How much cash to retire?

[wingssail]

Originally Posted by valhalla360

Already considered that when I posted...

If you are paying 34% making $40k/yr, you really need to take a math class. Heck, we typically get in the low 6 figures and don't pay anything close to 34% with no unusual deductions.

Federal tax they get $24k standard deduction, so run the numbers and that's 4% of gross, you are paying as taxes. (use a qualified plan to save, and your effective tax rate drops by another percent or so).

States vary but with a few outliers, most are between 0-5% for the top bracket and there are still deductions and other ways to reduce that. But making $40k isn't likely to get you in the top bracket, so even in the extreme states, you aren't likely to break 10% in total income taxes.

If you are paying more than 10% total income tax with a combined income of $40k, you should really consider moving to a low income tax state and now it's around 4% total that you are paying...but that takes a little planning and an organized approach.

Also, if you are used to living on say $35k take home (to cover income tax plus 10% retirement savings), you don't need to save a million, especially after factoring in social security which will generate something on the order of $1200/month/person based on each making $20k/yr (inflation adjusted over time...or about $29k/yr SS). This means you need enough to generate about $6k/yr from your savings...using the 4% rule (which I dislike but makes an easy calculation), you only need about $150k saved to generate $35k per year...and you are likely paying 0% income tax in retirement.

Yes, it's very much possible to save for a comfortable (not rich) retirement making only minimum wage...but again as I said before, someone disciplined enough to budget and save 10-15% won't be making minimum wage for long.

OK, this is the type of thinking I like. In the first place you are not one of the "$2-$3 millions" crowd, (although I think your $150,000 is a bit low.)

But I doubt that a diversified investment of $150,00 will generate 4% without dipping into the capital. (if you can suggest otherwise, lets hear it) Assuming for these folks that's all they have then they need to keep as much capital as possible for the major expenses (or a really long life).

So I think they need more, (plus remember they need to buy a boat and outfit it somewhere along the line).

Back to my premise, minimum wage isn't going to get people to be able to retire and live on a boat cruising the world. (Why are we arguing that use case anyhow, it's stupid?).

However, middle class people can do it, (with good financial discipline), and the elite who have been very successful can do it. I view them as privileged.

[Paul L]

Originally Posted by wingssail

Oh Yeah, back to Sean's world.

Plus you won't need near as much money in retirement if you take the Philippines life expectancy along with the food costs.

[Joli]

Originally Posted by sailorboy1

My ACA plan IS a private market plan no different really than any plan i had through my employment over the years.

True enough. But the variation in plan pricing is an additional tax imposed on the rich through the mandate. Otherwise few would buy a $4,700/month policy. Fortunately Trump cancelled the mandate and we can now buy temporary policies.

I'm fine with the government subsidizing insurance costs for those in need although I do believe assets should also be taken into consideration.

I'm not fine with the government forcing me to buy a product especially after they have ruined the market place.

The OP asked about costs to cruise so discussing health insurance is certainly a subject that qualifies.

[NPCampbell]

Originally Posted by Gadagirl

Ecept that $40k is gross income before tax. So after tax income is substantially lower. I have consistently paid %34 between Federeral and state taxes. Subtract another %15 ? That is living on half of your gross income. Not saying they couldn't save something if they were frugal. But i would peg their ability at saving maybe, maybe, %3.

You pay 34% but someone making $40k will pay a max of around 19% no matter what state they live in.

For a single person making $40k:
Nominal federal income tax will be around = 7.5%
FICA = 7.65%
California tax rate @$40k = 2.5%
New York tax rate @$40k = 4%
$6k in a tax deferred account = -3%

Can you save on $40k? You can but it will be pretty tough. How do I know this? My girl friend makes $1k less than the median income for full time single workers which is $49k. She worked for 25 years in a non-unionized grocery store and never made a title higher than department manager. She's 43 and has $200k in a 401k with no company matching. She raised a child as a single mother and never received any external income other than normal wages.

How'd she do it? She always split the rent with someone else, she cut coupons, she rarely ran the AC in Texas, she didn't have cable, she drives a 10 year old car, she rarely ate out, she spent less than $200 at Christmas time and ... she saved around 8% of her paycheck starting at 18.

If she continues this contribution rate until 67 and the S&P500 continues for the next 24 years with the same returns as the past 25 years she should have around $2.5 million by 67 (which would be the equivalent of around $1.5 million today at an inflation rate of 1.8%).

[DeValency]

Mr. Joli, with all due respect you are trying to promote here a failing 2017-2020 administration with baseless information.

Originally Posted by Joli

True enough. But the variation in plan pricing is an additional tax imposed on the rich through the mandate. Otherwise few would buy a $4,700/month policy. Fortunately Trump cancelled the mandate and we can now buy temporary policies.

