I agree that housing costs are the major factor in the expenses of living in a HCOL area. Taxes are another reason for HCOL. Income taxes as well as property taxes. Does paying off a mortgage change a HCOL area to a MCOL area for an individual?marcopolo wrote: ↑Sat Jan 26, 2019 5:34 pmWell, OK. But, reading over my post, i don't recall saying housing costs go away. Did you see that somewhere?bltn wrote: ↑Sat Jan 26, 2019 4:15 pmThe housing costs that don t go away with a paid off mortgage are the taxes and insurance. Both much higher in a HCOL area.marcopolo wrote: ↑Fri Jan 25, 2019 9:24 pmI think the impact of HCOL area is a bit overstated for retirees. Most retirees have a paid off house. The biggest contributer to HCOL is the cost of housing. If that is already covered, the spread is quite a bit smaller. Sure, other things are still more expensive, but the impact is not as big as some make it out to be.HomerJ wrote: ↑Fri Jan 25, 2019 9:15 pmWe've argued about this before.visualguy wrote: ↑Fri Jan 25, 2019 11:30 am
Probably more like 3.2% SWR for early retirement. Also, you need to reserve money for LTC for the first person to need it (the second can rely on selling the house and remaining assets), money for renovations, and other big ticket items. Say you have $4M left after that (probably less, frankly), you're talking $128K pre-tax per year. After income taxes, property taxes in HCOL, and health insurance for a couple, you have less than $70K left. Now you have utilities, food, insurance, cars, travel, gadgets, pets, repairs, etc. I'm grounded in the reality of my bills and cost of living - that's the only reality that matters in terms of my ability to retire.
You can be 100% correct about your bills. You, indeed, would need to make painful decisions with only $5 million.
A very large majority of the rest of us would not have to make painful decisions. We would get everything we wanted and then some.
I submit most of your problems would disappear as soon as you moved away from the HCOL area. That's the only thing holding you back from retirement.
If working an extra 10-15 years to afford the HCOL area is worth it to you, then it's worth it to you.
A paid off house and $5M would support a pretty nice lifestyle even in a HCOL area, IMHO. But, I can see how others have greater wants (needs are more than covered) Can you have everything you want? no. But , that is still a problem, at 10M or 20M.
The taxes are higher in a HCOL area, income taxes in particular. This pushes all costs up.
I agree that a move to a MCOL area would mitigate enough expenses to afford more vacation time or nicer cars or whatever.
I m not sure that a move away from a HCOL area would be categorized as a sacrifice so much as a change.
But I submit that a 5 million dollar nest egg will support a pretty nice lifestyle in 95% of the country. If one hasnt submitted to lifestyle creep resulting in an unsustainable lifestyle. Including maintenance in retirement.
By the way,the notion that 10 million dollars in savings is needed for a comfortable retirement is absurd, even in this great forum community. This is not the kind of thing we should be teaching our younger forumites. Financial security is about lifestyle control as well as accumulation.
What i said was that a big part of the difference between cost of living between areas is due to the cost of the house.
Just eliminating the difference between the mortgage on a $400k house and a $2M house narrows the required expense quite a bit, even if the taxes are and other expense are still quite different. Are you suggesting that is not the case?
As far as taxes on the house, I don't know if that is so clear cut. Many MCOL areas have higher property taxes than HCOL areas. The property tax on a $2M house in Hawaii is less that for a $400k house in Ohio, as an example. In California, if you have owned for a while (not uncommon for retirees) your effective tax rate can be relatively low due to prop 13. So, it does not necessarily follow housing taxes are higher in HCOL areas.
HCOL areas are high-cost for a reason, and you have to decide if you think they are worth the cost (i think many of them are).
Having lived in HCOL, MCOL, and LCOL areas in the past, I enjoyed my time in all. Each has its advantages and shortcomings. To me, the HCOL area was not superior to the other two, just different. I m probably not sophisticated enough to appreciate the benefits of higher expenses in life for the most of the same amenities.
Equating HCOL to a nice climate (as someone in the thread suggested) would include the southern portion of the country in HCOL, and eliminate NYC, Chicago , and Boston. Unless one prefers cold weather. Probably not a good idea to relate climate to COL.
I believe retirement location is important in determining how much is needed for retirement. I don t believe that one must remain in a HCOL area if he wishes to retire comfortably a few years before FRA. It s a trade off.