November 12, 2016

Retire With Less Than One Million Dollars? Sure

From the archives. First published three years ago, these thoughts continue to be appropriate as 10,000 people a day retire.





According to many retirement advice experts, $1,000,000 is the minimum you need in your investments accounts to have a satisfying retirement. Others say you need something north of $2 million to rest easy.

As regular readers know, I tend to push back against such generalizations. How someone can draw a line in the sand and tell you what you must have or must do without knowing you and your situation is poppycock (I love that word!).  I offer suggestions and advice based on my experiences and feedback from readers, but I hope I am never guilty of telling you "my way or doom."

That being said let me offer some thoughts on how the non-millionaires among us can still retire and enjoy a fulfilling and stimulating life. Again, I will say these are thoughts from me. They may not work for you, or you may have even better ideas which I sincerely hope you will leave as comments below.

In the interest of full disclosure I will state that with all my assets, minus my almost non-existent debt, Betty and I are technically millionaires. But, I have never thought of myself that way, and honestly, I live my life denying that fact. I live my retirement years on a nest egg that I see as several hundred thousand dollars below that figure. Why? To give me a safety net if everything starts to fall apart and to keep me from making the mistakes that I see too many others making: living for wants and instead of a balance of needs and wants.

How to retire without a million dollars is really quite simple: adjust your lifestyle to what you have to work with. That includes any 401(k) or IRA accounts, any other investment accounts, Social Security, the value of your home or other real estate, projected inheritance (if any), and part time or full time income.

Specifically:

1) The vast majority of us can substantially lower our everyday expenses after retirement. My book, Living a Satisfying Retirement, includes a section on this very topic. The average of those surveyed  is much closer to folks living on 50% of their pre-retirement income. Betty and I are closer to 40%, even though we live well and are much happier than when my salary was into six figures. Possessions and things don't motivate us nearly as much.

2) For unexpected emergencies and expenses set aside enough to live for 6 months, or pay for a large emergency. Remember, even if you have insurance for whatever the problem, you will probably have to fight for that money and/or wait months or years to be reimbursed. The worst scenario is to max out credit cards or a home equity loan.

3) Simplicity and retirement can often go together. Most of the retirees I come into contact with, both in real life and through the blog, have downsized both possessions and desires. Less really is more: more time, freedom, and flexibility. Keeping up with the Joneses becomes very unimportant.

4) Adjust your expenses based on two things: changes in your investments and changes in your lifestyle. This is rather obvious. When my investments were earning 8-10% my income and spending options were different than they are with something closer to 3%. And, Betty and I are very happy with simple meals, simple pleasures, and simple living.

5) Accept that the condo on Maui and the world cruise are out. Rejoice in all you can do. With a nest egg of less than $1,000,000 and upwards of 30 years left to live, your ability to live the large life is not likely. So, rejoice with what you do have and what you can do. Even if you live almost solely on Social Security and must count every penny, remember you are still better off than at least 80% of the rest of the people on this planet. We have so many opportunities and blessings we can lose sight of how good we really do have it.

6) Aggressively protect your health. As I age I realize how incredibly crucial this is to the rest of my satisfying retirement. Taking shortcuts now in terms of foods I eat, exercising, and regular health checkups will cost me later, and I don't just mean monetarily. I mean in my mobility and freedom to do what pleases me. I mean in how much of a burden I place on loved ones.


It is hard for me to express, just in words, how much more fulfilling and satisfying my lifestyle is today on 60% less money than I once earned. As soon as I adjusted my mindset to living and not spending a load was lifted and my life took on a whole new depth and sweetness.

How much do you need to achieve this same state? I have no idea and I'm not going to give you a figure. That is for you to determine. But, I will tell you the experts are wrong: you can be happy and productive without achieving whatever is the latest magic number they are promoting.

