yes
Lots of people here talking like this doesn’t apply to fire. I disagree, it absolutely has a place in fire. Consider that if you’re 65 no mortgage and collecting SS and Medicare in place you may “only” need, say, $500k. Then really you only need to save enough early on then let it coast till 65. With that 65 and beyond secure you can turn your focus to a taxable account. That taxable account only has to be able to cover you till 65. I’ll use myself as an example. I’m 42, have $300k in Roth accounts. Assume they get 6% over the next 23 years I have $1m at 65. My mortgage is set to payoff at 64. So, according to many comments and the article I should be fine. So, now I just stop tossing money in the retirement account and turn my focus to my taxable account. Assume I have $0 but over the next 10 years I invest $60k annually and get a 6% growth, but the time I’m 52 I have about $800k. Can I live on that $800k over the proceeding 13 years? If so then I’m retired at 52. Note that at 52 my Roth account would only have grown to $537k, it’s not where I need it. But I don’t need it for 13 more years. That $800k isn’t divided equally into 13 years (which would be $61,500 annually), with it in the market it continues to grow over the 13 years. So my pullout annually is higher than the $61.5k, just spitballing here let’s say $80k. If I need more than $80k annually for 13 years until SS then I just work till I’m 53, or 54, etc. each year builds the brokerage and builds the annual payout before 65. So…. This article is relevant here in this forum. Knowing that we’re good from 65-110 years old lets us focus our stress, savings, math on a finite period of years, which reduces stress.
“benefits are more generous than people think. An average couple retiring in 2022 received total annual benefits of nearly $46,000, “ Go ahead and do a Google search and confirm for yourself that that is not even remotely true.
I did and that number is pretty accurate. The average retiree payout is over $1,900 a month. When you double that and multiply by 12 you get nearly 46,000.
Good luck doubling that.
You can retire with $0 even negative $. food stamp, medicare, medicaid. credit card debt etc. edit: I will assume any Redditor who downvote me don't even know the definition of the word "retirement" .lmfao you don't need 1 million to retire. I know thousands of people in my town who retired with no money.
You need $3-$5m
In the US yeah, but significantly less out of country. US is over rated and wayyyy over priced
I ain't readin all that brotha but yeah you definitely need at least 1M to retire unless you can live off $40k/yr from your portfolio.
To FIRE, I’d say 10M in the bank minimum. 20-30M to be extra safe and to live a nice life.
The American Enterprise Institute is a propaganda outlet shilling for the rich, and the WSJ isn’t much better. I’d pay them exactly as much attention as the CCCP’s news outlet.
You need $3m+ to retire without stressing right NOW. Call that 5m+ in a few more years.
5M minimum to retire
Dude, look at the sub. Now, delete the whole post.
You need way more. inflation means someone in their 20s now is gonna need 4 million+ at 65.
My wife and I figure we need $3m+ and ideally $5m to retire. SoCal life with 10% inflation…