Well, you're only one serious illness away from death. I'm not trying to be flippant here; there are more things that can properly kill you rather than just make you seriously ill and bankrupt you, provided your health insurance is decent.
I do want to emphatically underscore that this isn't an endorsement of the system. It's just that if you're worried about almost dying and you're not worried about actually dying, you're probably miscalibrated. The best we can do is minimize the risk of Really Bad Outcomes. No one, no matter how rich, can avoid them altogether. All of us are gonna die.
If you really feel that way, there's always the emergency exit.
If I die, life insurance pays out. If I commit suicide, it doesn't.
If I die, there are some basic optional-but-socially-mandatory costs around disposal of the corpse and a memorial ceremony. Those are fixed and measured in thousands, not tens or hundreds of thousands. My property and assets pass to my heirs. They are grieving but financially secure.
Prolonged illness can sap my reserves dry and drain me of wealth in a manner matched only by the retirement home industry. My family can watch me suffer and wilt away while watching their potential financial security drip through a hose into my veins.
Of course one may be only a serious illness away from death, and I don't take that as flippant. But the far more common circumstance is that one is several illnesses and/or a long chronic medical decline away from death, with both circumstances likely to be hugely expensive in the US compared to other first world nations.
The economic fallout can mean that family members can't get a good education, can't move to take a better job...all the things that, sometimes, just a little more $$ can make possible.
The US hasn't prioritized its citizens' wellbeing to the extent they deserve. In that regard, OP is spot on: the US is not a place to retire.
Top 5% of US income earners are around $343k[1] and top 5% of net worth is over $1MM[2].
If you are in this bracket - by either measurement - and are actually fearing bankruptcy from a medical expense, then you are clearly screwing up somewhere in your financial life, and likely living well beyond your actual means.
[1] https://www.investopedia.com/personal-finance/how-much-incom...
[2] https://finance.yahoo.com/news/know-im-rich-140000452.html
However, that doesn’t necessarily include any benefits. It’s expensive and relatively uncommon to get long term disability insurance that will cover lost income if you’re an hourly 1099 contractor, which is necessary for any chronic condition that prevents you from being able to work. Think offshore oil workers for someone that’s most at risk while being in that income bracket.
There's no way around it. $187k is a lot of money - no matter where you live in the US.
Disability insurance can easily run more than 4% of your after tax income at that salary. Not such a big deal if your job’s secure, but many contractors making that salary however don’t have much job security and may expect long periods of unemployment when the oil sector does poorly etc. So perhaps you want to save 1/3 your after tax money for unemployment + 10% for retirement, and have disability, life, and health insurance…
Don’t get me wrong it’s still a lot of money, but the more you try and hedge the less money it actually is so many people end up taking risks.
A safe 4% withdrawal limit gives me about $50K per year. Net taxes, it is around $43K or $3580 per month. A two-bedroom apartment in a city will cost around $1700. Medical insurance for me, my wife and one of our kids is around $650. Car expenses (one car paid off, insurance, gas, maintenance) is around $650. Food expenses are $500, utilities around $150 and I am already over the budget. Assuming I get tax credit for the insurance and it is free, I am still right at the edge where my car breaking down is a major disaster.
I would like to see how you would budget this..
Also, it's very unusual for a married couple with kids to have a million dollars in retirement savings and no owned home. There's a lot going for owning a home, but in this toy model there's two main factors:
1) Your "housing cost" (mortgage payments) are fixed in nominal dollars, unlike rent, and unlike the 4% draw, which are both fixed in real dollars (and in places with artificially limited housing supply, rent may unfortunately grow much faster than inflation). So effectively, it shrinks over time. Plus you may finish paying off the mortgage at some point.
2) Tax efficiency. Your house can be viewed as an "income producing asset": it produces the value of the rent you'd pay to someone else to stay in it. But you don't pay any tax on that value.
Finally, this model disregards Social Security, which isn't insubstantial. If you're Top 5%, you'd probably be drawing pretty close to the max. So you could redline your withdrawals a little bit beyond 4%, knowing that at 67 or so you could juice your income with the SS payouts.
My point is that if I get dropped in US with a million dollars, it puts me in top 5% in the wealth category, but I would be living hand to mouth with the fear that the money can quickly disappear. That gives me PTSD :)
Welcome to the sad club. Retirement age is within sight for me and my friends, and most of my circle is not in a position to be able to retire.
1) increase retirement age
2) reduce purchasing power of money (print/issue/lend out excess money, resulting in inflation)
3) adjust “bend” points in SS benefit formula, making it more and more of a marginal income tax
Start early, and start young. Get a job that offers a retirement plan - even fast food chains do this now. Get the maximum match possible - it snowballs so much faster than people think.
Don't count on the government to provide for you. That is a serious tactical error.
Plan as-if Social Security will not be there. Then, if you get anything at all, it's just gravy.
I didn’t explicitly do this but I started to take some cues from the FIRE (Financially Independent, Retired Early) crowd, in particular the FI part. If, by the time I’m 50 (call it 20 years from now), I don’t have to work in order to pay the bills: success. At that point, I always love my job (barring the occasional rocky period) or I bounce, no second thoughts.
To that end, most of my disposable income (admittedly, as a relatively high earner) goes first to max out the employer contributions to my 401(k) (might as well be extra salary), then to max out my yearly contributions to my HSA, then to an ITA at a hedge fund. (My income recently passed a threshold which lowered my maximum yearly contributions to a Roth IRA so I stopped regular contributions to that in order to avoid the need to keep track of what my limit actually is. This isn’t recommended; I’m just lazy.)
> it snowballs so much faster than people think
Indeed, I seem to be well on my intended track and I didn’t start doing this in earnest until ~5 years ago. As it’s been said: best yesterday, second best today.
Look into a backdoor Roth IRA - you may still be eligible to contribute the full amount.
Several years ago, I started looking toward my future and wondering how I was going to manage it. I looked into how Social Security works, and I discovered to my horror that I hadn't worked enough to draw Social Security on retirement. This was a big consideration because of my finances and my disability.
So I realized that what was going to happen is that I would work diligently at whatever job I could get, as many hours as I could muster, for as long as it took to earn those sweet Social Security credits, and then see what happens.
I made it to my goal, so my Social Security benefits are now "assured" as much as anything can be. This is the last job I'll ever have. Once I'm no longer able to do this job, I'll apply for SSDI, and then look forward to Social Security in retirement. As for health insurance, I'll have Medicaid, and perhaps I'll die before I'm 65. Good times.
I'd wager you would admit this isn't a normal situation for people.
This has plenty of "let them eat cake" vibes. There's plenty of folks struggling just to make ends meet without the luxury of putting much away for retirement. Like a poor old lady I saw working in a CVS in Cambridge recently, hooked up to an Oxygen bottle (probably due to COPD) and still working stacking shelves.
...
Assuming your plan is willing to cover the remaining expenses in the first place.
(Yeah, it's not an irrational fear :P)
Not sure how that would apply with something like Medicaid
[1] https://www.medicaidplanningassistance.org/asset-protection-...
Unless you’re pretty close to retirement already, turning your $1M into $2M is pretty easy in 10 years with smart investing and average returns. It becomes $3M in less than 15 years. You should be on autopilot to a multimillion retirement if you’re in the top 5%.
It's made me look at all the places in my life where all that "money" is being sucked away from me. Silly examples like that convenient 4$ Starbucks coffee on the way to work, or at the ground floor of your office building. It's easy, simple, delicious, and just a tap of a card to get. But poor people aren't able to do this, heck, they forego such things and simply drink water. Apply this kind of thing to a myriad of things that happen daily (and monthly as they come off your bank account).