19 comments:

  1. For the first couple of years after retirement, I continued to save. Then it dawned on me that I was saving for now. Habits are hard to break and it's scary to start spending what you spent a lifetime saving. I routinely set aside a small emergency fund for larger expenses, like car repairs. I pretend part of my savings don't exist. It's for end of life care, should I need it. Of course I still worry about money, but I should be fine. How much you need to retire depends so much on lifestyle choices and luck....meaning no major disasters.

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    1. I found that accepting (and liking) a more limited lifestyle has taken away a lot of the financial stress that comes from having to draw down your investments.

      Things are constantly in flux. If the new leadership in Washington takes an ax to the ACA we will have to do a major overhaul of our budget to continue to provide health insurance for Betty. But, that is the good thing about financial planning. We can adjust as we must.

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    2. We've been trained all our lives to "save for the future". When you retire it can come as a shock to realize the future you've been saving for is now - so start spending! Ingrained habits can be hard to break.

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  2. That realizing you can get along on 40% or so of your preretirement income is key. I was shocked after I retired and started downsizing how little we were spending. And how little we really needed to spend. With that new benchmark I decided to stay retired in my 50s. Before I just thought I would take long break from work. But then I found out how much fun it was to sleep in many mornings. I have not looked back.... You are right you don't need big $$$ to enjoy life. Good Luck...

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    1. The old saw of needing 80% of pre-retirement income after retirement probably keeps a lot of folks from retiring when they want to. And, it is just flat our wrong as a guideline. There are some who probably spend well in excess of their pre-retirement income. The rest of us have figured out how to be happy on much less.

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  3. Most % of pre-retirement income and COL predictions are made by people who have a vested interest in you saving money with them. That inherent conflict of interest means that much of what such experts say should be viewed with a questioning eye. I don't mean to imply that we should spend frivolously but look at your own situation dispassionately and not through the lens of a so-called expert.

    Many people do not realize how much less is needed in retirement. First off, your taxes will be reduced, oftentimes down to zero. Now look at what you paid during your working years; it could be a combined rate of 25, 35, or even higher %. Now take out saving in your 401k and that could be upwards of another 10%. Start to whack out clothes expenses and the like and you might easily get to 50% or more very quickly.

    Don't let fear stop you from enjoying the fruits of your labor. You will not want to be 80 or 90 and trying to squeeze in all the things you wished you could have done. Some might be able to, but I wouldn't bank on it.

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    1. Reminds me of the old saying "Do you really want to be the richest guy in the graveyard?" As you said ChuckY - enjoy the fruits of your labor.

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  4. When I retired 12 years ago, I had less than $200,000 in my retirement fund, and my only assets were my house, my car, and a beat-up camper. I knew that I would have to work part-time to support myself, and I have succeeded in doing that, up to now. I'm in the middle of moving again - downsizing - and decided to do it so that I could survive when my income streams run out, which they will do eventually. I do my best to enjoy each day, as my nest egg (now less than $100,000) shrinks because I am using it to live. My worry is for the people who have even less retirement savings than I had.

    My 20-year teaching position did not supply enough funds for retirement, but I was able to find enjoyable part-time work post-retirement. Like many women of the Boomer generation, I did not receive equal pay for equal work, and that is the main reason for my straitened circumstances. But I am making the best of it. Reading the many helpful retirement blogs, including yours, provides hope and new solutions for many problems retirees face.

    I'm glad you republished this blog post. Thanks!

    --Dr Rin Porter

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    1. Thank you for your comment! Making the best of whatever our circumstances are is the only logical approach. I firmly believe attitude is the one factor that money can't buy but can guarantee a satisfying retirement.

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  5. As new retirees, we aren't anywhere close to being millionaires. My question is: do we continue to save for that "maybe nursing facilities years"? How much of our savings should we spend and enjoy for NOW?
    We are living comfortably on our retirement income, and I really don't want to leave money for the kids.
    Keep saving? Just live on our income? Spend some of our savings?
    Interesting thoughts!

