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Comment by marktangotango | Hacker News Reader

This is the reality of the situation; until you're eligible for (edit) medicare, health is a significant expense. When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are levels, and one could live modestly in a LCOL area on that, but that's not what most people have in mind. Particularly for a "millionaire".

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Will $80k a year be enough for any lifestyle? That's the question I struggle with. It's more than enough in today's dollars. But I have no idea what will happen with inflation and costs between now and retirement day. Maybe by the time I retire, $80k/yr will be poverty level. Maybe health insurance premiums alone will cost $80k/yr. Who knows! What will the value of the dollar be and to what extent will healthcare costs have grown? It makes it impossible to set a target. All those "save for retirement" online tools start with that nonsensical question: "How much income will you need in retirement?" How the F should I know? I can't predict the future.

EDIT: Yes, SOME tools will account for inflation by asking you what you think inflation might be between now and retirement day. (Who knows?) Most don't account for costs that will rise much faster than inflation, like housing and health care.

The calculators usually account for inflation (and also for a percentage rate of return on the lumpsum you have saved), you would answer "How much income will you need in retirement?" with today's value of a $ (eg. if $80k a year would be enough for this year if you retired today)

There is uncertainty in everything, but your argument about inflation seems vacuous. The $80k figure is supposed to be real dollars, not nominal. A well diversified investment portfolio will include inflation resistant assets (such as REITs, energy stocks, or commodities).

Aren't there tons of books and calculators for this?the value of the dollar is irrelevant if you live in the US. Inflation does not concern me much. Real estate and stocks have generally been good hedges.

I'm about at that salary level, and live fine in a LCOL Midwestern area. I'd love to make more money but then I'd just buy more crap. 80k is definitely a decent lifestyle. Though as you say by the time one retires, it might not be.

> "How much income will you need in retirement?" How the F should I know? I can't predict the future.

Correct. But that doesn't mean you *shouldn't* plan. That's why you rebalance your portfolio every few years, and adjust your budgets, and expectations, and make lifestyle changes. It takes a lifetime to prepare for retirement. And its kinda hard to fuck up by your own hand if you are diligent: save 10-20%/yr., cover the basic investment grid, buy and hold. With 30+ years experience and many friends in the same boat, that's a winner.

Also, retiring on $100k today would require $148k/yr in 10 years with 4% inflation, so you're right, that number will at least go up via inflation.

That's why it matters who you vote for. Medicare/Medicaid will be your primary healthcare in your 60's, but we absolutely need the ACA/single-payer, not just for early retirees, but to prevent insurance companies from forever inflating premiums and bankrupting us.

By the time you're withdrawing, your house should be paid off and you no longer need to save anything for retirement so that $80K is all spending money. Further, you're collecting social security and a good chunk of your healthcare is covered by medicare.

Even if your house is paid off, depending on the property, you may still have significant costs to budget for. I have an old house and a large property and between property tax, insurance, utilities, and maintenance (both routine and occasional large), I'm probably a good $1K/month.

If your property taxes and insurance are high it’s because your house is worth a lot of money. If your house’s value constitutes a large share of your net worth such that taxes and insurance are a burden then it indicates that too much of your equity is in your house and you should downsize.

I never said they were a "burden." I was indicating that just because you've paid off your mortgage doesn't mean living in a house is free.

I think you'll find those numbers are not especially high for a house. (As opposed to a condo which have their own fees.) My house is not especially large--but it is about 200 years old although renovated so budgeting a few hundred dollars per month for maintenance seems reasonable.

I honestly doubt that most people could get the cost associated with maintaining a house below $500/month or so.

> I never said they were a "burden." I was indicating that just because you've paid off your mortgage doesn't mean living in a house is free.

No one claimed it was free, and if it’s not a burden then what’s the problem? My point is that $80K without a mortgage or retirement allocation leaves significantly more money left over than $80K with those expenses. Where is the problem?

Of course. But my point was that your "spending money" may still need to budget $10+K/year to keep a roof over your head. (Of course, you can downsize and move someplace cheaper.)

> How much income will you need...?

I tried to get my own answer for this question in a couple of ways (retired 5 years ago, age 62 so not early).

First, I tracked my expenses, but didn't have a planned budget. I wanted to know how much I spent and where it went. I kept monthly and yearly summaries on a spreadsheet and made charts to better visualize trends and variability. I think just tracking expenses was encouragement to live modestly and contribute regularly to savings: information not coercion.

