Long time reader, first time lavender room poster…
How much cash flow (think passive, return on investments, inheritance, rental proceeds, drug money, whatever works for you) would it take for you and your family to leave behind two good paying jobs?
Lets go ahead and assume that before you leave the job market you build up a nice little lump of cash that could sustain you for 6 months if, for some reason, your source of cash flow dried up.
In real dollars ?50k? 75K? 100K? 250K?
How about as a percentage of the money you are current income? Obviously a couple making 60K would have much different requirements than a family making 300K in their current positions.
Clearly many factors at play here… And that is fine, give me your thoughts (and in some cases, dreams).
It’s hard to say because my wife is still working. But I get about half of what I used to make from my pension and Social Security. I think we will be able tocover all the bills with that and only need savings for travel, new cars and special purchases when she stops working
It’s kind of vague but everyone is different. Without the pension, i doubt that our very substantial savings would last us the rest of our lives.
I think a lot will depend on whether someone has a mortgage/pays rent. We will have our mortgage paid off in 3 years, and at that point our cash flow requirements will be cut in half. Also, are you talking about the bare minimum to get by? Or the amount it would take to replicate our current DITINK (Double IT Income No Kids) lifestyle?
Cash flow is really income by another name. Passive income differs from traditional income in that it will usually continue far after “retirement”. A better way to look at the issue is to examine lifetime earnings potential. Add that up for the rest of your expected career, and decide if that is sufficient for your retirement goals (it is in our case). If we received an inheritance (or something) equal to ~50% of our lifetime earnings potential (in our present jobs), we could certainly consider some form of early retirement (if we wanted to stop working). At present “we owe, we owe, so off to work we go.” We are paying for mortgage/kids/college savings/retirement. When those are done, our annual costs will plummet (and we will be pretty near retirement age).
The way this is generally figured out is based on expenses, not income. Ideally you want to have investments such that you can plan to draw out about 4-5% from gains and dividends per year to cover expenses and then some, taking into account other sources of income like social security. There are some other ways to figure it but this seems to be the most reliable “can I retire now?” way to answer.
I think a lot will depend on whether someone has a mortgage/pays rent. We will have our mortgage paid off in 3 years, and at that point our cash flow requirements will be cut in half. Also, are you talking about the bare minimum to get by? Or the amount it would take to replicate our current DITINK (Double IT Income No Kids) lifestyle?
I am just looking to hear what an average ST user feels is a “comfortable” level of living and enjoying life… Clearly there are a ton of factors in play, obviously the housing nut being the biggest… Lets assume mortgage is paid off.
The point of this post was more of a poll on what the average ST user defines as “a comfortable living”.
Having enough income so that you can cover the bills** **easily as well as potential minor emergency with enough left over for the occasional vacation and general entertainment.
For me that’s not much less then what we have coming in now. I suppose that once the kid get’s thru school that will be a chunk we will no longer need, but most of our expenditures are food, clothing, shelter, health care and taxes.
I think a lot will depend on whether someone has a mortgage/pays rent. We will have our mortgage paid off in 3 years, and at that point our cash flow requirements will be cut in half. Also, are you talking about the bare minimum to get by? Or the amount it would take to replicate our current DITINK (Double IT Income No Kids) lifestyle?
I am just looking to hear what an average ST user feels is a “comfortable” level of living and enjoying life… Clearly there are a ton of factors in play, obviously the housing nut being the biggest… Lets assume mortgage is paid off.
Here’s the most common means to estimate what (I think) you are asking http://www.firecalc.com/. We (me, wife, and 2yr old) currently live off about $25k/yr, about 1/5th of our gross, and have no debt. Don’t own a home yet, but probably will within the next year and expect to have it paid for by the time the wife hits 40. We’re aiming for and on pace to retire when she hits 50 (I’ll be 55, 23 more years); by then we should have no debt, low 7-figures in retirement, and a small pension from a previous job. Barring a catastrophe, should be able to live better in retirement (that isn’t saying much) with a 3% withdrawal rate…at least that is what we’re going for.
I’m really surprised at how little “out of pocket” spending I do now that I don’t have to go to work every day. I don’t try to not spend, there is just not as many small cash purchasses to make.
I would say that we could definitely get by on ~75K, be “comfortable” on 100K, and easily spend more if we had it. (today’s dollars, need to plan for inflation).
