We generally get 12-15 years on our cars. I’ve seen both my dad and FIL use the 401k for property taxes and other “bumpy” expenses. Their 401k balances were relatively modest, so it wouldn’t generate that much income. No other investments/savings. If they had relied on the 401ks for regular income, they’d be in a world of hurt when it comes to the bumps.
OTOH, they both have SS and pension benefits, so they are fortunate that they have some modicum of security despite not saving during their working lives.
Earlier I was being half facetious and half serious about my Volvo lasting that long. Our cash reserve comes from our dividend earnings of approximately $1k a month, and this reserve is used for unexpected expenses and for vacations. For our retirement income, other than the dividend earnings, we’re relying on my wife’s 401k, my 403k, Roth IRAs, SS (my portion, which I plan to start withdrawing at 62, is smaller relative to my wife’s since I’ve been full-time stay home dad to take care of my kids for at least 1/3 of my professional career). We have a house fully paid and a sizable stock investment along with our retirement accounts, but I’m just not sure whether we have enough for retiring relatively early. We’re seeing our Fidelity investment specialist next Tuesday, and we hope to have a better idea.
@TiggerDad — I am at over $30K/year for property taxes, home & car insurance, electric, home heating oil, water, sewer, garbage, lawn & snow, internet & cell. I consider these fixed, even though they aren’t exactly fixed. Water bill & sewer bills decline when children are away at college, but the differential is not significant.
Groceries & gas total more than $10K/year. That does not include any dining out but does include household items such as cleaning supplies and whatever shampoo & razor blades are purchased at Costco.
I have kept one car for 18 years, but as @HImom commented, it will have to go once the repair bills become uncomfortable.
@CountingDown – I don’t have the stats, but my guess is that there are a LOT of retirees relying on SS and pension and have no other savings. Since most in our generation will not have a pension, and many have not saved an amount that will throw off the earnings of a pension or allow a comparable draw down, I do not know what they will all live on.
@TiggerDad – if you really can live on $30K/year all-in, and have sizable stock investment + SS & 401K, then it seems to me that you are in solid shape.
Medical is truly the one variable completely outside of your control and an expense you cannot defer. You can put off having the house painted for another year, and for now, you can mow your own lawn, shovel snow, cut back on dining out, etc…but there’s not a lot you can do to curtail the cost of healthcare.
Well, I’m seeing that people have far lower taxes than we do. Basic expenses with a paid house in our area are about 30K-50K (10-20 taxes easy, 5-7K heat, 3K gas, 2-4K household upkeep, 5K car, 12K food,gifts, travel etc) so that might be partially covered by SS if you had high income. The rest is going to be based on retirement savings.
We know a lot of people who have earned high income who have not saved much. Their plans are to sell their house when they retire. I don’t think they have thought through the high cost of housing and living expenses in retirement. They give me a blank stare when I talk about health care. We paid 26K annually plus 12K out of pocket for a long time for health care, so I know what impact that can have. We saved $1,9000 a month when my husband sold his company and went to work for someone else. That is just healthcare!!! We also were very healthy and not old so I can imagine the cost getting astronomical for many. People all think they’ll be healthy but statistically that’s not true.
I cannot think of it in neat little boxes because life isn’t that simple. How much do you need in retirement? As much as possible so you won’t have to depend on your kids or worry about health care, housing, buying gifts and living a little. I think a million dollars bare minimum in savings plus SS and a paid house. That’s for someone who is middle income and doesn’t have high expenditures or tastes. In expensive areas of the country or those with high taxes, much more.
There are so many variables ( real estate, the market, healthcare etc) that just one thing can mean you have far more than you thought or far less. The trick is to be able to live well in any case. I think people need to be realistic about the market. It’s not going to be a bull market forever and younger kids aren’t spending $$ on real estate.
I also know people who plan to sell their big house when they retire and use the equity to buy a smaller place in lower COL area or rent. Lots of them aren’t quite sure how they will have the cash flow they’re used to.
Some of us have federal income taxes alone more than $30k, so have to plan accordingly, especially after adding state taxes, property taxes, insurance —medical, home, hurricane, flood.