* No one is buying $4,700/month health policy. You can call a policy with any name you like, but the fact is you can privately buy a policy in a more or less the same price as small employers do. That was never the case prior to the ACA

* No tax has been (yet) imposed on the "rich". As a matter of fact, we have just heard on one (not so rich) who paid in good years just $750 in taxes (about 0.5% of my taxes). Meaning that you and me paid for his millions in healthcare costs last weekend. But that's ok, we should support people in need...

* As one that will probably have to pay more taxes as of next year, I can definitely agree to pay more in order to support health services to all the people, exactly as we pay for the military, law enforcement and firefighters that serve everyone.

* The public, through the government, has the full right to force anyone to carry a health insurance, otherwise, when they get sick and they will, you and me will have to pay their bills. This is why civilized countries and states impose helmets on motorcycle riders and seatbelts.

I'm fine with the government subsidizing insurance costs for those in need although I do believe assets should also be taken into consideration.

* Sure, so for the less privileged people with a small $150K apt., or $30,000 liveaboard boat (if they're lucky), once discharged from the hospital, will have to find a bridge to sleep under.

I'm not fine with the government forcing me to buy a product especially after they have ruined the market place.

* That's of course has no connection to reality, but in this season, I guess, anything goes...

The OP asked about costs to cruise so discussing health insurance is certainly a subject that qualifies.

* Here I can agree with you. We live in a situation where healthcare costs in the US are the highest in the world (2-3x) while the health outcomes are at #37... This has a significant effect on any American on or off shore.

[Joli]

Originally Posted by DeValency

Mr. Joli, with all due respect you are trying to promote here a failing 2017-2020 administration with baseless information.



* Here I can agree with you. We live in a situation where healthcare costs in the US are the highest in the world (2-3x) while the health outcomes are at #37... This has a significant effect on any American on or off shore.

I guess we fundamentally disagree. I believe the marketplace finds solutions when the government stays out of the market. The insurance and medical industry are so heavily regulated it's a disaster. I showed you the price for our policy but you deny it. The Tax Reform Act of 2017 removed the mandate that require we buy expensive policies but you deny it. When Biden wins, more regulations will be enacted and the medical and insurance industries will be worse for it.

This is becoming political rather then a discussion of cruising costs so I'm stopping here.

[DeValency]

I had no intension to get into too much politics, however, in this toxic environment we live in - I had to discontinue my ocean cruising in March due to countries and islands lockdown - everything becomes political. Yet, facts are facts.

My day business company is global clinical development and health data research and analytics - we see the numbers and conditions on a daily basis from over 34M lives.

- The fact is the ACA first of all enabled shopping through the states exchanges and getting a coverage regardless any preconditions at competitive prices. In fact, you were able to find a cheaper plan.

- States that chose not to create exchanges (for political reasons) forced their residents to go out and be exposed to the “free market” with the common sharks.

- Regulations should be carefully measured, but basically are made first of all to protect the people and the legitimate public interest.
This is why we must use holding tanks, eliminate fuels and oil spillage, adhere to the EPA - some of fat-cats business interests gets hurt when not allowed to poison a whole city drinking water or when not allowed to continue pumping the sub prime real estate scams that created the biggest economical recession since 1930 - and again this year by ignoring the CDC requirements.

Over and out.

[valhalla360]

Originally Posted by wingssail

But I doubt that a diversified investment of $150,00 will generate 4% without dipping into the capital. (if you can suggest otherwise, lets hear it) Assuming for these folks that's all they have then they need to keep as much capital as possible for the major expenses (or a really long life).

So I think they need more, (plus remember they need to buy a boat and outfit it somewhere along the line).

$150k does create some different issues in terms of unexpected expenses but really 4% doesn't care about the scale. Call it $250 if you like, it's still very doable for someone on minimum wage.

Presumably, they aren't buying a $500k boat. Probably more like an older $20k boat and a lot of sweat equity. Of course a lot of their spending is likely going into rent, so if that is re-routed to the boat, they likely can free up $10-15k/yr for maintenance and upgrades which is quite reasonable for a small boat.

[valhalla360]

Originally Posted by NPCampbell

You pay 34% but someone making $40k will pay a max of around 19% no matter what state they live in.

For a single person making $40k:
Nominal federal income tax will be around = 7.5%
FICA = 7.65%
California tax rate @$40k = 2.5%
New York tax rate @$40k = 4%
$6k in a tax deferred account = -3%

Can you save on $40k? You can but it will be pretty tough. How do I know this? My girl friend makes $1k less than the median income for full time single workers which is $49k. She worked for 25 years in a non-unionized grocery store and never made a title higher than department manager. She's 43 and has $200k in a 401k with no company matching. She raised a child as a single mother and never received any external income other than normal wages.

