have you accepted a lower cost lifestyle to retire early?

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Tamalak
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Re: have you accepted a lower cost lifestyle to retire early?

Post by Tamalak » Fri May 05, 2017 12:38 pm

sschoe2 wrote:
Tamalak wrote:Yes, definitely. I plan to retire at 40ish on about a million. Withdrawal rate of 2.25%. Not a lavish lifestyle, but I'll be totally free!!
I'd love to as well but the biggest obstacle I see is health insurance. Otherwise I could live on $30-40k just fine but not if I am paying $2500 a month for health insurance.
What?? I was expecting it to be something like 5k a year. Can someone speak to this?

Carefreeap
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Re: have you accepted a lower cost lifestyle to retire early?

Post by Carefreeap » Fri May 05, 2017 12:59 pm

Tamalak wrote:
sschoe2 wrote:
Tamalak wrote:Yes, definitely. I plan to retire at 40ish on about a million. Withdrawal rate of 2.25%. Not a lavish lifestyle, but I'll be totally free!!
I'd love to as well but the biggest obstacle I see is health insurance. Otherwise I could live on $30-40k just fine but not if I am paying $2500 a month for health insurance.
What?? I was expecting it to be something like 5k a year. Can someone speak to this?
At ages 58 and 55 we are paying approximately $620 and $580 per month respectively for premiums therefore about $13,500 for premiums and another $5,500 in out of pocket medical costs for a total of about $1900 a year. This is for a Bronze Plan through Kaiser of Northern California. These rates will increase as we age until we reach Medicare eligibility. So, not $2500/mth yet but eventually will be. And of course we don't have dependents or expensive treatments.

I always said that health insurance would be the new mortgage payment in retirement.

YMMV.

furikake
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Re: have you accepted a lower cost lifestyle to retire early?

Post by furikake » Fri May 05, 2017 1:44 pm

Not only health insurance, but remember to figure in the taxes you will pay also. I didn't figure that in at first and then realized I missed that one income tax item. I'm not retired yet, but we will not be lowering our lifestyle. Also figure in things that work pays for you now like, if you have any, like cell phone, gasoline, Internet, etc.

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Elsebet
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Re: have you accepted a lower cost lifestyle to retire early?

Post by Elsebet » Fri May 05, 2017 1:47 pm

Personally I wouldn't say I accept a lower cost lifestyle but would rather say I enjoy a lower cost lifestyle with the benefit of also potentially retiring early.

J295
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Re: have you accepted a lower cost lifestyle to retire early?

Post by J295 » Fri May 05, 2017 2:20 pm

We "retired" at age 53, which was 5 years ago. Ended up that we didn't have to accept a lower cost lifestyle, but we would have. And, if we need to in the future we will without any angst.

Of course, everyone is different, but we knew we wanted to transition to "retirement" and we took the leap .... and it has worked out wonderfully on so many fronts .... if you feel this is right, it seems to me that your finances and emotional/mental attitude support the change .....

Perhaps you're a bit nervous -- we were. Someone told me there's a word for that feeling when making this kind of move ....."Normal"

Best of luck.

grayparrot
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Re: have you accepted a lower cost lifestyle to retire early?

Post by grayparrot » Thu May 18, 2017 4:52 pm

White Coat Investor wrote:
grayparrot wrote:
Not retired yet, but $50K from $2M is an extremely conservative plan. If you're really okay living on $50K, you're going to be just fine with any reasonable portfolio. That's a 2.5% withdrawal rate.
conservative, true but also prudent in my view. I am personally persuaded by Hussman, Grantham, etc. that while short term valuation timing is useless, the provable tendency of average valuations to revert to long term averages over a 10-12 year cycle is quite clear. If markets are at long term average valuation ratios in 10-12 years, that would be a close to 0% return from here. Hence, I think it's an extraordinarily risky time for people beginning withdrawals now to hope for anything more than 2.5% to avoid devastating sequence of return risk in the first years of withdrawals.

grayparrot
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Re: have you accepted a lower cost lifestyle to retire early?

