Financing the full-time lifestyle
By Tom Nichols
You’re probably wondering how a couple of 50-somethings are paying for their touring lifestyle. Sure looks like they’re having a good time in early retirement, but they’re probably headed for financial disaster in a few years!
After all, any financial planner will tell you that your retirement spending must be based on a 30-35-year horizon as life expectancies are hitting 85 and beyond. We agree. You’ll also be told to replace at least 70 percent of your pre-retirement income to enjoy a respectable Boomer life. On that one we respectfully disagree.
You’ve seen the commercials from financial institutions. They appeal to our lust for consuming. You can have enough money stashed away to buy a sailboat, start a small business, retrain for a second career, or lounge at your beach house.
Our generation refuses to settle for the simple 20th century retirement pleasures our parents enjoyed like visiting with friends at the coffee shop or tavern, fishing, and picnicking at the local lake or vacationing at the home of family and friends.
Just beware folks, those images of exotic travel, yoga camps and business start-ups are probably a mirage.
Consider a 2015 retirement savings snapshot from Fidelity: The average 401(k) balance held by savers of 10 years or more is $248,000. Applying a standard 4 percent withdrawal formula, an average account could provide about $10,000 annually. You’re going to need your annual Social Security benefits, say $22,000, to lift yourself out of poverty.
Unless you have a spouse with a similar 401(k) balance and Social Security income, you won’t get anywhere near replacing 70 percent of your current household income. (Unless you or a spouse have a defined benefit pension or an expensive home or inherited wealth to cash in.)
If not, it seems to me there are two choices: Work until you drop, or figure out how to live on 50 percent of your current income.
Take our lead. Begin simplifying and live more richly on much less money.
Watch for my next blog post that will show you how we’re downshifting from 150k a year to 60k, which includes a rolling home and inexpensive entertainment like hiking.