I’m really surprised at how little “out of pocket” spending I do now that I don’t have to go to work every day
I’m a “Projects” person. I think if I was not working I would end up spending more money then I do now because I would be working on all sorts of different projects. I was talking to a guy just the other day that stated it this way “When I had time, I had no money, when I had money, I had no time”
A big expense that would be saved or, severely cut, would be auto expenses. If both my wife and I were not working we could probably get away with a single car and we’d be doing a whole lot less driving.
I’m really surprised at how little “out of pocket” spending I do now that I don’t have to go to work every day
I’m a “Projects” person. I think if I was not working I would end up spending more money then I do now because I would be working on all sorts of different projects. I was talking to a guy just the other day that stated it this way “When I had time, I had no money, when I had money, I had no time”
A big expense that would be saved or, severely cut, would be auto expenses. If both my wife and I were not working we could probably get away with a single car and we’d be doing a whole lot less driving.
~Matt
Interesting take on the time vs. money. I had that same discussion with wifey last night… I mentioned that right now, between from the time I go to bed at 10PM through work and my workouts the next day, I don’t have any opportunities to spend money until 8pm the following night!! When I am not working anymore I will have all day to spend money!!
I figure 80K is a comfortable level of income sans job.
figure 80K is a comfortable level of income sans job.
Again that’s going to depend on many different factors. House paid off, high/low property taxes, source of income, taxes paid on that income, Medicare or private insurance etc etc.
If you are retireing and are eleigible for medicare, house is paid off and your in a low property tax area then you’re going to need a whole lot less then if you have a $1500 a month mortgage payment, $750 tax payment and a $1200 insurance premium to pay. The medicre issue is a major reason why many people don’t/can’t retire early. A couple that is 55 years old and not elegible for any other pension type insurance might be paying ~1500-2K a month in premiums or more. If they are paying 15% on their income you’re looking at 21-27K of your income going to insurance including taxes.
A big expense that would be saved or, severely cut, would be auto expenses. If both my wife and I were not working we could probably get away with a single car and we’d be doing a whole lot less driving.
Same. We could easily cut back to one car. We own both outright. However, we are both running our own businesses, out of the house, and typically in a given week there are 3 - 4 times in a week, when we’ll both need to be out on calls or meetings with clients. Or stuff will just spring up at the last minute and a car will be needed by one individual.
Mortgage, taxes, food, rainy-day fund, investments, with a little bit left over each month. Because of being self-employed and running businesses out of the house, we can “write-off and expense things” that others can’t, which is helpful. We’re “comfortable” I guess. Don’t put too much thought into it, beyond that.
The point of this post was more of a poll on what the average ST user defines as “a comfortable living”.
Having enough income so that you can cover the bills** **easily as well as potential minor emergency with enough left over for the occasional vacation and general entertainment.
For me that’s not much less then what we have coming in now. I suppose that once the kid get’s thru school that will be a chunk we will no longer need, but most of our expenditures are food, clothing, shelter, health care and taxes.
~Matt
I follow along these lines. Rather than look at necessary income look at the expense side of “a comfortable living”. I paid off the house and cars, no credit cards, so I can live off of enough to feed, cloth, heat and water, and entertain my kids and family. Which surprisingly is pretty affordable when you simplify living. I used to have mortgage, car payments credit cards that were eating the largest chunk of the household income. Once that was eliminated from the monthly expenses, the rest became easy.
In today’s dollars, the number for us is about 5k/month (this assumes I’d have to get private insurance for my family - currently provided by work).
The house should be paid off around October this year - then it drops to about $3700. Again, that’s in today’s dollars though. I think it would be reasonably easy to get to that number in recurring income…what I’m worried about is in 30 years when the $3700 is $15000.
Sadly around here Property taxes are ~50-60% of what the mortgage would be on the property. One of my majopr concerns about retiring is the fact that I will have 10-20+ years where property taxes will continue to increase. My property taxes have doubled in the last 15 years or so. If you’re on a fixed income and Taxes are going to double or more during your retirement and it’s already at 50%+ of the mortgage, in essence you WILL have a mortgage payment in 15-20 years.
CA is kind of in the similar boat. Although the tax rate is way lower due to Prop. 13, the homes values to live in the nicer parts of the state would cause you to spend $750-$1000/mo just on property tax.