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  6. My Mother is currently in a nursing. My parents were very good savers. The results are my Father is paying the full cost of the nursing home care. My mother is getting exactly the same care that everyone else in the nursing home receives. Out of 120 residents there are only 10,including my mother, that are private pay. It makes one wonder what the point of saving for a nursing home was all about.

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    1. My parents are also out of money and are both on Medicaid in a nursing facility. They are getting the same care as those who are paying full price! They paid full price until they ran out. Who knows how long any of our savings will last.

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    2. There is a whole new class of amazing continuing care. I assure you, there are very few who are not paying the fees themselves. They do not play BINGO with rags around their necks. They are dining in a beautiful room and listening to the piano.
      I will never qualify to get into such a place. I do not intend to save pretending I will get in. The buy in currently is about $250K and you had to prove you had more then a million in liquid assets. These are the secondary facilities of the future. Like the new private hospitals (yup- they are there- you just don't know about them if you are below the million class), the division of care is growing fast.
      We are going for that $250,000 end of life amount that is often quoted.
      We are also praying that those robots boot up soon enough to help us just die in our house or one of those granny pods in our kids' back yard.
      My single sister is planning on moving to a third world country and hoping her money goes much further.

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  7. This is so true. And not only for retirees. I have friends, a couple, who are both still working at good paying jobs and yet are always so stressed about money. They live in a lavish home and send their kids to a very expensive private school. To hear them talk, you would think that they are one step away from bankruptcy, and maybe they are. They are the sweetest people but for reasons I have never understood, they just cannot see that their lifestyle choices are causing them severe stress. I have much less than they do, in terms of income, yet I live quite contentedly on what I have and even have plenty left over to give to my favorite charity. The saying that money does not buy happiness is certainly true in their case.

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    1. The type of lifestyle choice your friends have made is so common, and responsible for so many problems and heartache. If spending and balance aren't achieved before leaving work, then retirement can become very unsatisfying.

      While never in the same league as your friends, I had to learn the hard way that my income wasn't what was going to make me happy.

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  8. One million dollars ain't what it used to be. Even if one has the $1mil invested at a 5% return- a reasonable figure today- that would be only $50k a year. Certainly not what most people think a million bucks would bring. I don't have $1mil in assets, yet my income which includes SS, teacher retirement, a couple of annuities, IRA, and some other streams adds up to more than that! It's all how you spend it.
    Simplicity and retirement- so true they go together! We've downsized and gotten rid of so much in the 2.5 years since I retired, and we will continue to do so in the future. So much less to take care of and maintain.
    SO true about health! My wife and I have been aggressive in our pursuit of better health this past year. We've both lost weight, feel better, and I'm off all diabetic meds (with dr's approval). I have buddies who like to ride bicycles and jog with me. Imagine a 63 year old planning to run in a 5k!
    One more thing. The waiting "until I've maxed out my retirement" whether that is for a pension or SS or whatever. There are lots of people who did that and keeled over soon after. If having a large income drives a person, go for it. I was very happy to retire at 59 with the prospect of a lower income. The time I've had with my wife and grown children is worth far more than another few bucks each month.
    Thanks as always.
    Jeff in OK

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    1. I certainly couldn't agree more, Jeff. You know my story: forced to retire at 52, not knowing if it was going to work out, but willing to take that leap of faith. 15 years later everything is just fine. Life is good and our finances are solid.

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  9. I ran into a friend recently who is my age (68) and still working long hours to maintain an upscale lifestyle. He looked like he was worn out, stressed out, and needed a break. I advised him he should either go part-time or retire and have fun like all of his friends, but he shrugged me off. I wouldn't trade places with him for anything...I can live without the Country Club, and the Range Rover. I'm very happy driving to the YMCA in my Dodge Dakota. I loved this article.

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    1. Thanks, Joe.

      Like you, I remember the stressed out days when I was running a business. Never again.

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