How much would this person need to retire?
 

Assume an individual that is 40 years old, no wife or kids, home paid off and yearly expenses of $30,000 including taxes. Person is educated and has the ablity to find relatively high paying work fairly quickly if the need arose. Assuming expected life of 90 years old and no inheritence, how much would this person need to have socked away? At this young an age, would 30X annual expenses work? That would be $900,000 - how many would be comfortable retiring at that age with that much money? If this were you, how much many would you need to be comfortable to retire full time?

Re: How much would this person need to retire?
 

Assuming 3% return after inflation you'd need ~$850,000 to get $30k a year.

I'm just not sure $30k is a realistic amount to live off. Once retired you have an extra 50+ hours a week to fill up. If your expenses are $30k now I'd assume at least double that when retired.

Re: How much would this person need to retire?
 

Double that? I don't think so. What would you spend 30K more a year on? I would travel 2 or 3 times a year from the current once a year vacation, play more golf, etc...that doesn't add up to 30K. I'm in Canada, so I don't have to worry about medical

Re: How much would this person need to retire?
 

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What would you spend 30K more a year on?

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We are not talking about me. I know I couldn't live on $30k a year and I also live in Canada.

I assumed that $30k a year was your current spending while working thus why I figured doubling it was a safe assumption since you'd have to fill up 50 extra hours a week which increases spending.

Now that you stated you want to travel 2-3 times a year I am 100% sure your estimate is too low.

Re: How much would this person need to retire?
 

If my house was paid for and I had no wife or kids, I'd be able to retire on that pretty easily in a reasonably affordable city.

Re: How much would this person need to retire?
 

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What would you spend 30K more a year on?

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We are not talking about me. I know I couldn't live on $30k a year and I also live in Canada.

I assumed that $30k a year was your current spending while working thus why I figured doubling it was a safe assumption since you'd have to fill up 50 extra hours a week which increases spending.

Now that you stated you want to travel 2-3 times a year I am 100% sure your estimate is too low.

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Please tell me what it should be...the average median salary in canada is something like 60K for a family. After taxes there is maybe 35K left and families raising kids get by on that income no problem. These people would be flat broke if they spent what you are suggesting. 60K after tax is like making a 90K salary which is a fairly high salary in Canada although in my profession about the average.

Also, if you don't work anymore you should be able to save money on lunches at home, no work clothes, drycleaning, less mileage on car, etc....

As far as vacations, an all inclusive to Mexico is about $1200 including taxes, fees, etc. I see deals all the time for less than that, but it's last minute deals. If I was retired I could take advantage of those all the time.

Re: How much would this person need to retire?
 

How much income is needed after taxes?

To earn 30k per year, I would probably dump all my money into one of the Dividend Achiever indexes (dividendachievers.com). I like that for a few reasons.

1. Dividends are taxed less than interest (although Hillary could change this)

2. The dividend achievers companies increase their dividends at a rate that should match or eclipse inflation.

3. You benefit from capital appreciation as well. (11% average over last 10 years total return)

$900,000 is about the low end of how much the guy would need to retire. Living in a cheaper country for a few years or working part time would go a long way to making this work. The chief concern is inflation. While he should easily be able to earn $30k in gains from his 900k investment now, a bad year or two could be a major setback. 20 years from now he'll need to earn $60k/yr just to be able to afford the same stuff he'd buying today. Even though he owns his own home, taxes will continue to increase as well as maintenance costs. If death comes at 50 years from now, thats a long time this money has to last. He really can't afford to touch the principal at all. Keep in mind how much health insurance will cost now that he isn't working. I guess medicare won't kick in for another 20 years at least.

Edited: Just realized you're canadian. Ignore the tax and health care stuff, but worry about your investments that are earning in USD instead of CDN

Re: How much would this person need to retire?
 

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How much income is needed after taxes?

To earn 30k per year, I would probably dump all my money into one of the Dividend Achiever indexes (dividendachievers.com). I like that for a few reasons.

1. Dividends are taxed less than interest (although Hillary could change this)

2. The dividend achievers companies increase their dividends at a rate that should match or eclipse inflation.

3. You benefit from capital appreciation as well. (11% average over last 10 years total return)

$900,000 is about the low end of how much the guy would need to retire. Living in a cheaper country for a few years or working part time would go a long way to making this work. The chief concern is inflation. While he should easily be able to earn $30k in gains from his 900k investment now, a bad year or two could be a major setback. 20 years from now he'll need to earn $60k/yr just to be able to afford the same stuff he'd buying today. Even though he owns his own home, taxes will continue to increase as well as maintenance costs. If death comes at 50 years from now, thats a long time this money has to last. He really can't afford to touch the principal at all. Keep in mind how much health insurance will cost now that he isn't working. I guess medicare won't kick in for another 20 years at least.

