Question about net worth, please advise.

[earlyretirement]

[quote=AN]ER, I totally agree with you that lifestyle makes a HUGE difference when coming up with the $ amount needed for retirement. Some people would say $500k would be more than enough for them to retire on and others will need $10M+. I know people who DON’t ENJOY going out to eat or go traveling. So, their retirement would be them staying home and working on their house/yard. Those people don’t need much to retire, as long as they have their house paid for. Others who travel all over the place and go out to eat constantly will probably need many millions to retire.

I also agree that rental property(ies) should be counted toward the net worth for retirement, since they can be liquidated if need be. I was only referring to primary resident, since we all need to live somewhere.

For me, when I can accumulate enough where I can live off the interest alone is when I think I’m ready to retire. That will compensate for different spending habits and have enough money to last you through your entire retirement. When I’m talking about interest, I’m talking about something very stable, like CD.[/quote]

Hi AN,

Yeah, I actually think “lifestyle” is the single most important factor in considering if $X is going to be enough. I constantly see people asking if $X million will be enough but there isn’t a one-size fits all answer.

I know people that took early retirement about 10 years ago with almost $4 million and they have little of that left due to poor choices, poor investments (and being in too volatile stocks for supposedly being “retired”). Also, they were living too high off the hog and spending more money than pre-retirement!

Before when they had to work they never had time to do anything. But they were finding themselves with tons of free time so they were going on all kinds of trips, bought expensive boats, visited their kids more that lived across the country, etc.

Yeah, they were stupid and foolish but unfortunately people do stupid things in retirement.

For us, we really enjoy traveling around the world and seeing new cities and going back to the cities that we enjoy. Fortunately we own a few properties in cities that we really enjoy outside of the USA. We rent them out when we don’t use them so they are income generating which is ideal for us.

Also, for those that don’t know about Home Exchanges or “home swapping” it’s GREAT if you are retired and want to see the world. It’s a GREAT and cost effective way to travel around the world. We currently travel about 100+ days a year around the world and we used to stay in hotels but the past 3 years we’ve done home exchanges via http://www.homeexchange.com and it’s amazing. Most of the properties we have stayed in have been really high end properties. You can do simultaneous or non-simultaneous exchanges.

I thought it sounded strange before I started doing them but I can’t think about any other way to travel or going back to small hotel rooms now that we discovered home exchanges. It allows us to “live like locals” when we travel and have always swapped for high end places. It’s simply the best way to travel in retirement or otherwise.

Definitely an ideal situation is if you can live off of interest income. But then again, you can have multiple year stretches like the past few years where interest rates plunged due to government interaction. Lots of retired folks never planned on getting close to 0% to 1% on money markets/CD’s so you also have to factor that into the mix.

Someone above talked about $2 million being enough as he planned on getting 5% interest income. That’s all fine and dandy unless interest rates are super low for extended periods of time. Forget what statistically they are. You could have a really bad stretch where you aren’t getting 5%. Plus once you are “retired” you will want to be in SUPER conservative investments and not the stock market. So factor all of that in too.

But I do agree with you AN that $100,000 in after tax net income per year will be enough for most people to retire comfortably. Even with a fair amount of travel, if you have your primary residence paid off, car paid off, no debt whatsoever…then a six figure per year retirement should allow for a really comfortable retirement.

Some retired people panic and just make horrible decisions. Like when the stock market was plunging they panic sold at the bottom. And now that CD’s are paying next to nothing…they feel forced into investing in more speculative investments and higher risk like the stock market, even though retired people shouldn’t be in high risk stocks.

Interest income used to be GREAT pre-recession but these days I’m really happy to be a landlord and having rental properties that are generating great cash-flow. Definitely being a landlord can be a pain in the butt ….however it’s been really great and I believe high end rental properties in desirable areas/neighborhoods/cities will continue to do well heading into the future.

Flu touched upon this a bit above in his post about the benefits of having rental properties. I totally agree and that has been a big part of my retirement strategy and focus. I’d much rather depend on stable rental income vs. trying to guess what CD’s are paying in the future. I also like having a tangible asset with no debt on it that spins off cash flow each year.

