How much cash to retire?

[Dockhead]

Originally Posted by daletournier

. . . I just sold a house, actually two dwellings on the same block returning about 5%, at 5% this would of been the best return in the area!!! 5%, a good return?. ..

5% running yield? That is a very good return in most markets for residential property, other than residential property so crappy (either location or the building) that you don't expect any capital appreciation.


Running yield on my rental property averages about 0%, but the capital value has doubled several times, and since I bought the properties with leverage, my initial investment has increased about 3000% in a few decades. And that's why we make long term investments into real estate.

[Dockhead]

Originally Posted by redneckrob

You need to remember inflation rates before pining for the "good old days" of what you incorrectly remember as high rates of return simply because you remember higher interest rates and forget higher inflation rates. Absolute rates of return, meaning return after you subtract out inflation, are remarkably steady over remarkably long time periods.

Correct.


Any time you are living comfortably off bank interest -- it means you are actually spending your capital, as the capital loses value every month.

[daletournier]

Originally Posted by Dockhead

5% running yield? That is a very good return in most markets for residential property, other than residential property so crappy (either location or the building) that you don't expect any capital appreciation.


Running yield on my rental property averages about 0%, but the capital value has doubled several times, and since I bought the properties with leverage, my initial investment has increased about 3000% in a few decades. And that's why we make long term investments into real estate.

That's sort of my point, cashflow investing is a distant memory, the only game in town is speculation and I would argue (at least here in Australia) that the underlying fundamentals are very flawed.

When I first started, it revolved around "what does it make me today " , was it cashflow positive, the deal had to make sense now, not in 10 years.

I'm also a speculator now, I dont like it, capital gain was a bonus if it happened, not now, everyone's a investing genius, buy s... and it goes up.

[daletournier]

Originally Posted by Dockhead

Correct.


Any time you are living comfortably off bank interest -- it means you are actually spending your capital, as the capital loses value every month.

I think you are misunderstanding what Redneck is saying, hes pointing out the official low Cpi.

We've disagreed on this before, the models used to measure inflation have changed substantially over the years.

I agree with you, I have little cash lying around getting eroded.

[Yihang]

I think 3-4% yield is about average in Australia. 0% yield is a bit hard to see, unless the rental price hasn't increased in 30 years and the value went up 3000% like you said.

[Yihang]

Originally Posted by NaClyDog

This is NOT investment advice.


I used to own physical real estate and it became a massive PITA as you put it. I eventually divested those holdings and moved them to various REITs. All the perks / pitfalls of owning the actual real estate without the PITA factor. Everything related to them is easily managed from an internet connected keyboard (buy / sell).

I wouldn't say REITs are as safe as actual real-estate. A lot of REITs dropped 40-50% during covid. Most of them will rebound eventually (maybe), most have dropped dividends. I don't see nearly as much of a drop in actual real-estate value.

CFAs all have their little biases. I would just research as much as I can and only then seek a second opinion from a CFA.

[Boatguy30]

Depends on if you think SS and Medicare will be around in 25 years....

And your lifestyle of course. If you're living off millions now you can probably afford a survival of the fittest future better than most if you cut back soon enough.

Ann Rand died on Medicaid!

[Dockhead]

Originally Posted by Yihang

I think 3-4% yield is about average in Australia. 0% yield is a bit hard to see, unless the rental price hasn't increased in 30 years and the value went up 3000% like you said.

I didn't say value went up 3000%, I said MY EQUITY went up. That's the magic of leverage.



Yield of course is better than 0%; I was exaggerating. But it's far from 5%, and the yield is eaten up with costs and interest payments so that I feel lucky when I'm breaking even. In the U.S. and Europe (don't know anything about Oz), 2-3% yield is considered very good for quality urban residential real estate in capital cities. 1%-2% is not unusual. And that's remarkably consistent across different countries, including Helsinki, Warsaw, Moscow, London, and New York, cities I have personal knowledge of.


The only city where I saw something really different was Tokyo maybe 5 or 10 years ago. It was possibly to buy quality apartments in good locations on a 10% yield. I wish to hell I had scraped up some money and bought one or two of those, because that turns out to have been a brief window which has since closed. An obstacle was that I couldn't get any kind of mortgage without being a Japanese resident, and I was busy with my work so decided not to mess with it. With that kind of yield though you could buy without leverage and be happy.