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After taxes would be 25K. Tax rate in canada for the first bracket is fairly low and dividends are taxed extremely favorably in Canada so the 5K estimate for taxes is on the high side if anything. So after taxes we are talking about 2K a month...I think that is fine with paid off house and car.

Re: How much would this person need to retire?
 

Can you describe a typical week as you envision it? What type of activities do you see yourself filling your time with?

At 40 you are only 6 years older than me. I don't have a job so I find this interesting.

Re: How much would this person need to retire?
 

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Can you describe a typical week as you envision it? What type of activities do you see yourself filling your time with?

At 40 you are only 6 years older than me. I don't have a job so I find this interesting.

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Why does it matter? All I know is that grinding it out at the office is about the last thing I would want to do. If I'm in a position not to do that, then I'd be a fool to keep busting my ass.

Re: How much would this person need to retire?
 

People tell me they would be bored without work too. Work is the last thing I would ever want to do. I say if you can't figure out how to occupy your time without working, then you just aren't being creative enough.

Re: How much would this person need to retire?
 

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People tell me they would be bored without work too. Work is the last thing I would ever want to do. I say if you can't figure out how to occupy your time without working, then you just aren't being creative enough.

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I'm not saying that at all. I'm saying you can't occupy your time on a $30k budget.

Re: How much would this person need to retire?
 

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People tell me they would be bored without work too. Work is the last thing I would ever want to do. I say if you can't figure out how to occupy your time without working, then you just aren't being creative enough.

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I'm not saying that at all. I'm saying you can't occupy your time on a $30k budget.

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That makes it trickier, fortunately you'll have plenty of time learn how to distill your own moonshine.

Re: How much would this person need to retire?
 

Something to keep in mind is that you don't need to maintain the full initial balance during the duration of the timespan. You don't want to check out at 90 having drawn 30k per year every year, and have your balance still at 900k or whatever it started at. You can afford to be much more aggressive than some of these posts suggest, because you can allow your principal amount to drop over the years as long as you time it according to when you think you yourself will drop. [img]/images/graemlins/wink.gif[/img]

Re: How much would this person need to retire?
 

The $850-900k was with him drawing down to 0 at 90.

He might get something out of CPP. Not sure how that works for someone who retires that early. But with 15-20 years of contributing I believe he should get something when he is in his 60s. That would give him a few hundred a month extra.

He also has the option of doing a reverse mortgage on his home.

Re: How much would this person need to retire?
 

I THINK $900K is do-able for retirement. But I'm not sure. I mean, 40 is pretty damn young.

Getting older yields more expenses for things like medical to name one big one. Travelling 2-3 times per year + normal expenses probably costs substantially more than $30K. I'm assuming by "travelling" you mean 1-2 weeks in another country pretty much doing whatever you want within means. Not going crazy, but coming back without regrets.

I think it's do-able. But like you said, if you are running thin, working part-time for a few years certainly shouldn't kill you. I don't think it's a great retirement. At all. I think you should want a lot more. Also, you didn't say how much the home was worth. I'm assuming average home.

Re: How much would this person need to retire?
 

I'm in Canada, so health insurance is not an issue. Home is average home in this area...about 400K. Personally I think 900K is too low. 1.5Mil would make me comfortable. At 900K I'd still want to consult on the side to basically cover expenses and let the capital grow for 5-10 more years.

Re: How much would this person need to retire?
 

I'm not sure you can discount health care insurance completely. Yes in Canada we have free health care in theory. The quality of health care though is sad and I see it getting much worse. I've already had to pay for medical services and I certainly expect to pay for them in 20 years.

Re: How much would this person need to retire?
 

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You don't want to check out at 90 having drawn 30k per year every year, and have your balance still at 900k or whatever it started at.

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Ya, you kind of do want this. You definitely don't want to be slowly depleting your retirement to the degree that you're actually timing it to your death. That'll be pretty stressful if you live a while. Most everyone who saves well for retirement and lives long, ends up with a decent estate when they die. There's a reason for this - you can't predict how long you'll live, what kind of health problems you may have, ect..