WSJ profiles four folks who are doing this. Seems that people make adjustments, and find a way to make it work.
free link:
The last women in the article should be giving seminars. She kept her Tesla and is currently on a 50-day cruise of South America and Antarctica.
intercst
To the retiree who has lots of stuff (based on the $300+ monthly cost) in a storage locker, how often do you go to the locker? I strongly suspect they could get rid off a lot of the stuff, and save themselves a lot in storage fees
Its great that these people worked out a way to survive.
It probably works best for those who own their home and paid off their mortgage. Rising property taxes are a concern in my area. And it has to be tough for renters. Rent probably goes up almost every year.
You wonder what they pay for Medicare supplemental. Over $100/mo?
They may be “dual-eligible” and get some kind of Medicaid assistance.
intercst
Sure, as long as the seminar is on how to live above your means in retirement. I think she’s going to run out of her non-SS money sooner rather than later. She’s been retired for 2 years and between the cruise ($11k - half of her brokerage account balance) and her trip to Australia ($10k) has spent $21k, plus 4 cruises to Mexico (unknown cost) and a 5 month trip to CA ($3500) She’s taken $19.2k ($800 x 24) out of her brokerage account, which apparently paid for the Australia trip and the CA trip, but isn’t enough to pay for the current cruise. Her car has a $706/month payment which will be paid off in a year plus she pays $134/month in car insurance. However, during the time that she’s out of the country (1 month on Mexican cruises, 5 months in Australia and 2 months on her current cruise), she rents out the car on Turo to cover the monthly payment and insurance. That means that she’s only covered the car payment out of her SS & brokerage income for 16 months out of 24 (2/3). That means that she’s effectively going to be decreasing her expenses by $470/month when the car is paid off, not the full $706. If you amortize the cost of the current cruise over the 24 months she’s been retired, it’s $458/month, which says to me that if she keeps traveling at the same rate, she’s still going to need to pull $800/month from non-SS sources. The problem is, the $11k that she will have left in her brokerage account is going to run out in just over a year at that rate, which means that she’ll need to start pulling from her $151k retirement account. For a few years, she may be able to skate under the SS taxability limit, but depending on how much she has to declare on the Turo income, she may not.
But even without considering the additional expense of taxes, at 63, she has an average life expectancy of 21.24 years. Assuming that the brokerage account money will last for 1.24 of those years means that she will have to pull from her retirement account for 20 years, if she just lives to her average life expectancy. Firecalc.com indicates that she would have a success rate of just 69.2% Given that she’s healthy and over her lifetime she had above average income ($1970/month SS, even though she started pulling at 62), she’s very likely to live longer than average. So if she has to draw on her retirement account longer than 20 years, her portfolio success rate would be 59.4% for 25 years, 48% for 30 years and 42.4% for 35 years.
Those low success rates indicate that her lifestyle isn’t sustainable for the life expectancy she should be planning for without significant changes - in other words - she’s living above her means.
AJ
She may be betting that the late 2020’s stock market returns, goosed by AI adoption, will match what the Internet did for the late 1990’s.
intercst
She can bet all she wants. The statistics show she’s more likely to fail than not. Never mind that she is running the risk that the increases we have seen have already moved us to where the market was in late 1999 or early 2000.
AJ
You’re discounting “earnings expansion”. If AI allows our corporate oligarchs to drastically cut head count, the money flows to excessive Executive Compensation and perhaps a few cents to shareholders.
We’re already seeing a collapse in commercial real estate, especially center-city, office building loans. The Fed is going to need to cut interest rates to keep the banks afloat.
Back in 1994, there was a Stanford Univ. Physics PhD who retired about the same time I did with a 9.6% initial withdrawal rate. Seems to have turned out just fine, since he retired into a rising market. I would have retired 5 years earlier, had I seen the future. {{LOL }}
intercst
You’re forgetting that if that many people lose their jobs, the economy’s going to tank, along with the market.
AJ
They will find a happy medium (they have an algorithm for that. Jack up prices and concentrate on the upper end market. Very Bob Macnamara stuff)) and back fill the necessary and desirable profit levels with government subsidies
She says:
“This is going to blow the Social Security budget, but I only live once,” she said.
IOLO
This implies she has a higher risk tolerance than others?
And, she’s starting a travel agency for women travelers.
She seems to know the risks?
I wish her the best.
ralph
I bet she’s been a “free spirit” all her life.
I think it implies she ignores risks and doesn’t want to think about them, not that she has a higher tolerance.
Or is just really good at ignoring them.
AJ
And thinking you know the risks is different from actually knowing them
At least thinking about the possible risks is understanding that there are risks, and gives you the possibility of coming up with contingencies that can be used in case something happens - even if it’s not the exact risk that you thought might occur. On the other hand, choosing to ignore risks means that if something happens, you’re much more likely to be a deer in the headlights.
Sorry, but someone who chose to spend on travel while working instead of saving for retirement, and who justifies spending on travel by saying “I only live once” doesn’t impress me as someone who is likely to have even thought about financial risks in retirement, much less have taken any steps to plan for any possible risks occurring.
AJ
What if she’s making an informed choice, (i.e., "I’m going to spend and live for the moment now while I’m healthy, and I’m fine with subsidized senior housing, and a Medicaid nursing home when I’m older?)
If I’m a multi-millionaire living in a luxury dementia nursing home, will I even be aware that I’m there? Maybe it makes sense to spend the money while you can still enjoy it?
It’s not the choice you or I would make. But I can see where it would be an informed choice.
intercst
I can also see where it could be an informed choice. But having lived in the real world for 60 years, I know that it is a very rare case. Most of the people who live that way are not making an informed choice.