[Dockhead]

Originally Posted by Boatguy30

Depends on if you think SS and Medicare will be around in 25 years....

And your lifestyle of course. If you're living off millions now you can probably afford a survival of the fittest future better than most if you cut back soon enough.

Ann Rand died on Medicaid!

Good reason not to retire in the U.S. I'm certainly not going to (if I retire at all).

[sailorboy1]

Originally Posted by Clipper4730

So question, how much cash do think you want/need to retire and be comfortable. We have several friends in our age bracket 49 me and 39 admiral who have retired completely however they are quite hazy on how much they have in the bank etc. we know their budget but we are curious to know how much is enough. Given the current state of things we are seriously thinking of bailing out and enjoying life. Assume no mortgages or other major debts a million enough 2 million just not sure. Mine is not a job you could leave and come back to at the same pay so the decision would be final. Thoughts? Just spitballing and since we can’t discuss it on the cruisers beach though I would throw it out here.

Cheers

Did you get a useful answer yet?

[CorryvreckanTid]

On the other hand, in 2021, if you are over 50, with pre-existing condition (like 50% of the group), do you think you will find non employer health insurance in the US? post ACA and all that.
Then again, if cruising outside US, insurance is whole complication in itself and quite possibly ad hoc healthcare will be cheaper. (My limited experience.)

Self insure? How much do you want to set aside? (available for prompt liquidation from long term to cash - you cannot control the timing of the need)

Interesting factoid: US govt pays 60+% of total healthcare cost in the US. Average cost per individual is 2X average of developed world. If we fixed this last number, we would have "Medicare for All". Done.)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4880216/

While the above may perturb a reaction, the only point is that required "cash to retire" is very tricky calculation under current circumstances - uniquely to the US.

[ArmySailor]

Wasn't intended as advice for the OP. Just a response... The usual rabble amongst posters that disregards the actual question.

Originally Posted by NaClyDog

This is NOT investment advice.


I used to own physical real estate and it became a massive PITA as you put it. I eventually divested those holdings and moved them to various REITs. All the perks / pitfalls of owning the actual real estate without the PITA factor. Everything related to them is easily managed from an internet connected keyboard (buy / sell).

[ArmySailor]

Originally Posted by daletournier

The problem I see with many investment models is "that times have changed alot" ,most still invest based on past results that came in a completely different economic environment.

60% stocks 40% bonds etc., yet bonds pretty well return zero today, in some cases they are negative, and arguably the stock market is grossly overvalued.

I just sold a house, actually two dwellings on the same block returning about 5%, at 5% this would of been the best return in the area!!! 5%, a good return?

It really wasnt that long ago where I could of left my money in the bank and recieved a return I could live off comfortably, to get the same return today from a fixed term bank deposit I'd need 12-15 million in the account!

Interesting times to invest.

To the OP, most everyday cruising couples that live comfortable life on their boats spend very similar to Sailorboy Imho, for me that's about $1,000 aud/week, I expect that to go down quite abit as I'll now be doing less miles than Ive been doing which means less wear and tear.

60/40 as generic non-personalized advice is still... Ok. Returns are definitely not zero.

[NaClyDog]

Originally Posted by ArmySailor

Wasn't intended as advice for the OP. Just a response... The usual rabble amongst posters that disregards the actual question.

Thanks for your condescending uninformed opinion.


I answered the OP in post #5.

[NPCampbell]

Originally Posted by Dockhead

If you have a couple million dollars, then budgeting on income without withdrawing capital is excessively conservative. What's the point? Unless it's so much more than you need that you are consciously preserving a legacy for your children or grandchildren.

I don't want to withdraw from capital for a number of reasons.

If you withdraw from capital then you are having to guess or gamble on how long you live. If you live longer than your target then obviously you will run out of money with no means of generating more income.

Tools like FireCalc stress test against market conditions but not against life conditions like unexpected nursing home, legal, medical bills or the occasional impulse buy of a 50 foot catamaran. In 30+ years of retirement a lot can happen and I have first hand experience with my parents. My father retired at 52 but he had Alzheimers which required care over and above insurance, a pension fund dried up and stopped paying out and an insurance policy that was supposed to last a lifetime starting requiring supplemental payments. Burning through your capital sucks and I don't want to put the burden of taking care of me on my children or the make other people pay for my care (the government).