Second, I tracked potential future income/benefits. I have an employer retirement plan and an IRA plan. Before retirement, I used the retirement plan's calculators to estimate that benefit. For my IRA I used a 4% withdrawal estimate.

Third, I assumed my expense totals would be the same in retirement. I might spend less on commuting, work clothes, etc., but more on medical care, vacation travel, and so on. I estimated housing costs for either renting or having a mortgage. (Ended up selling the house when I retired, moving and renting for 3 years, then buying a new place and getting a small mortgage for that.)

Over the short term, assumptions of continuity are reasonable. As you point out, the longer term is much more of a question mark. So, fourth, I tried to make allowances for uncertainties and contingencies. How much padding or margin did I want to be comfortable? Perhaps 10% to 20% more income than one's average expenses would feel comfortable? Perhaps a contingency plan for part-time work?

All these numbers will be in current dollars, so they will be comparable. What I discovered when running my numbers (after learning about an opportunity to buy some retirement plan benefits with money I had saved in a 401-K) was that I could then afford to retire. I can't predict the future either, but felt comfortable with the uncertainties I could see.

Following one's own situation roughly once a year, one can see how different conditions and assumptions give different results. Generally, the less one spends and the more savings one has, the more flexible one can be in choosing jobs, places to live, lifestyle, and so on.

> When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year.

Right, which is why people should save 10-15% starting from a young age.

> Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year.

That's quite a lot more than the median household income and by the time you're withdrawing your retirement that $80K is purely spending money--your house should be paid off and you're not setting 15% of that $80K aside for retirement any more. $80K/year is a lot of spending money to most people.

> You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are levels, and one could live modestly in a LCOL area on that, but that's not what most people have in mind. Particularly for a "millionaire".

The meme of a millionaire driving Ferrari's and eating caviar is dated due to inflation. Most people with any real-world experience with money (including my no-higher-education, blue-collar family) understand that millionaires don't live like that these days due to inflation.

Most Ferraris are financed, I remember reading an article that said more than half of UK Ferrari owners have a net worth of less than a million pounds.

I’m talking about the specific meme, not particulars of Ferrari ownership. That’s an interesting digression, however.

Medicare. To be eligible for Medicaid, you have to be quite lacking in assets.

Silver hair? Medicare. Need some aid? Medicaid.

Good mnemonic. I can never remember which is which.

I feel like I'd be happy enough just maintaining my current lifestyle more or less, but yes, we as software developers tend to be paid relatively well, so just matching that can be quite expensive. I also feel kind of uncomfortable with the idea of retiring without a little bit of extra safety margin in case of economic turmoil. If 2M is enough to retire, I'd probably want 2.5 just to be extra safe.

My current job pays well but is very stressful, and that had me thinking more about FIRE (Financial Independence, Retire Early), but then I realized that on anything less than 120K a year (also have a mortgage to pay), I couldn't afford the therapist I'm seeing right now, and I'd be on the hook for dental cleaning, every other expense. My current plan is to save enough that I could technically almost retire on it, and then start prioritizing low stress jobs over income. Let the nest egg grow on its own even if I don't contribute as much with a lower paying job, and still get some benefits.

The low stress jobs are the key. If I have 2-3 million saved, do I really want to grind at a FAANG or equivalent? Theres low key startups and enterprise dev jobs that are much less stressful and still pay around 120-150K which keeps healthcare covered, CoL covered, and keeps your nest-egg intact.

IMO your view of stress at FAANG vs elsewhere is off. Some of the least stressed engineers I know work for the big names.

I'm sure there are stressed engineers there as well, but I'd be surprised if it's actually a higher %.

Sounds like Coast FIRE would be a good approach for you:

https://walletburst.com/coast-fire-calc

Does the 4% withdrawal rate include dividends and the average 6/7% estimated growth rate? Napkins calculations for 2m at 6% is 120k.

As OP said if you don’t have a mortgage then you’re going to have a lot more extra money than someone with an 80-120k income and a mortgage.

For the US, retiring, at least for most that are on the verge of retiring savings-wise, means you have a mix of regular savings (that has already been taxed) and 401k savings (that hasn't). If you figure out how to limit your 401k distributions, then it may be possible to keep your taxable income low enough that you get ACA subsidies to limit the cost of your health insurance premiums. Although maybe that's not the expensive part?

Medicare eligibility is certainly an important milestone in the US. One can retire earlier but doing so would add another significant non-optional cost.

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