Cheepnis wrote: ↑
Sat Jun 22, 2019 8:36 am
The work tying you down vs. not actually wanting to be tied down paradox is tricky. I think the van living experiment is a great half measure compromise for the time being.
Have you ever read any of the Living A FI blog? He's got a good post about taking long breaks during your working career and how they don't actually impact your future projections as much as you'd think. https://livingafi.com/2014/04/27/how-to ... ire-early/
Thanks for a great insight - I think I'll be needing that. I've been doing similar research of my own, mostly talking to many people that I know that have retired.
The consensus was that if they were to do it over again, they would have retired earlier. But for most of them, 'early' meant around age 60.
A lot of them stayed on longer to secure a stronger financial footing prior to retirement, perhaps overly so - and it makes sense.
Most waited to have the house paid off or close to it, and to have a combined household monthly income of at least $5000 or more, through some type of pension. Beyond that, most didn't have extensive savings - maybe around 250k or so.
Many delayed retirement to near age 65 so that they could continue the healthcare coverage under medicare.
Looking at my situation, the earliest window for retirement would mean:
- at an income level around 300% Federal Poverty Level (FPL)
- healthcare coverage
- around 500k in savings, mostly pre-tax.
What the retirement budget experiment has shown me is that, yes, I could live at an expected retirement income level of 300% Federal Poverty. I would be renting, in a somewhat below average neighborhood.
The income at 300% FPL will cover the basic cost of living for food, shelter, utilities and transportation:
Scenario 1 - Renting
Net monthly income: $2,600
Total Monthly Cost of Living Expenses: $2,150
Left over: $450 (This would be the car payment should there be one)
Scenario 1 is feasible, though there isn't much wiggle room.
Scenario 2 - Purchasing a 450k house (current going price) in a decent neighborhood
Net monthly income: $2,600
Mortgage, Insurance, Property Tax, 30Yr, 20% down: $2,300
House maintenance cost: $400
Additional Funds required: -$1,500/mo. x 12 / $300,000 (after tax) = 6% withdrawal rate on savings.
Clearly, to cover the expenses in Scenario 2 without tapping into the savings, a monthly income of at least $4,000 is needed. $5,000 a month would provide some wiggle room.
This is all just for a shelter (!) It's not an exaggeration to say that people work their entire lives just to pay off their mortgage.
Of course there are options, i.e., purchase a cheaper house in a not-so-nice neighborhood, buy a condo, or relocate out of state to a cheaper area etc. But in the end, the solution will involve some form of reduction in standard of living or a complete lifestyle change as a result of moving.
Having gone through the Retirement Budget Experiment, I found that while I can live and tolerate the standard of living that 300% Federal Poverty Level provides, I do prefer a bit more comfort than that. And I'd prefer to live in a nicer neighborhood in retirement.
300% FPL in 2019 is about $37,500 / yr. or about $3,000 a month (before tax).
Retiring with a house that's paid-off and without a mortgage payment, 300% FPL at $3,000 a month is quite tolerable, as monthly life expenses amount to about 2/3 of that with about $600 left over each month at your disposal.
It is clear that the problem of shelter is the most important problem to resolve before retirement.
And this is reflected in the thoughts of many that have retired. They chose smaller savings in exchange for a paid off house.
My current thought is that I will likely delay the retirement while looking at the next 5 years as the retirement window.
The first objective will be to reach at least $4,000/mo. in net monthly retirement income. This will be reached in 2023 along with about 650k in savings.
Second objective will be to shift savings focus from pre-tax to after-tax starting next year.
While I will continue to live ERE minimalist lifestyle, I believe it is better to build cushion while the opportunity is available.
A 30 - 50% downturn in the real estate market would be ideal in the next few years. Same for the stock market.
The interest rate can no longer be raised drastically due to the 22 trillion federal debt. The only remaining variable then, is the price, which has already begun to fall.
My intuition tells me that the perfect storm forming, given the current state of mess that the country is in, both financially and politically.
It is clear that the problems are far beyond the capabilities of these political appointees to handle.
I will continue to save and look for opportunities to solve the shelter problem. I believe there is a high probability that it will be resolved within the next 5 years.