Could you retire on $550,000?

D

Dr sharp

Joined
Oct 20, 2003
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Just wondering if its possible. If you were to live cheaply, and were into inexpensive hobbies could you do it? Would you buy a cheap house in say vermont for 200,000. would you rent? what would you do and can it be done?
 
It probably could be done, but not by me.

LOTS of variables to consider.

Age and health being the biggies.

Phil
 
Dr sharp said:
Just wondering if its possible. If you were to live cheaply, and were into inexpensive hobbies could you do it? Would you buy a cheap house in say vermont for 200,000. would you rent? what would you do and can it be done?
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It depends on how long you plan to live doesn't it? If you only have three years you'll be fine but if think you are going to live another 30 years, heck no, it isn't enough.
 
No wait let me clear this up. If you bought a house for 200,000 , with low taxes and invested the rest. and didnt buy bmws or anything crazy. Im thinking you could.
 
Why not just move to Mexico into one of the retirement villages? Expenses would be much cheaper then vermont.
 
OK - I get it. You're going to spend 200K on a house and invest around 350K and live off the interest, dividends, etc.

I think you would be living a pretty Spartan life. You'd better be growing and hunting as much of your food as possible. If you didn't have medical insurance you could get wiped out by a single serious medical problem.

I went on a cruise last year which cost me about $1000 for a week. It made me think that I could stay on a perpetual cruise for around 50K per year - all food and shelter are covered so all you have to pay for is clothing and activities. You can probably do it even cheaper by booking all bargain rate cruises.
 
Depends on how your investments do, doesn't it? It certainly could be possible given the right circumstances but it is not likely. I know I couldn't do it given present obligations and lifestyle desires.
 
the house is paid for, and you have an additional 550 k?

How old are you?

If you had good growth, maybe 10-11% yearly, that would be about 50,000 before taxes yearly.

Otherwise, you're asking to retire on maybe 22k yearly. Can you live on that? Property taxes would brobably eat up 3 grand, leaving you 19k.

Or, take the stream of payments that you'd like to live on, and annuitize accordingly. ( Finance math problem.)
 
Lets see....

200,000$ for a house. Nope, way to much. Buy a much cheaper house, a fixer upper maybe, and renovate it over time as finances allow. After all, what else have you got to do, you're retired. Don't say it can't be done, I bought my house for 48,000 in 1994, in excellent, move in condition. There were a few issues that had to be fixed over time, new furnace, hot water heater, bathroom renovation. This was spread out over several years, so the budget wasn't busted. In 2000, we put a addition on to accomodate our growing family. This was paid for in cash, no loans and interest to pay back. Since you are retiring, a growing family isn't a concern.

Being retired doesn't mean that you shouldn't have some form of supplemental income, part time or seasonal work will give you extra cash for those January trips to the Virgin Islands without digging into the nest egg. I don't know how old you are or your medical situation, but those would weigh alot in the decision. The older you are, the more feasible it is.

It depends on alot of things that, in you're individual case, that I don't know about. You have to decide based on the lifestyle you want to live, medical condition, interests you want to pursue, etc. It could be done if you have the financial disipline to stick to a set budget.
 
What did Henny Youngman say, "I have enough money to last me the rest of my life! As long as I die by the end of next week."
 
All depends. That 550,000 would go quite a ways in my part of the world. I built in my city four years ago for 135,000 and while there are plenty of more expensive homes where I live, we'd be considered solid middle to middle/upper middle class and I don't want for anything. If you took the remainder after the house(let's say 400000) and got 10% on on it each year, that would be as much or more than I clear and I would no longer have a mortgage. If I didn't change my lifestyle, I'd be fine.

We have a lottery commercial that makes the point of how reasonable our cost of living is here, by stating "Where a million dollars goes as far as a million should".It's all about cost of living.
 
stjames said:
Depends on how your investments do, doesn't it? It certainly could be possible given the right circumstances but it is not likely. I know I couldn't do it given present obligations and lifestyle desires.
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The old man retired with 250K in the early 80's. He had to spend a lot on Mom's health care, Parkinson's. He spent between 5-7K a month for almost ten years and still had most of the nest egg left when he died, before our "uncle" ;) got a hold of it.

