I have to share my reading of a Yahoo Finance post, "You Can Retire on $2,000 a month". I'm posting the link, but eventually, I'll have to remove it since these things seldom remain live for long. Ultimately, going over their listing of things you could do I found the title was very misleading.
Here's the deal. You can retire on less than the $2-$3,000,000 many investors recommend. John and I retired on a lower income. I found the list on this Yahoo Finance article a little questionable in some areas. For one thing, they recommend you have 'less house', namely an apartment for 'about $700/month'. Obviously, if you sell your home, you will have less maintenance, insurance costs, and upgrades to make. You'd also have the money to sock away into savings/investments. And if you're living in a very large home, you might well benefit from moving into a smaller one. Good luck finding anything for $700!
We budget for insurance and maintenance. But our home is paid for, so we don't have a mortgage payment. It's hard to beat what we 'pay' for living here, even given the monthly homeowner's insurance, maintenance, and taxes which are very low being as we're in the middle of rural Georgia.
Also recommended, keep your electric bill to around $200...that is doable even if the apartment is all electric and in a mild climate such as we live in. They do not mention other utilities though, like water, phone or internet, or natural gas or oil (if you happen to not live in an all-electric apartment).
Our average (which includes a propane gas fee for part of the year and includes the electricity required for our water) works out to about $220/month.
So per the article, for just electricity and an apartment, they've spent $900 which is roughly half your income.
They recommend you sell your car. Wonderful advice if you live in a city with public transportation available. Not so much if you live in a rural area. Selling your car would mean no insurance or gasoline costs, routine maintenance, or emergency repair fees. I have no clue what public transportation would cost as we don't have those services in any of the towns where we typically shop. We can get Uber/Lyft and taxis in a few of the towns and none of that in the more rural areas. They do say in this article that if you keep your car, you would budget $200 a month for insurance, gas, and maintenance. I think that is a bit of a low-ball figure.
We are very careful with our gas, budget for routine maintenance, carry a moderate insurance policy, and have good driving records. Typically, we spend nearly $300 a month in this area. That's with no car payment and a much older car than most drive.
The writer allots $150 a month for medical/pharmacy and medical insurance costs. Honestly? We have minimum health insurance coverage (what we can afford) and we put aside the same recommended amount of money each month to cover our very occasional doctor visits and all of our pharmacy and over-the-counter med needs. Some months, that amount doesn't quite stretch to cover the expenses. And it does not include dental or vision. Those are 'extras' that you'd need to consider.
After we recently had an eye exam and bought glasses, we've decided that it would be wise to budget a monthly amount towards these expenses next year.
It's suggested you budget about $300/month for food costs. This is entirely dependent upon the area where you live and how many you are feeding. The article does not mention if this budget is for one or two. That will make a difference. It also doesn't take into account stockpiles or having a pantry/freezer to draw from, so your total may be lower, but you keep more food on hand. Now I know of a few who spend a good deal less than John and I do on groceries. They live in areas where they have access to a variety of stores at various price points. If we bought groceries at our local store only, we would pay roughly $600 a month. Shopping at a distance from home, and taking advantage of sales, I can keep it somewhat lower for the two of us, but we'd have to seriously reduce our wants and compromise on our needs to manage a $300-a-month.
They recommend $100 a month for entertainment with liberal use of 'free' entertainment via museums and libraries. And $50 a month for shopping (clothes, incidental items needed for home).
And then they mention savings of a few hundred dollars a month. Based on their budget figures I'm figuring you would have about $300 a month leftover if you were able to stick exactly to their ideals. That 'savings' would have to include telephone, internet, any excess spending required in a month as well as savings. They do not budget for tithing or giving to charity, holiday or birthday giving, taxes...
I'm not saying it's an impossible thing to do, but it would be difficult to make their ideal budget. And the assumption is, of course, that you are in good health, have six to nine months of living expenses as emergency savings, and have investments and such to bridge any gaps.
All in all, I thought it interesting to read such an article in light of how many I read that suggest those who haven't a large monthly income could not possibly hope to retire!
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15 comments:
For me the most concerning thing about retiring is long term care, if necessary. My husband and I are adamant that we won't put this responsibility on our children. It is outrageous that there are not more affordable options for elderly people. My FIL lives in an assisted living facility and I will not even mention the astronomical cost monthly. Granted,it is outside of NYC and the area is very expensive (but salaries are high as well) The ones in my area that medicare cover are not great, and you must divest yourself of all assets 5 years prior to have medicare pay. It really is a travesty.