More power to folks who can do everything with a smaller amount. Many of us can’t do it. The one thing that changed pre vs post retirement was no longer contributing to retirement accounts and not contributing to Medicare once no more paychecks, now Medicare premiums + our share of medical premiums.
But then we have a neighbor who had a house in Silicon Valley, which he sold and bought a really nice house here (northern Michigan). Completely renovated the house. I pay around $3000/yr in taxes for my 2400 sqft house so maybe he pays around $4000-4500 (house is 2x as big, same neighborhood).
He told me he lived on proceeds from the house sale and modest savings. Had not taken any money out of his 401k until he had to at 70 1/2. Health insurance was from his wife’s as she retired from a school district.
So from my very small survey of 1, if you live in the right place and move to the right place, sure you can downsize and live on the proceeds.
But most of the people I know if they relocate, they want to be close to kids and grandchildren. I’m not sure how the downsizing is going to work in real life.
Of course selling and moving to get your equity out CAN work as long as that’s what is desired and the numbers work out. I want to be near family and loved ones. My sibs All live on the same island I do, as do my folks. My kids live far away but not sure when and where they will ultimately settle and stay.
One of my friends plans to sell their lovely home in very posh neighborhood and move to San Diego to live near her sister. Depending on where she ends up, seems like prices in San Diego are pretty high as well.
I’ll bite. $70K a year for the two of us to live on. Perhaps much less needed now, but I want to be able to bank the extra for when inflation ratchets up and my fixed benefit retirement does not!
I also wear the same clothing until it’s so torn that I can’t wear them anymore. Not because I’m cheap, but I find the same clothing day in and day out to be most comforting. I don’t care what other people think, and that helps, too. My wife gets embarrassed by me, but even if I win the next Powerball, I’ll probably won’t change my clothing habit or any other spartan habits of mine. I find my happiness in simplicity in life. When I was a student at Cal-Berkeley in the late 90’s, I once gave all my money to the homeless and went a month on a single loaf of bread on peanut butter. Just for an experiment. My favorite TV series? “Life Below Zero.”
Our fixed spending expenses went down significantly after we were done with mortgage and our kids’ tuitions and related costs of them getting their degrees.
We have our household for 2, plus we pay all expenses for a loved one to live elsewhere—room, board, travel to visit us, etc. Honestly, we don’t closely track as long as our income exceeds the expenses (it always does).
A lot of our current post-retirement discretionary spending is travel and dining out. If we had to cut that out, it would be sad but definitely do-able.
I often wear the same clothes till they’re long gone, but it’s not because I’m spartan like TiggerDad, it’s because I truly hate to shop. I can’t imagine living on 30K, right now I think we spend 10X that.
This sounds like an obsession of sorts. Nothing wrong with obsessions, but you have to make sure they don’t become unhealthy.
I know in college and when first starting out, I lived very frugally but at this point in my life, I enjoy comfort and convenience. I’m willing and able to pay for it, like having someone do our taxes, someone to repair our car, plumbing, or whatever else we need to have fixed.
I figure when we don’t want to dine out, we could use that money to have food delivered or hire a cook or whatever else. We want enough money that our kids won’t feel they have to be our caregivers—we value our independence and theirs.
We currently live very comfortably on several times $30k/year currently. Cutting back to $30k/yr would be very uncomfortable for us and would not allow us to support our loved one.
$300k per year spending seems like quite a lot, though…
The average senior on Social Security gets about $17k per year in benefits. Two average seniors would get $34k per year. Assuming that a typical American has little or no retirement savings or pension income, the $30k per year that is being thrown around here seems like it would be more similar to a typical retirement budget than $300k per year.
^^Exactly. We have high housing expenses, which is something we could change, but right now, we don’t want to move. It’s not required to live with such expenses, but having the option to live where we like is what we choose to spend our money on. I suspect the average senior spends more than 30K easily, with the cost of medical care. Most people have something saved up and don’t have to live on social security alone (I hope)!
My folks currently are retired and spending several times $30k/yr. They have a small pension, SS, savings, and significant investments. It allows them to live very comfortably in a very nice CCRC and hire any desired help.