Also, I read some people talking about retiring in Italy or other countries. Definitely I think you should live where you really enjoy. But also you have to factor in exchange rates, what currency you hold your currency in, etc. Heading into the future, the value of the dollar can really depreciate against other currencies. Even with as many problems going on in Europe as there are…. the Euro has done well with the endless printing of Dollars by the government.

I’ve also lived abroad many years and it’s been great but you have to really look into everything including healthcare costs and availability as well as residency status and how easy it is to become permanent residents. Also, you have to be careful as some countries once you become permanent residents, you get taxed on worldwide assets. So you just have to investigate all of those types of things.

Something else ESSENTIAL is to know how much you actually spend each year on EVERY category including (but not limited to) dining out, entertainment, clothing, automobile expenses including gas/insurance/maintenance/etc, travel, groceries, charity, housing expenses, utilities, medical/heathcare costs, prescription drugs, and especially any bad habit activities.

I’m always amazed by just how many people have no clue how much they spend each year on every category. Something essential is using a program like Quicken where you can track every category for an extended period of time. I have tracked every dollar I’ve spent since graduating college 15 years ago. It’s been really helpful in helping me plan my retirement to know just how much I’m spending in every category.

Also, something VERY important is to make sure you are adequately insured for medical/health insurance as well as possibly long term care insurance. Also, if you have multi millions saved up, it’s always a good idea to have a comprehensive Umbrella insurance policy that will cover you against liability, lawsuits, etc. I have known people that have gotten totally wiped out in a bad lawsuit or accident where their insurance coverage wasn’t so great. So do yourself a favor and get an Umbrella policy. They are easy to get and not so expensive. (Heck, it’s always a good idea to get it before you retired. I think anyone with significant assets should definitely have an Umbrella policy in place).

Definitely I’m always interested and curious to hear about people’s retirement and how it is going and the planning that is involved. I’ve always been fascinated with that topic. So thanks all for sharing your stories.

[flyer]

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We’ve had rentals for years, and completely agree with FLU’s thoughts on investment properties. That might be a great option for you to consider–if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will–so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it’s something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

[flyer]

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We’ve had rentals for years, and completely agree with FLU’s thoughts on investment properties. That might be a great option for you to consider–if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will–so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it’s something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

[flyer]

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We’ve had rentals for years, and completely agree with FLU’s thoughts on investment properties. That might be a great option for you to consider–if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will–so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it’s something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

[flyer]

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We’ve had rentals for years, and completely agree with FLU’s thoughts on investment properties. That might be a great option for you to consider–if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will–so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it’s something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

[flyer]

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We’ve had rentals for years, and completely agree with FLU’s thoughts on investment properties. That might be a great option for you to consider–if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will–so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it’s something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

[earlyretirement]

[quote=bearishgurl]All very good advice, ER. I’m going to check into an umbrella policy.[/quote]

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren’t worth anything. One bad accident or incident can totally bankrupt someone.

People don’t realize that Umbrella insurance coverage paid for O.J. Simpson’s legal defense as well as Bill Clinton’s legal defense. Millions and millions of dollars worth of legal bills. They aren’t expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don’t want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

[earlyretirement]

[quote=bearishgurl]All very good advice, ER. I’m going to check into an umbrella policy.[/quote]

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren’t worth anything. One bad accident or incident can totally bankrupt someone.

People don’t realize that Umbrella insurance coverage paid for O.J. Simpson’s legal defense as well as Bill Clinton’s legal defense. Millions and millions of dollars worth of legal bills. They aren’t expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don’t want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

[earlyretirement]

[quote=bearishgurl]All very good advice, ER. I’m going to check into an umbrella policy.[/quote]

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren’t worth anything. One bad accident or incident can totally bankrupt someone.

People don’t realize that Umbrella insurance coverage paid for O.J. Simpson’s legal defense as well as Bill Clinton’s legal defense. Millions and millions of dollars worth of legal bills. They aren’t expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don’t want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

[earlyretirement]

[quote=bearishgurl]All very good advice, ER. I’m going to check into an umbrella policy.[/quote]

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren’t worth anything. One bad accident or incident can totally bankrupt someone.