Post by grayparrot » Thu May 18, 2017 4:55 pm

the effectiveness of Kaiser sure is one of the very appealing aspects of California living!
Carefreeap wrote:
Tamalak wrote:
sschoe2 wrote:
Tamalak wrote:Yes, definitely. I plan to retire at 40ish on about a million. Withdrawal rate of 2.25%. Not a lavish lifestyle, but I'll be totally free!!
I'd love to as well but the biggest obstacle I see is health insurance. Otherwise I could live on $30-40k just fine but not if I am paying $2500 a month for health insurance.
What?? I was expecting it to be something like 5k a year. Can someone speak to this?
At ages 58 and 55 we are paying approximately $620 and $580 per month respectively for premiums therefore about $13,500 for premiums and another $5,500 in out of pocket medical costs for a total of about $1900 a year. This is for a Bronze Plan through Kaiser of Northern California. These rates will increase as we age until we reach Medicare eligibility. So, not $2500/mth yet but eventually will be. And of course we don't have dependents or expensive treatments.

I always said that health insurance would be the new mortgage payment in retirement.

YMMV.

Mr.BB
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Re: have you accepted a lower cost lifestyle to retire early?

Post by Mr.BB » Thu May 18, 2017 5:15 pm

You should try to live on your budget for 6 months to a year first.
Obviously right now you be paying rent in your other bills and you're working, but try to live on $50,000 a year with everything else. Food , entertainment and estimated part of your rent and utilities and so forth see how that works for you. It would give you a really good idea of what it's like to live that way.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

chuckb84
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Re: have you accepted a lower cost lifestyle to retire early?

Post by chuckb84 » Thu May 18, 2017 6:40 pm

Not really. We did move to a much lower cost of living area, and I guess we forego some luxuries, living in a small western town as opposed to the "big city" in the East, but the things we've given up are not things I miss.

I think the distinction needs to be made between a lower COST lifestyle and a lower QUALITY lifestyle, as these are not the same thing! We've made some tradeoffs, and the net result was a lower cost, but it feels like higher quality to me.

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HomerJ
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Re: have you accepted a lower cost lifestyle to retire early?

Post by HomerJ » Thu May 18, 2017 8:47 pm

grayparrot wrote:
White Coat Investor wrote:
grayparrot wrote:
Not retired yet, but $50K from $2M is an extremely conservative plan. If you're really okay living on $50K, you're going to be just fine with any reasonable portfolio. That's a 2.5% withdrawal rate.
conservative, true but also prudent in my view. I am personally persuaded by Hussman, Grantham, etc. that while short term valuation timing is useless, the provable tendency of average valuations to revert to long term averages over a 10-12 year cycle is quite clear. If markets are at long term average valuation ratios in 10-12 years, that would be a close to 0% return from here. Hence, I think it's an extraordinarily risky time for people beginning withdrawals now to hope for anything more than 2.5% to avoid devastating sequence of return risk in the first years of withdrawals.
Schiller himself (The guy who won the Nobel prize for PE10 on which you are basing your investment decisions) predicted 0% real returns in 1996.

Instead we got like 6% real over the next 10 years.

The experts predicted 4.5% real in 2010. Instead, we've gotten about 12% real since then... It hasn't been 10-12 years yet, so the jury is still out, but I think you are crazy to think that valuations predicting returns is over 10-12 years is "quite clear".

The guy who INVENTED CAPE and won a Nobel prize for it has been a perma-bear since 1992 when PE10 first crossed 20, and returns have been 9.5% nominal since then. He's been wrong for 25 years. Why would you trust him?

"Extraordinary risky time" is quite a statement. Even in the Great Depression, 4% withdrawal worked... You think the next 10 years is going to be nearly twice as bad as the Great Depression? Why?

IlliniDave
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Re: have you accepted a lower cost lifestyle to retire early?

Post by IlliniDave » Thu May 18, 2017 8:54 pm

I dialed back my lifestyle pretty seriously in 2011 for that reason (e.g., I spent about $31K after tax in 2016). It's been the most content 6+ years of my life. I'll be handing in my notice at work two years from yesterday at age 55. I've been single again for the last 9 years, allowing my plan to include a cabin in the woods during the warm half of the year and a downsized house in my hometown for the cold half (medium COL area). Plan to live on about $45K gross from 55 until I start SS, then probably somewhat more after that. Anticipating an average withdrawal rate from age 55-80 of under 2% (~2.5% until SS and likely 0% thereafter).
Don't do something. Just stand there!

smitcat
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Re: have you accepted a lower cost lifestyle to retire early?

