How much money would you need to permanently retire?

[oceanbaby]

I sometimes entertain the idea of cashing out of our very expensive area, and moving somewhere much cheaper. Buy a house outright, and live off the rest. But I have no idea how much money it would take for us to live a comfortable life while raising two kids. If you had no mortgage payment, and lived in an area with a low cost of living, how much money do you think would be realistic?

Let's say we bought a house for $100k, and had $400k cash left over. If our expenses were $2k per month, that works out to 16 years, without investing any of it.

How does one go about figuring this out?

[Thystle]

I too have pondered this... :

[mar123]

There are financial calcalators you can use to figure this out or an advisor can help you. One problem is you have to figure for inflation and the unexpected. Your expenses are probably not going to stay at 2K for 16 years. Look how much things have gone up in the past 2 years.

My dad retired early and plans to live off the interest of his investments. he may not be able to completely do that, but he is earning 8-10% a year, so he is doing okay so far.

[Best Feeling]

I think it also depends on what you want to DO when you're retired. We want to be able to travel a lot and live the same lifestyle that we're currently used to. We've lived the same lifestyle since we were in our mid-20s, as we've made more money, we've just saved more. It's what we're used to and we don't feel deprived at all. We also want to retire young (pre-50) but aren't sure how health insurance will work into that...

[Peppermint Leaf]

I think its the "other" stuff that will suck up your money

medical expenses, vehicle fix/replace, vacations, emergencies, appliances breaking down, house repair etc etc

[Thystle]

You can always just go for it and if you need more money later on you can work again.

Or invest.


Or own a business.

[TiredX2]

From what I have read, 4% is considered a "safe" withdrawal rate for retirement. SInce you would be talking about a much longer time than a traditional retirement, I would assume no higher than a 3% withdrawal rate. So, if you could live on 3% of your nest egg, per year, you would probably be okay.

BIG CAVEAT--- HEALTH INSURANCE!!!

That said, we know people who have enough to do this--- and more. But, with children, they really want their kids to understand that generally you need to work as an adult. So, the adults keep working. Many people would need to work for health insurance anyway. Could you go down to two part time jobs (one each for you & DP) if you want more time?

[mnnice]

I think it is possilbe, but not likely. I currently live in a fairly low COL with two kids about the same age in a paid for house and there is no way I could live on $2 per month in this house right now with our current taxes, utilities, groceries plus a high deductible health insurance plan.

No mortgage does not equal no housing expenses. In most situations a pretty big portion of your monthly payment is taxes and homeowner's insurance. Also some of the cheapest housing in this country is available were people live 60-90 minutes from even a so-so over priced grocery store if you factor transportation and higher prices on any food you don't raise yourself it may not be as cheap as it seems.

Private health insurance can be spendy. There are self-employed people that spend $2,000 per month on health insurance.

In order to get it to work I think you would have to really focus on being self-sufficent in your heat, food, ect and live a real back to the land sort of lifestyle.

[llamalluv]

For DH & I, it would have to be in the $1 million to $1.5 million range. But we would be "retiring" to his home county and farming, and that's what it would cost to buy a house with acreage and outbuildings, farmland, and equipment for him to earn a living as a full time grain farmer.

He has completely poo-pooed my idea of being llama ranchers.

[avent]

The best retirement calculator I've found for exactly these types of questions is here:

http://fireseeker.com/

Be sure to read the instructions as the user interface is not very intuitive. But it works really well. It compares your projected scenarios with all actual US economic situations since 1871 and it tells how how often your plan would have succeeded or failed in those scenarios. You can decide what's acceptable to you, in terms of risk.

Also there's good info found here: http://www.early-retirement.org/forums/

I lurk there sometimes and get good ideas.

Good luck!

[velochic]

Dh and I have calculated what we need to do what we want, with dh retiring at the usual 65 years of age... it's $2 million. Until the latest market downturn, we were on target. We may need to do some adjustments over the next 5 years. We live more frugally now to enjoy our retirement. I may go back to work to get health insurance, though, because dh is older than me. Still, you have to remember that in retirement, you could end up living another 30 years. Can you sustain your lifestyle for that amount of time?

Most people severely underestimate. There are so many little things that suck up the money in retirement.