Yes, I am using ‘m’ for million. And no, there isn’t a lower number I would consider “a lot of money”, $50m is the floor as far as I am concerned for “a lot of money”.
So there’s the lottery “lot of money” - money that falls from the sky and changes my life forever and I would consider worth throwing away a couple of bucks for the fantasy of winning. I don’t get to that level until the lottery is at $100 mil.
But in the everyday reality land, I change my behavior over a lot less. I am thinking about installing solar right now, and that costs over $10k. That’s a lot of money.
Macadamia nuts cost almost $10 for a bag. That’s a lot of money.
Context is everything.
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It all depends on the life you have, I guess. Most people I know would consider one million to be a lot of money. Others I know, although fewer in number, would consider that number to be higher. How much higher depends on how they currently live, IMHO. If they have an expensive life, I assume the number is higher than a million, and the multiple of a million depends on the expense of the lifestyle.
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Many people think $1m is a lot of money and that they can retire and live on that. But if you retire at 50 you most likely cannot live on $1m for the rest of your life. But it is all relative to health, where you live, etc. I think I am in pretty good shape financially for my age and my net worth is constantly going up (I track it regularly on a spreadsheet with my assets etc), but I am not sure I feel like I will ever have enough or “a lot” even though I have a lot more than most people and I actually can live off of it now for the rest of our lives without issue. But, I guess I feel like it’s not enough and don’t want to take chances either.
But the question is about what we think constitutes a lot of money, rather than what we think we need for retirement. It’s a very interesting question.
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Many people can. It’s all relative. Sometimes high earners and those with high net worth have very skewed ideas of how others live. Many FIRE followers are doing it on a million even in their 40s.
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I agree with @itsgettingreal21 that this exercise is all relative. And the question wasn’t what would you need to comfortably retire, or what number would sustain your lifestyle…it was what number fulfills the definition (to you) of “a lot of money”.
I guess I am like Han Solo, “I can imagine a lot.” Lol
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i haven’t read the full thread so, apologize if redundant.
I retired about 18 months ago at 54 - I used the 4% rule as a starting point to determine how much we needed to have invested to no longer need to work. In essence, you need 25x your planned year 1 expenses invested in a balanced portfolio. If you aren’t familiar, you can read about it here.
So, if you have $1M, you can pull $40k/yr (plus a COLA) and not run out of money. If you want to start with $100k, you need $2.5M.
In reality, it is more nuanced than that - you need a form handle on your expenses ( including healthcare, taxes, etc) and no longer getting direct deposit every 2 weeks takes some getting used to.
I did it largely by taking advantage of 401ks, discounted employee stock - increasing my contributions whenever i got bonus or a raise.
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Interesting post, thanks. I will have to read that article.
Sometimes it’s easier said than done for some since many people just can’t know the cost of health needs, or a caregiver etc. My mother is 80 and has stage 4 lung cancer. She was diagnosed about 18 months ago. Yes, she’s far outlived the median expectancy, especially because she has so many other health conditions. It’s been amazing. But we also got them a caregiver for when she is not doing great after chemo etc and my dad has macular degeneration and can no longer drive so that’s an added factor. They pay about $900/week for the caregiver. Fortunately they can afford it. But using that methodology, how many people can afford that, and if they can’t what then? 80 is pretty young to have health issues like she does. Her mother lived until 99 so we never would’ve expected this.
On the other hand, our property taxes are more than 20k a year. Not even factoring sales tax at near 10% and income tax, etc. If we had $1m saved, there is just no way possible we could live on that. $40k/year when you subtract property taxes leaves less than $20k and you haven’t even gotten into any other tax (income or federal) or just basic necessities. We have no mortgage thank god, but still have property insurance, car insurance, etc. So we would definitely be in the negative. If we didn’t have high property taxes, it would probably go somewhere else, a mortgage or whatever, but I paid my mortgage off when I was divorced so not to have that monthly expense. I’ve only lived in my house for 20 years, so if I hadn’t done that, I would still have at least 10 years and probably longer if I had refinanced it like everyone has done recently with a mortgage. Downsizing would still cost us a lot just because our county has super high property taxes regardless. So, that’s why I said it’s hard to live on $1m if you retire at 50 but yes it is still relative. I guess when someone is in their 60’s they then get social security that they can add in there but still you can’t count on that.
