Places Where You Can Retire on $200,000 and Feel Rich

[stewie]

Its not how much you want, but how much you need.

[redneckrob]

I apologize that it's a little tangential but several of you have mused about how you disambiguate interest and inflation, i.e. is getting x% interest good or actually the same as losing money over time...hard to tell unless you know what inflation is and is going to be. One interesting product that can help you tease that out are TIPS, Treasury Inflation-Protected Securities. Basically they are very similar to regular Treasury bonds except that the interest rate goes up or down depending on inflation. Basically, they get you actual interest that neutralizes the inflation component, so if you have enough money in TIPS bonds to live off the interest now then you'll be able to live off the interest from that same principal balance indefinitely (assuming your lifestyle remains the same). While you may not want to invest in TIPS specifically, their existence with the same 5/7/10/20/30 year tenor as regular Treasuries allows you to back out what the market derived inflation rates are for the next X years and if you wanted to you could insulate yourself from those effects for up to 30 years by actually buying TIPS. If you don't want to actually buy them, they act as valuable free data source you can use to index whatever you do end up investing in.

[boatman61]

I can do it..
Give me $200K and I'll prove it..

[valhalla360]

Originally Posted by redneckrob

You sound like you might benefit from a few conversations with an accountant or good financial planner..... you're working off a lot of incomplete information. Take taxes. Assuming you've saved this $200k over your working life, which we all seem to be going with here vice lotto winner, you already paid taxes on that principal. You would only pay taxes on, in your example, an income of $8,000 a year. The marginal federal rate on that is 10%, not 25%, but given that it's lower than your standard deduction your actual realize rate is a whopping 0%. In the face of that, talk of renouncing citizenship is a bit extreme, no?

Actually if your residence is outside the USA (some rules go along with this), the first $95-100k in earnings from outside the USA is tax free (interest on US investments would be different but even with 20% return, standard deduction will cancel out most of that and the rest is at 10%). So even if you get a side job to supplement, you aren't going to have much if any US income tax to pay.

[valhalla360]

Originally Posted by Mike OReilly

My financial wisdom is to focus on limiting the expense side of the balance sheet. Instead of chasing revenue I think freedom comes from reducing costs and limiting financial commitments. No debt, and limited living expenses means small demand for revenue/wealth.

For the typical western CONSUMER, the expense side is usually the easier and more effective side to tackle. Just making an existing budget will often uncover a lot of wasted money.

But once you have a good handle on the expense side, there does come a limit where cutting expenses is worse than just earning a bit more. We like our work, so it's not a burden we hate and want to avoid at all costs.

On the other hand while we do a lot of DIY, some times, the hassle or dislike of certain jobs...it's worth putting in a little extra at work to pay someone to do the work...and that also provides "freedom".

[kevinjilliana]

well the first link was very interesting NOT

[hpeer]

Lies, damn lies and statistics. Here is a Market Watch article that tries to disentangle it.

https://www.marketwatch.com/story/wh...ers-2018-09-24

But the core problem remains with the premise: what is in the $200k?

What is an “average” and “safe” rate of return today? 2%-3%?

If the average SS payment is $1,400/month that’s about $17,000/ year. At 2% return that’s about the equal of a an $800,000 nest egg.

Take 2 couples, age 65, and each have a “net worth” of $200k. For simplicity let’s say they are both debt free and the $200k represents their home. Couple A have been high earners and each gets $2,500/month SS or $60,000/year in aggregate while couple B, being free spirits, have no SS what-so-ever. What amount of investment do you need to safely generate $60,000/yr?

A and B are in vastly different economic circumstances.

We have a brownstone in Philly, 4 apartments, throws off about $36,000 in income. We have investors who want to buy it, but what would we do with the money that would replicate that same income stream? Consider not only pure income but relative income safety.

Why are the housing prices high? Because “investors” are looking for better/safer places to put their money. I’m where they want to be, why should I trade places?

I was able to use FIRECalc, from our sister site, to analyze our income streams and that really helped with my understanding.

[Mike OReilly]

Originally Posted by valhalla360

For the typical western CONSUMER, the expense side is usually the easier and more effective side to tackle. Just making an existing budget will often uncover a lot of wasted money.

But once you have a good handle on the expense side, there does come a limit where cutting expenses is worse than just earning a bit more. We like our work, so it's not a burden we hate and want to avoid at all costs.

On the other hand while we do a lot of DIY, some times, the hassle or dislike of certain jobs...it's worth putting in a little extra at work to pay someone to do the work...and that also provides "freedom".

All true. Like I say, there’s many shades of grey when facing these financial questions. There’s no one right answer for everyone, but all I ever hear from the financial industry is the discussion of how much MORE money one must have to retire. There’s lip service paid to limiting expenses, but the focus is clearly on the revenue side — probably b/c financial advisers can’t make money by focusing on the expense side of the balance sheet.

From my perspective our society focuses way too much on the MORE side of the equation. Growth is baked into our economy. We’re all programmed to want more, all the time…

This is why I appreciate the cruising community. I think most people here have figured out how to live with enough.

[jmh2002]

Well said Mike

[ak08820]

Assuming that the OP was saying $200K as a nest egg, where to safely invest that amount to get an annual income of say $20K?

[bluedotvoyages]

Goa India.

[john61ct]

Originally Posted by ak08820

Assuming that the OP was saying $200K as a nest egg, where to safely invest that amount to get an annual income of say $20K?

If you had a sure-fire formula for that these days that any schmoe could follow with low risk, you could get very rich promoting it.

Would've been much easier in the earlier sages of capitalism@s development, say 3-4 decades ago.

[wingssail]

Originally Posted by ak08820

Assuming that the OP was saying $200K as a nest egg, where to safely invest that amount to get an annual income of say $20K?

If you find the answer to that, let us all know.

[roam]

Originally Posted by ak08820

Assuming that the OP was saying $200K as a nest egg, where to safely invest that amount to get an annual income of say $20K?

I've done some investing with Lending Club and am getting an 11.42% adjusted annualized return. When the economy tanks though those investments and the principal could vanish.

[Dave9111]

I have a friend in the USA - Midwest who is trying to live on $21K of SS income plus some other minor income and its not working. With any medical issues (which he has) it just buries him. Until we fix the medical system in the US, unless you have a BIG wad of cash in the bank, or a really healthy pension, you are at risk of burning your retirement saving in a very short time if you have major issues.



Honestly I think he would do a lot better in Mexico, but that's not happening. The US can be a hostile place for low income folks.



And according to the graph and the retirement of the baby boomers its only going to get worse for many of us.