People don’t realize that Umbrella insurance coverage paid for O.J. Simpson’s legal defense as well as Bill Clinton’s legal defense. Millions and millions of dollars worth of legal bills. They aren’t expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don’t want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

[earlyretirement]

[quote=bearishgurl]All very good advice, ER. I’m going to check into an umbrella policy.[/quote]

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren’t worth anything. One bad accident or incident can totally bankrupt someone.

People don’t realize that Umbrella insurance coverage paid for O.J. Simpson’s legal defense as well as Bill Clinton’s legal defense. Millions and millions of dollars worth of legal bills. They aren’t expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don’t want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

[an]

ER, all very good points and I agree to them all. I was actually the one who mentioned $2M and $100k/year. I actually mean $100k before tax, not after tax. $100k after tax would definitely make my retire that much more lavish.

Sure, the last 3 years, CDs might be paying ~3%, couple years before that, there were around 6%. If you have $2M and retiring today, you should be laddering your CD. I’m sure if you average CD rate over the last 10 years, it would be >5%.

I also totally agree about rental properties. I like to have my retirement fund more diverse. Which would also include rental properties. I don’t want to put all of my eggs in one basket.

I personally don’t care too much about all the expenses in individual categories. I’m more concentrated in total expenses. I keep track of all the big expenses, but all the smaller categories, like groceries, insurance, gas, etc, I just keep track of total monthly expense. I can always look up the details with Quicken or Mint, but they’re not something I look at every month.

[an]

ER, all very good points and I agree to them all. I was actually the one who mentioned $2M and $100k/year. I actually mean $100k before tax, not after tax. $100k after tax would definitely make my retire that much more lavish.

Sure, the last 3 years, CDs might be paying ~3%, couple years before that, there were around 6%. If you have $2M and retiring today, you should be laddering your CD. I’m sure if you average CD rate over the last 10 years, it would be >5%.

I also totally agree about rental properties. I like to have my retirement fund more diverse. Which would also include rental properties. I don’t want to put all of my eggs in one basket.

I personally don’t care too much about all the expenses in individual categories. I’m more concentrated in total expenses. I keep track of all the big expenses, but all the smaller categories, like groceries, insurance, gas, etc, I just keep track of total monthly expense. I can always look up the details with Quicken or Mint, but they’re not something I look at every month.

[an]

ER, all very good points and I agree to them all. I was actually the one who mentioned $2M and $100k/year. I actually mean $100k before tax, not after tax. $100k after tax would definitely make my retire that much more lavish.

Sure, the last 3 years, CDs might be paying ~3%, couple years before that, there were around 6%. If you have $2M and retiring today, you should be laddering your CD. I’m sure if you average CD rate over the last 10 years, it would be >5%.

I also totally agree about rental properties. I like to have my retirement fund more diverse. Which would also include rental properties. I don’t want to put all of my eggs in one basket.

I personally don’t care too much about all the expenses in individual categories. I’m more concentrated in total expenses. I keep track of all the big expenses, but all the smaller categories, like groceries, insurance, gas, etc, I just keep track of total monthly expense. I can always look up the details with Quicken or Mint, but they’re not something I look at every month.

[an]

ER, all very good points and I agree to them all. I was actually the one who mentioned $2M and $100k/year. I actually mean $100k before tax, not after tax. $100k after tax would definitely make my retire that much more lavish.

Sure, the last 3 years, CDs might be paying ~3%, couple years before that, there were around 6%. If you have $2M and retiring today, you should be laddering your CD. I’m sure if you average CD rate over the last 10 years, it would be >5%.

I also totally agree about rental properties. I like to have my retirement fund more diverse. Which would also include rental properties. I don’t want to put all of my eggs in one basket.

I personally don’t care too much about all the expenses in individual categories. I’m more concentrated in total expenses. I keep track of all the big expenses, but all the smaller categories, like groceries, insurance, gas, etc, I just keep track of total monthly expense. I can always look up the details with Quicken or Mint, but they’re not something I look at every month.

[Author]

Posts