Your comment about needing a firm handle on expenses is dead on. I think many people retire and don’t have that.
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That is your personal financial situation. My point is that many people can retire on $40k a year. There is no retirement amount that applies to everyone. The reality is most don’t have $1 million when they retire. Perspective.
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That last line is true. Most don’t have $1m and that is why so many never get the chance to ever retire. And for anyone that can actually live on 40k then they would have a heck of a time even being able to save $1m in the first place because to them that would seem like a fortune. But, yeah there are people that do that I guess and then realize that 40k doesn’t go as far as they think. Especially these days. The biggest issue is COL.
The ability for both H and I to work at home this past year and to continue to do that once the pandemic ends has really helped us both as we finish up the next few years before retiring. H was ready to quit his high paying job before March 2020 because of the company politics and the hour a day commute he had. Since he has been at home this past year, management at his company has changed and he is not commuting so he is much happier and can continue working and adding to our retirement.
We would love to retire now, but don’t have access to retiree insurance so we have decided to keep working . We have not led a frugal lifestyle and have done a lot of traveling over the years by ourselves and with our kids and even with that we have been able to save well for retirement. We never upsized our home and living near the beach in Southern California our property is now worth quite a bit. It is still to be determined if we stay here when we retire or move somewhere else.
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You’re demonstrating why so many think CC posters can’t see past their own privileged bubbles. Smh
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Actually that’s quite false. Many people on CC are chasing merit money and are not privileged. You’re making assumptions based on things you don’t know about. I was a single mom of 4 kids with the inability to work out of the house for many years until my youngest was in school full time.
Maximum monthly social security benefit for someone in full retirement is about $3,100. So under $40,000 per year. Maximum for someone taking social security at 70 is about $3,900/month. About $7,000/year over $40,000. Most people receive less than that. And there are many people (upwards of 40% from what I have read) who live 90+% off social security.
I think there is a tendency for people who live in high COL areas to think that everyone does. But most people do not. My inlaws live on less than $40k/year. They live fine. Happy in retirement.
Perspective can be a good thing.
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I guess I’m a little confused about the 4% rule. So you need 1 million to get $40,000 a year. Does that include social security? What if you get the maximum social security and that’s $37,000? Does that mean you really are living on $77,000 and not $40,000. What if your spouse gets 1/2 of the maximum so $18,600. Then it would be $95,600 with a value of $1 million in investments.
I’m not that savvy and I admit to not being very smart. And being confused about retirement
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4% rule is just what you can withdraw from your own person investments each year. Social security and pensions would be in addition.
There are some people who think it should be 3.5%. And others who think 4% is too conservative.
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If you try the Firecalc calculator, you can add in social security with starting dates in addition to entering savings & any pension you may have. I really like the calculator.
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My hat is off to you @srparent15 for being able to navigate the changed paradigm in your household situation.
I had aggressive cancer that went from stage I to stage III in 10 weeks (misdiagnosed) - so I went from 100% survival to 50/50 at age 53. I survived and am now over 10 years cancer free. Residual effects of chemo brain - it is very spotty on recent as well as other memories; I can remember a lot of detail or nothing at all until I get some clues. Glad to pick up and go on.
The health care costs are very key - some are fortunate to be able to continue very good insurance at a discounted cost, while others are not. Some ‘gamble’ with the open market availability, esp if not too far from Medicare. One doesn’t know what health issue comes up that will be a financial drain.
My parents died relatively young (dad at 64 of cancer and mom at 77 of dementia/Alzheimer) and did not drain the estate due to some live in help and brother who lived a house away and then moved in towards the end with mom.
DH and I have LTC insurance but hope to never need to use it. IMHO key is being able to stay at home and hire help to come in.
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the 4% is just what you can take from your investment portfolio. SS, pensions and such are in addition to portfolio income.
It can get pretty complicated. Since you note you aren’t investment savvy, perhaps an advisor would be a good idea. You can find people who will build a plan for you to follow (for a set fee). A written plan is a great place to start.
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