So, if you have good investments and investment advice. The market doesn't tank your investments, no health issues, and a bit of luck, it's possible to do.
 
A good deal of it would depend on whether or not you own a house. Many retirees do. $550,000 invested prudently should produce $44,000/year (8%). If we assume taxes are about 33%, that's $14,500 in taxes to be paid (keep in mind that this will not be "income" for tax purposes but capital gain. If you work it right, it'll be a long-term capital gain and only taxed at 20% and with deductions and exemptions and all that, 33% is a pesimistic estimate of tax.). That leaves $29,000. But, retirement is a long-term thing -- usually -- so you need to re-invest about 1/3 of that so that your earnings will grow to keep up with inflation. That leaves you just shy of $20,000/year in spending money. That's about $1650/month. That may not sound like much, but if you're housing costs are only property tax, insurance, and maintenace (which could be around $500/month), then you've got $1150 a month of disposable income. That is livable.

If you're over 55 1/2 years old, then you can add on some social security to that figure.

Basically, you could live modestly but comfortably.

On the other hand, if you don't own a home and have to rent, it's gonna be tough.

Let's say you go into this retirement with $550,000 cash and no home. Should you buy a home? It depends on how long you intend to live. If you intend to keep kicking for more than about ten years, then you should probably buy a house. But not a $200,000. Nope. $125,000 max. That leaves $425,000 to invest at eight percent producing $34,000/year. Take out 33% for tax. Reinvest 33% of what survives taxes. Allow $300/month for property tax, insurance, and house maintenace. And you end up living on about $972/month. That's tight. But, housing is already taken out of that, so that's no an unlivable sum. And, again, if you can throw some social security into the pot, you'll be ok. And if you can manage a bit of side income -- especially if you can do it in cash and not pay tax on it -- you can get along.

It will depend a great deal on where you want to live too. According to the National Cost of Living Index, $30,000/year in Buffalo, NY -- a perfectly nice city --is only worth about $11,500/year in New York City.

So, yes, I think that a person in good health could retire very modestly -- but comfortably -- on $550,000.
 
Too many variables to rely on a formula on paper.

For example, property taxes can skyrocket. If you budget for, say $1,000 per year for those, and then property values escalate, you're hooped. That's happening a lot these days, with older people, who have lived a long time on their property, that they paid very little for (by today's standards). They are being forced to sell, because they can't afford the new, huge taxes. Pretty sad, to have to sell the family home.

Case in point: I know a person who bought a nice little lot with cabin for $21,000 back in the mid-1970's. Her property is now assessed at half a million, and she's up against the wall, trying to afford the annual $7,000 tax payment.

A couple of other variables: serious health expenses, divorce.
 
braddy said:
I could have retired at age 17
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Silver spoon? Lazy? How does this post help out with Dr sharp's question?

I agree that it depends on where you live. In the country where my mom lives, you can build a nice, comfortable house for $150,000, including the land. In a lot of spots, however, that $150,000 won't even get you a condo.

What's the draw in Connecticut?
 
Silver spoon? Lazy? How does this post help out with Dr sharp's question?

I agree that it depends on where you live. In the country where my mom lives, you can build a nice, comfortable house for $150,000, including the land. In a lot of spots, however, that $150,000 won't even get you a condo.
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What I meant was I could have retired at 17 with $550,000 dollars. When I die my earnings will not total $550,000. As far as helping , yes take your life in your hands, get the highest percentage for you money , at the same time become more involved with the earthy side of yourself. Learn those new hobbies, start those interests you have been putting off. Often when someone that accumulates $550,000 dollars there are more primitive interests they have been putting off.
 
Could you retire on $550,000?

Yup & happily as I intentionally don't live an extravagant lifestyle. 'Course it depends on your definition of retirement too A number of retired people I have know have either made a hobby their new (part time) career or picked up something in a field totally new to them just because they'd always been curious... I could work just a few hours a week in a book or video store & be happy as a clam for a very long time if the majority of that sum was well invested.

Add another zero to that sum though and I'd taking flying lessons, buying a Grumman Goose or Widgeon, heading south & not looking back. :D
 
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