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HOW MUCH INCOME do I need to retire? That’s a question many Americans have. I recently learned the hard way how different the answers can be. On a Facebook group, a person posted the question, “Can I retire on $40,000 a year?”
I thought the question was about living on $40,000 a year after earning a much higher salary. I was wrong and insensitive. I replied from my life perspective that it would be tough to live on that amount for 30-plus years in retirement. My property taxes and homeowners’ association fees alone are more than half that amount, and in normal times I spend $20,000 annually on travel.
Other members of the group took me to task, and rightly so. Then I recalled that tens of millions of Americans live on that amount or less for their entire life. The median retirement income is $47,357, which means half of retirees live on less. By some estimates, 40% of retirees get by solely on their monthly Social Security check.
What about lifestyle? Again, the comments from others brought me back to reality. Those living on $40,000 a year or less often described themselves as doing fine, enjoying retirement, and even being able to travel and live comfortably.
It became clear that what makes people comfortable and able to enjoy life isn’t all about income. I like staying in nice hotels, book mini-suites when I take cruises and rent houses in Florida in the winter. By contrast, one person said their desired travel was a road trip—sleeping in the back of their minivan and stopping at free campgrounds.
A woman described her comfortable lifestyle as having no debt, not going out to eat and living frugally, just as she had done her entire life. The words “living simply” popped up frequently.
When their mortgage is paid off and the kids are out of the house, one couple planned to retire “easily” on $40,000 a year at ages 54 and 56. Retiring at 54 is truly beyond my comprehension.
Is living simply and having enough to “get by” a sound retirement goal? Or is it what many people must settle for based on their circumstances? When I hear people talk about retiring before age 60, and living frugally to do so, I believe these retirees are living too close to the edge. They’re too optimistic—and perhaps naïve—about the next 30 or 40 years.
Maintaining your preretirement lifestyle may sound easy. But the nature of expenses in retirement, plus inflation and the ups and downs of the stock market, say otherwise.
I retired at 67, when I was sure that my retirement income would equal the base pay I earned before retiring. Did I miss out on a decade or more of enjoying retirement? Did I trade some of my present leisure years for greater security? I did, and intentionally so. I don’t feel cheated, but I do feel financially secure.
“I retired at 67, when I was sure that my retirement income would equal the base pay I earned before retiring. Did I miss out on a decade or more of enjoying retirement? Did I trade some of my present leisure years for greater security? I did, and intentionally so. I don’t feel cheated, but I do feel financially secure.”
What’s missing from the above is that you took a huge gamble – and won. You ignored another massive risk: staying healthy and alive long enough past 67 to experience enjoyable retirement.
Sadly, those who shared your thinking but didn’t win that gamble are not around or cannot share their perspective. So…confirmation bias.
There are so many stories of people passing away after working too long – and never getting to enjoy their retirement dreams. I am sure their loved ones would rather have a lower standard of living and build more modest retirement memories together, vs be left alone prematurely with a bigger nest egg.
It’s a tough call when to retire – too early and risk financial safety. Too late and risk losing something you can’t buy more of.
These and many other comments elsewhere indicate living on $40,000 or some times less in retirement and for many more years than from the old traditional age 65 is very feasible. That makes me wonder be that the case why is accumulating sufficient retirement funds so difficult for many earning very average incomes while working given SS will make up 35 to 40% of the total income.
I don’t think its an either or, I could have retired at 54 with more than enough money but worked until 60 because it was still a lot of fun. To me the right retirement age is the longer of two options. One is how long it takes you to become financially independent with margin and the other is when work stops being fun. In my case I hit financial independence a few years before work stopped being my favorite hobby. In your case you retired exactly when you had FI with a healthy safety factor. I think we both made appropriate choices.