Obscure, An elder care attorney could be a help. After my Mom went into memory care for $5000 a month my sister used one to set up everything to get her on Medicaid. She was able to keep a car and her house. Then everything was set up for her monthly allowance and sheltering her assets. It cost $7000 but was worth every penny.
We are just a little above that after tithing and savings and we are doing quite well. House is paid for, even though we have a large house our utilities are around $145 a month with 2 refrigerators and a big freezer. We only have one paid for vehicle and don't have any need for two.
I am easily sticking to $250 a month for food. I have the same stores as you except you have Kroger which I do not and I have Lidl that you do not. We have pretty much quit shopping at the salvage stores because the prices are up to what we get BOGO when shopping sales and everything is short dated or out of date. We have only shopped at Aldi and Lidl for the last 6 weeks or more and are spending $165 a month. We have not been to Publix in at least 6 weeks and probably more. We do not buy anything from the deli when we do go. That is a major money area in your spending. I do not browse the store, ever, and stick to my list. Things bought outside the list are the things that go to waste here. We do occasionally make a stop at Sam's for items that are less there than anywhere else. I know I sound snarky here but I constantly feel called out when it comes to grocery spending here. Our cost is lower because our shopping habits are different. We are willing to do without and wait for items to go on sale to keep our budget low. There is very little that we buy that is not on sale or best price by shopping at Aldi or Lidl.
I just love how these millionaires who write these things (or have them written) think the real world works and how much it costs. Goodness sake.
Obscure, Yes assisted living and nursing homes are expensive. In our area, Assisted Living runs around $7000 a month right now for one of the nicer homes. A good care home is worth every penny in my opinion. However, I think the medical community as a whole is trying hard to steer people into being cared for at home more and more.
For people who are poor and don't have the means to buy long-term care insurance a home that accepts Medicaid is about all you can hope for. For most that means, in Georgia, (As far as I know) that if they have a home the property becomes the state of Georgia's property and their social security check will cover the cost of their stay with a $30 a month amount to be used for 'personal expenses' and that may mean for any medications or equipment that Medicaid will not cover. We warred constantly with the doctors not to prescribe any new medication for patients without being sure that Medicaid was going to cover it. Things may have changed though since my day working in a nursing home.
Lana, we are only a little higher as well before tithing and savings come out. Now that Katie and Caleb have moved out we're edging our grocery spending down. I spend about $15 a month on deli meat for John and we stretch that over the full month since I will divide and freeze and then piece out with homemade lunch options.
I'm not sure why you feel you sound snarky. I personally have always thought you did a most excellent job with your grocery spending and know that you work hard to keep it affordable, and healthy and you inspire me and others.
Karla, I don't know if it was a millionaire's advice or just a frugal guru who came up with this article. I think it's a good article in some ways because it is TRUE you can retire on a lower income but misleading in the things they do not include and the idea that you can save 'hundreds' as they suggest.
Terri you are right about good care being worth every penny. Things are pretty expensive here in California, but I am thankful that my mother has good care.
I've had many occasions in the last 5 years to visit all type of facilities and there are many that are very poorly run, understaffed with poorly qualified people. I am thankful that Mom is in a good place, and I hope that my sister is comfortable where she it in different place. She's not getting excellent care, and sometimes it is borderline poor care. My brother has been disabled for many years and has an apartment. It's not an easy life.
I help my siblings when possible, but I focus on mom's needs.
I don't think that it is possible to save enough money to pay for excellent care.
I hope you all have a great week, and enjoy the many blessings that God has given us.
These are just some random thoughts on this topic. Terri, I know you are a numbers person so I really appreciate you sussing this out.
You probably could rent subsidized housing for $700 month if you met income requirements. This likely means you do not have a house to sell and have not been able to save or invest for retirement. Most likely, your only income would be Social Security or similar. Lots of hardworking people are in that boat, but the article clearly was not written for those of us who own our homes and were able to save/invest for retirement. I am a cheapskate and I couldn't do it.
Utilities of $200 per month...I honestly can't think of anywhere in the US where you could do this. Northern or coastal California might have the right climate, but not the right utility rates. You either need heat in the winter and A/C in the summer, and sometimes both. You would need water, sewer, etc., to be included in the rent. I live in a colder area with low rates and my combined natural gas and electric bill this month was $380--the most ever. It will be lower this summer, but then my water bill will be higher. I pay $76 month for water, sewer and trash pickup (required).