Post by smitcat » Fri May 19, 2017 7:16 am

"Plan to live on about $45K gross from 55 until I start SS, then probably somewhat more after that. Anticipating an average withdrawal rate from age 55-80 of under 2% (~2.5% until SS and likely 0% thereafter)."

Please help me here I do not understand the math....

$45K before SS / single / 2.5% withdrawal rate

$50+? (somewhat more) after SS / 0% withdrawal rate

How does one get above $50K a year for SS single payee?

IlliniDave
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Re: have you accepted a lower cost lifestyle to retire early?

Post by IlliniDave » Fri May 19, 2017 11:18 am

smitcat wrote:"Plan to live on about $45K gross from 55 until I start SS, then probably somewhat more after that. Anticipating an average withdrawal rate from age 55-80 of under 2% (~2.5% until SS and likely 0% thereafter)."

Please help me here I do not understand the math....

$45K before SS / single / 2.5% withdrawal rate

$50+? (somewhat more) after SS / 0% withdrawal rate

How does one get above $50K a year for SS single payee?
Sorry, should have been more clear.

I will get a retirement annuity from my employer so I'm not withdrawing the entire $45K that I'll be living on pre-SS, just a fraction which increases a little each year (I plan with current $ so the annuity payment goes down a little each year in my calculations). SS + annuity > $45K in 2017 dollars for a long time, out past age 85 at least if I assume 3% inflation and full SS. If I assume 4% inflation and 77% of current estimated benefit for SS I'll have an average withdrawal rate of under 0.2% between age 70 and 85 (starts at 0% at 70 and creeps up to 0.3% at 85 and it will increase a little each year thereafter).

I should add, when I say "somewhat higher" regarding post-SS spending, that could increase the withdrawal rate a little bit. In my baseline plan I just keep spending at $45K post-SS, and will be a net saver for a number of years. Could be I spend some of what the spreadsheet shows as saved.

Also, I don't "count" RMDs as withdrawals since the money net of taxes is just shuffled over to my taxable account in the plan. Maybe I should count the taxes paid as part of the withdrawal rate calculation, but I don't. That would add something like 0.5% to 0.8% or so to my post-70 withdrawal rate. Because the withdrawal rate is so low to start with, I don't bother.

I don't worry to much about tenths of percents here and there in the out years in my spreadsheet calcs. At some point I expect medical costs to start ramping up and driving my assets down. My "nominal" plan is to keep spending low enough relative to assets so that it is reasonably likely assets will grow a little through the early part of retirement, leaving margin should age/health force expenses to spike during the last years. In the universe of possible outcomes money could wind up tight, but I'm willing to take the gamble to free up some years while I'm not-so-old.
Don't do something. Just stand there!

smitcat
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Re: have you accepted a lower cost lifestyle to retire early?

Post by smitcat » Fri May 19, 2017 11:24 am

IlliniDave wrote:
smitcat wrote:"Plan to live on about $45K gross from 55 until I start SS, then probably somewhat more after that. Anticipating an average withdrawal rate from age 55-80 of under 2% (~2.5% until SS and likely 0% thereafter)."

Please help me here I do not understand the math....

$45K before SS / single / 2.5% withdrawal rate

$50+? (somewhat more) after SS / 0% withdrawal rate

How does one get above $50K a year for SS single payee?
Sorry, should have been more clear.

I will get a retirement annuity from my employer so I'm not withdrawing the entire $45K that I'll be living on pre-SS, just a fraction which increases a little each year (I plan with current $ so the annuity payment goes down a little each year in my calculations). SS + annuity > $45K in 2017 dollars for a long time, out past age 85 at least if I assume 3% inflation and full SS. If I assume 4% inflation and 77% of current estimated benefit for SS I'll have an average withdrawal rate of under 0.2% between age 70 and 85 (starts at 0% at 70 and creeps up to 0.3% at 85 and it will increase a little each year thereafter).

I should add, when I say "somewhat higher" regarding post-SS spending, that could increase the withdrawal rate a little bit. In my baseline plan I just keep spending at $45K post-SS, and will be a net saver for a number of years. Could be I spend some of what the spreadsheet shows as saved.