How'd she do it? She always split the rent with someone else, she cut coupons, she rarely ran the AC in Texas, she didn't have cable, she drives a 10 year old car, she rarely ate out, she spent less than $200 at Christmas time and ... she saved around 8% of her paycheck starting at 18.

If she continues this contribution rate until 67 and the S&P500 continues for the next 24 years with the same returns as the past 25 years she should have around $2.5 million by 67 (which would be the equivalent of around $1.5 million today at an inflation rate of 1.8%).

I missed FICA in my earlier review but the example of $40k was for a married couple filing jointly, so Federal income tax would be around 4% (lower if contributing via a qualified pre-tax plan). So 12-16% is what they would be looking at and keeping it down around 12% is a choice in where they live...in fact not living in California or New York is a big benefit in terms of general cost of living.

[Mike OReilly]

According to this official (Social Security) government website, the USA national median wage in 1919 is: $34,248.45. An individual making $48k is considerably over the median. The average income was: $51,916.27.

As the site states:

The table below shows that the median wage is substantially less than the average wage. The reason for the difference is that the distribution of workers by wage level is highly skewed.

[Sailingsailor12]

I am a want to be sailor. I retired a year ago at age 64. Two things I didn't budget properly for were medical insurance and income tax. It is much better now that Medicare has kicked in for my wife and myself. Also you should be able to sail until you are 70 - 72 years old, then sailing probably won't be an option. You will need to be able to live somewhere. The best of luck to you.

[gordonhinds]

Interesting question. I guess its complicated as it depends on what you require to live. Skiing holidays? travel? Boat repairs, wine? eating out?

People seem to report that living on a boat with some degree of mortality costs about $50K a year and that is being pretty frugal. So $80K a year is probably more the mark as you have to include a raft of costs - maintenance, upgrades, insurance, berthing pus normal living costs, food, wine, clothes (not many), health insurance, travel to see kids/grandchildren etc.

So if you are 60 then bank on ten years - so you will need about $1,000,000 plus the purchase price of a yacht (you will get about 50% back when you sell it if you buy a good second hand yacht). Its probably smart to have some sort of asset for your eventual shore life as well.

So like someone said 'as much as possible' - so minimum $1,000,000 for ten years, and probably between $1-2 million to be secure. I am sure people do it for way less and good on them - at least they are doing it.

[wingssail]

Originally Posted by Sailingsailor12

I am a want to be sailor. I retired a year ago at age 64. Two things I didn't budget properly for were medical insurance and income tax. It is much better now that Medicare has kicked in for my wife and myself. Also you should be able to sail until you are 70 - 72 years old, then sailing probably won't be an option. You will need to be able to live somewhere. The best of luck to you.

That is too pessimistic. You can sail much longer than that. We quit our careers in corporate America when I was 50 (wife 46). We've been sailing since then (now in our 70's). We sail a powerful boat, double handed, race 25 times a year, and cruise at least three months a year. We hope to sail into our 80's. One of my friends races his 44' boat with a small crew and he is over 80. He does foredeck when his regular foredeck person is not available.

We had 160,000 when we left 25 years ago, which we burned through rather quickly, and had to go back to work periodically (in foreign locations). We did well in those temporary jobs and now we now live quite nicely on SS, and dividends from a diversified portfolio of under 250,000. Our capital has not been touched and in fact it is increasing. Nothing good lasts forever so we know the future may bring a financial impact which take much if not all of that capital. But, well, S**t happens. We'll still have SS.

Medical Insurance and Income tax? Forget it. Cruising means going places other than the US. Self insured medical care (meaning pay as you go) is very inexpensive in many countries and quite good. (Major surgeries in top hospitals at 1/8 what it costs in the USA. Example for less than major: orthoscopic knee surgery for $2500 rather than $19000). We don't have medical insurance. We will return to the US if possible and use Medicare for major illnesses.

If you have only a little income you don't pay income tax.

Cruising does not cost as much as many people think it does.

[edlepera]

After 20 years in the Navy and 27 years in the civilian work force. KIS keep it simple. I am planning on moving up to a 30 footer with no engine. My 22 footer I am currently honing my sailing skills on has a trolling motor on it. But I use the sculling oar for most maneuvering on the river. At the lake no motor needed. Solar, wind generator, So I figure living in as an expat in a nice quiet area. Sailing were the wind takes me Just like Slocum

[Dulls]

Originally Posted by Paul L

If you believe that this is the way to long term cruise, maybe you should just consider long term, single-handed camping in a forest you can walk to. It'll be even cheaper and you won't have to consider anyone else onboards desires.

I have done it before and we had a happy little ship. Only canvas on boat was the spray dodger. You come across as a cheerful companion.