I live in a small city and public transportation is very basic. If I lived close to one of the buslines (and I do), I could meet basic shopping and medical needs with hourly bus service. But to go downtown, I'd need to ride the bus for 30-40 minutes and then transfer to another bus. I live in northern Idaho and most people don't have access to public transportation AT ALL. It is not at all uncommon for people to drive 20 miles to a grocery store or church, and farther for medical care, so in that regard it's good to live in town.
I have a friend in another part of the country who lives on about $24,000 per year (not here). She does this by renting out an upstairs apartment in her home for $1,200 per month. This pays her $800 month mortgage with some leftover. She drives a 20-year-old car (no public transportation). She shops at Aldi and relies on a food pantry. She shops exclusively at thrift stores and on Facebook Marketplace. She qualifies for Medicaid but not for SNAP. She manages because she does not go into debt and tries to keep an emergency fund of $2,000 that she is constantly trying to replenish. She never eats in restaurants or spends anything for entertainment. Not that there is much free entertainment in her small town--she just can't afford to do anything. She is constantly refining her budget. In fact, that's her hobby--to see if she can squeeze out ONE MORE THING.
Most of the articles I've seen about living on $2,000 a month involve moving to Mexico or Central America. And, even then, I don't know if you could even do it.
--Maxine, aka mikemax
I should also have told you that when my friend had an immediate need for $3,000, she sold her car and lost a lot of money on the deal--but came up with the 3 grand. That's why she's driving a 20-year-old beater and praying it doesn't break down. She isn't eligible for a pension plan, even if she could afford to participate in it. Her house is her retirement plan. She had to sell her former home a few years ago when she needed to have the septic system rebuilt for $31,000. Unfortunately, this is what happens to a lot of women after a divorce. (She has not remarried). Her youngest child just left home and she rented their bedroom the next month.
Ginny, I expect things are far more expensive in some states than here. And here they are pretty gasp worthy.
Max, the article was specific that the person in their scenario had both savings and investments but they were living on the lower end, so affordable housing with some assistance wasn't likely to be the case. However, I think it's brilliant your friend was able to rent out a room. I know a couple at church who do the same thing and it's a true help to them. They also are fairly low income retirees with health issues (he's battling a second round of oral cancer).
Living on $2000/mo would be difficult, but could be done with the right choices. Living in town where things are close by helps, including less lawn-mowing gas and gas for driving. We live on $2600/mo. However, we earn some extra money on top of this to keep in savings for emergencies. Monthly I pay $65 for heat, $101 for electricity, $85 for water/sewer/trash, $56 for internet, $125 for property taxes, $400 for groceries for 3 adults, and $275 for health/dental insurance. Our house cost $92k ten years ago (worth about $180k now) and is 2200 sf, 4BR 2BA, with a finished basement. We live in a tiny town where I can walk to the library, bank, and grocery. I drive 25 min to Aldi ONLY twice a month. I do not make extra stops at the grocery throughout the month. Our house and both cars are paid for. My husband retired early (age 57) and now we both work part-time to subsidize his pension. We almost never go to restaurants. I thank the Lord for everything we have.
I really just wanted to sigh. I shared this with my kids ... they would love to not have to pay over $1000 for rent. They all live in cities.The one with the cheapest "rent" acutally is buying his house and no longer complaining about the property tax and house ins going up due to being LOWER than his siblings that are still renting. Taxi's are mostly non existent.Uber is at least $20 Bus routes don't always go where you need to and can take an hour to get 5 miles away with all the stops.Utilites are more than that and water is no longer included in a lot of rentals nor trash service. They asked where the writer was living.
We live in country, I could get a buggy ride if both trucks broke down if I needed one. Maintaining a 2015 truck is $4000 a year, dealer gave us that heads up BEFORE we bought truck from him. Everything computerized means a lot of money to repair.
We made the home wheelchair accesible which is on average the most common reason people have to leave their homes.My in laws can't even get a walker in their bathroom door but refuse to have the door widened due to cabinet next to it that is holding Extra what evers *not necessary stuff according to son that is in charge of them* We have it so we can have in home care.
I just figured out our grocery costs for the year. $450 a month average with stocking up and eating out.
I just read the actual article and, given a choice, I wonder why people would want to spend their later years like that?
In our small city, the three bus lines are all loops, meaning that you have to ride around the entire loop to get back to where you started. I am near the start of the loop, meaning that to transfer buses, I have to spend nearly an hour on the bus to get to the transfer station (three miles away) and start again on the downtown bus. This is true of ALL transfers. It would take me the better part of 2 hours in each direction to go downtown...a little over 4 miles away.