Also, I don't "count" RMDs as withdrawals since the money net of taxes is just shuffled over to my taxable account in the plan. Maybe I should count the taxes paid as part of the withdrawal rate calculation, but I don't. That would add something like 0.5% to 0.8% or so to my post-70 withdrawal rate. Because the withdrawal rate is so low to start with, I don't bother.

I don't worry to much about tenths of percents here and there in the out years in my spreadsheet calcs. At some point I expect medical costs to start ramping up and driving my assets down. My "nominal" plan is to keep spending low enough relative to assets so that it is reasonably likely assets will grow a little through the early part of retirement, leaving margin should age/health force expenses to spike during the last years. In the universe of possible outcomes money could wind up tight, but I'm willing to take the gamble to free up some years while I'm not-so-old.
No problem - since much of your plan details are not in this post and some of your figures are rounded or estimated the ability to do any checking or commenting on this plan is very limited. Without really knowing your savings, income, or expenses the feedback will have little value or could even be misleading (unintentionally).

IlliniDave
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Re: have you accepted a lower cost lifestyle to retire early?

Post by IlliniDave » Fri May 19, 2017 2:11 pm

smitcat wrote:
No problem - since much of your plan details are not in this post and some of your figures are rounded or estimated the ability to do any checking or commenting on this plan is very limited. Without really knowing your savings, income, or expenses the feedback will have little value or could even be misleading (unintentionally).
Understand, I wasn't really putting it out there seeking specific feedback (though I always appreciate it when it comes), just responding to the OP w.r.t the question of lowering lifestyle to facilitate ER. I threw out a few summary numbers to indicate what I meant by lower cost lifestyle and convey that I wasn't doing something reckless like punching out at 55 assuming 10% returns and that a 6% withdrawal rate would last 40 years.

I did give my most recent current expenses: $31K ($31,400 actually) in 2016, which includes everything but income tax. I've been pretty stable at that level for a few years and content with the day-to-day lifestyle. I also gave a number that bounded my estimate for expenses in retirement that I'm planning for ($45K, with basic needs/wants being $33K of that, the rest for discretionary/leisure, and both those numbers are pre-tax equivalents). Didn't give my current income because it really doesn't matter, but it's on the order of 5x what I'm spending. I have no debt and already own the cabin I mentioned. I'll be selling my current home and downsizing (net of everything I expect to come out with $60K-$80K in my pocket after that, maybe more). My net worth right now is a little over the 7-figure threshold, with two more years left to fatten the kitty. There's a good probability I'll inherit on the order of $200K-$400K sometime in the next 20 years.

If the financial markets are not too terribly unkind, I should be in pretty good shape come 2019. Nothing is certain but I feel pretty good about the plan.

What I worry about besides vaporization of the financial markets is medical insurance costs spiraling out of control. But as long as my employer doesn't completely renege on the annuity and the gov't doesn't completely renege on SS at the same time (I can handle some reduction in either/both), I have room to increase my spending and still have, from a firecalc-style perspective, a high probability of avoiding shortfall. I don't have a ton of room to lower spending w/out it starting to hurt, but I have some.
Don't do something. Just stand there!

chinto
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Re: have you accepted a lower cost lifestyle to retire early?

Post by chinto » Fri May 19, 2017 9:30 pm

No kids, you want adventure, why not retire now and simply blow the U.S.? You can live like a king and queen in another country. You are young and healthy so the healthcare in those countries should suffice for a long time. Why not globe trot a bit. 6 months or a year here and there and see the world. I say 6 months to a year as that normally means you will away from the tourist areas,go native, and save big $$$.

SarahShaw
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Re: have you accepted a lower cost lifestyle to retire early?

Post by SarahShaw » Fri May 19, 2017 11:03 pm

Did that by retiring and moving to Chiang Mai, Thailand at age 49 in 2009. That might sound extreme but I previously lived & worked in SE Asia as an expat for a big US company and already had a high degree of familiarity with Thailand. Financially, it seems to be working out but we (two people) still seem to be spending about $50K/yr despite the fact that most retirees living here claim to spend half that much and many young Westerners living here brag about living on $1000 or less per month. We do live well on that $50K/yr but not like rock stars - if the stock market hadn't more than doubled since retiring I might be feeling more nervous about it.

IMO
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Re: have you accepted a lower cost lifestyle to retire early?

Post by IMO » Fri May 19, 2017 11:35 pm

You mention "lower cost lifestyle" and then just put $80K as your budget and then want to go to $50K. To answer that question, it seems that you really should be posting your specific budget items. For example, does that $80K now cover most medical costs from work, do you have 2 cars, but are going down to 1, or just 1 already? How much is eating at restaurants? How much is travel now vs. new budget, etc? In each category how much are you willing to cut to get you down to $50K?

Next, how much do you hate your jobs? Many don't like their jobs or aspects of their jobs, others may have complete and total burnout.
Is there not alternatives in your 40's? Or is it only this job, only this location vs. the absolute, "we are checking out"? Interesting there is 2 of you that are at the same level of dislike from the job, or is that group think? Is the $50K lifestyle after going through the categories provide you enough lifestyle trade off for leaving the cash cow?

On the other hand, you have a large stash of money and seems like another large stash could be given to you in the future (probability?).

To answer your question, yes and no.

JGoneRiding
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Re: have you accepted a lower cost lifestyle to retire early?

Post by JGoneRiding » Fri May 19, 2017 11:41 pm

You might have to pick and choose. I live in a small university town (highly rated state U) with good amenities and amazing access to the outdoors. BUT we don't have a "specialty" grocery store--there was hope for a Trader Joes but we got grocery outlet instead, there is NO wallmart which should make a lot of people happy right? We have a great farmers market and we have a movie theater but not eclectic type (well the "new" one shut the old more eclectic ones down) technically its independent but you wouldn't know that.

BUT 50k would be comfortable here. 60k probably better. Most importantly we have a hospital--I think that fact gets overlooked a lot in smaller town living if you are aging.

michaelbtate
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Re: have you accepted a lower cost lifestyle to retire early?

Post by michaelbtate » Sat May 20, 2017 12:02 am

First post :)

My wife and I have been on a journey to early retirement for a few years now. Currently 30 years old each and been working our finances for seven years. We have a combined income of around 50k a year both working full time. We live in Northern California (which actually has a lot of what you described--definitely eclectic, lots of surrounding outdoor beauty. Ashland (2 hour drive has the Shakespeare theaters and a lot of indie movie stuff. Shasta county has a lot of random stuff too)). Anyways, back to us. Yes, we have chosen to live a cheaper lifestyle. We live off of about $1000 a month, eat 90% organic and are investing between 60% to 70% of our monthly income. Our % is higher as our $ are lower. Our year over year increases in income have averaged around 15% increase the past 5 years (again not hard when you don't make a ton hah). We bought our 4B house 1.5 years ago, and rent out three bedrooms in our house to four college students bringing in $1800/mn with a $1350 mortgage. We are launching two side businesses, and are in the process of starting our first 501c3. Our hope is to hit our first level of retirement in the next 2-3 years (which is for us, not having to work if we dont want to, or better said: getting to pick the work we want around the way we want to spend our time). Our hope would be by 35 to hit level two retirement for us which is all our expenses + enough passive money to fund our investment initiatives.

That's our story as of today.

JGoneRiding
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Re: have you accepted a lower cost lifestyle to retire early?

Post by JGoneRiding » Sat May 20, 2017 9:21 am

Here is a simplified 50k budget. Could you be happy? I gurantee most of the country you can find housing that is nice and a 1/2 to 2/2 on half what you are paying

Monthly Yearly total
Housing 1200 14400
Health insurance 600 21600
Auto insurance 60 22320
Auto Care 100 23520
food 600 30720
Entertainment 1000 42720
Other incidentals 200 45120
Cable/phone 200 47520
Other Utilties 200 49920

Kencufc
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Re: have you accepted a lower cost lifestyle to retire early?

Post by Kencufc » Sat May 20, 2017 10:40 am

I'm looking to retire to Lewisburg WV. Check it out if you've never heard. I plan to teach at the medical school part time. Farmers market, two movie theaters, 2 miles from world class river and bass fishing, trout fishin, 45 min from best ski area in mid Atlantic, great restaurants, Greenbrier Resort, festivals, art gllaeries, pick your own orchards.

Very low cost of living. Luckily, the word West Virginia is after the city name which means 97% of the US thinks that it doesn't have running water. If it had Virginia after it, it would be a high cost of living town.

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