My son paid $685, PLUS water/sewer/trash, for rent on one-bedroom apartment, THIRTEEN years ago. I can't imagine that it rents for less than $2,000 month now. Did you notice the picture of the couple at the table...the brick wall behind them? Them folks ain't livin' in a $700 apartment, LOL.
I do recommend downsizing, if possible, before age 70 (we were 72 and 74 and our house was too big and on 5 acres). Like Juls, we had our home built with wider doorways, no stairs and other accessible features. It isn't 100% accessible, but close. I don't expect to need longterm care because my family dies from first heart attacks, meaning we don't hang around long (like, not at all). But, if we did, we feel that owning this home would enable us to live here (with help) for much less than the cost of nursing home. We definitely could get by here for less than moving to assisted living because we own the house free and clear. Never underestimate the value of housing as part of longcare care costs. My sister (who has macular degeneration) and her 85-year-old husband are going through this right now and so far they are doing OK with minimal (but regular) help from their two daughters. They have a weekly cleaning lady. They can't drive anymore, but they hire a longtime acquaintance to drive them places, such as $50 RT to the doctor's. (Be careful of hiring people you don't know because of the risk of elder abuse). Groceries are mostly delivered. Amazon for everything else. A daughter takes them out to a movie every 3-4 weeks. Two people in not very good shape can take care of each other for a long time with a little help. It is harder if you live alone.
We drive a 2011 Honda Odyssey that we paid cash for and have only done routine maintenance such as oil changes and such for years. So thinking carefully about which vehicle to buy can save a lot of money.
One other thought-my Mom was a two person assist to get here in and out of bed and other care so having her at home with two caregivers around the clock was completely unaffordable. After she had COVID her legs would not support her so a nursing home was our only option. You just cannot predict what is coming. We did not expect that.
Lisa IN, I agree. We lived off a similar salary most of our marriage. As income rose slightly we took every advantage to pay off all debt and so when John wanted to retire I knew we could manage our lives on a lower income once more.
And I totally agree with being grateful to God for everything we have as well. It's by His grace we continually do what other people say is impossible.
Juls, the average rental for a 1 bedroom in what my daughter calls 'semi-livable neighborhoods' is around $1200 a month. That might or might not include water and sewage and does not include electricity. I can't think of one town near us that has any sort of public transportation except Macon. When my oldest lived there and needed to go to the grocery she had two choices: taxi or private ride. The private rides were exorbitant. It's for people living in that area that I really think would find the article details unrealistic.
When we bought our home, I was working in a nursing home and not long out of a drunk driving accident that meant a lot of additional pain and struggle as none of my family or friends had wheelchair or walker-accessible homes. When we bought this home, I looked hard at the width of doorways, accessibility, etc, and what wasn't accessible at the start we adjusted. The steps of our back porch face west though the door is at the east end because we are on a slope and that end needs only 2 steps (easy to ramp). Hence my reason for wanting to replace our former shower and garden tub with a floor level 6 foot long shower, so we could use it with a shower chair in the later time of need. I think if you've ever been disabled, even for a short while you quickly learn what is necessary.
Max, that's what I meant. Rent of the sort they mention isn't likely. Here in my little town, you may rent a house for around that amount BUT you will pay for electricity, sewage, trash, and water. We have ONE grocery which does have decent food but it's HIGH, as much as the premium grocery in the larger town, no place to buy any other needs (clothing or furnishings), no public transportation, etc. So the article is misleading on many points.
And I say this even while I agree that it IS possible just not in the ways they suggest!
Lana, yes, older vehicles. We have a 2005 Toyota Camry that has had routine maintenance as recommended in the owner's manual but it's still mostly oil changes. Ditto for the 2006 Honda Civic. The Camry has 212,000 miles on it and the Honda is around 150,000. But that routine maintenance is KEY in keeping them going.
I'd suggested to Mama that rather than go into assisted living, she consider having a hired carer come in to attend to housekeeping and running errands, once or twice a week. She can do all her own work at present but she's getting a bit anxious about driving and unless she agrees to do this cataract surgery, she will need someone to do housework. Her apartment is wheelchair accessible and equipped for a handicapped person. I thought it might save her some money initially over assisted living. She is unlikely to take my advice and that's fine. But you are right in that we have no idea what is down the road for any of us.
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