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01-23-2020, 11:06 AM #1
Money needed to retire in every state...
I'm reading an article on MSN Money that discusses the cost of living and what people need in their savings accounts in order to retire, by state. Now, it gave the cost of living figures after taking into account how much people would get from Social Security...And they're assuming people (couples?) are bringing in $16-17,000 per year. It also said that they're assuming a draw down of 4% every year from savings to cover living expenses. It didn't say anything about people having a mortgage, although I'm assuming that when it talks about retirement, it assumes people of that age don't have mortgages...I know they do, but again, the article doesn't say it's factoring that cost into the equation.
I'm looking at these numbers and question the accuracy.
Let's take NJ for example, since my mom lived there. The article states that the cost of living is $46,964 / yr. The savings account should have $1,174,100 in it! From first hand knowledge of my mom, her savings had $100,000 (never touched) and a monthly income of about $3,000 (pension, SS). Her expenditures (rent, car, food, utilities, medical, dental bills, medi-gap ins) came to about $1800. And these numbers are from 2015.
Mom didn't have many wants or needs and was a type 2 diabetic. But her numbers aren't even close to what this article mentions and she certainly didn't need over a million in the bank to survive!
Being that this forum is made of frugal minded people, does anyone see major discrepancies?
01-25-2020, 10:19 AM #2
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Anything done by state is going to be not terribly useful. The cost of living varies depending on what part of the state you live in. In some states, this varies by quite a lot.
Glancing at the numbers, if they are following the standard 4 percent rule, it looks like they are assuming that the investments are your only source of income. Pensions are becoming less common, but it makes no sense to ignore social security money.
How much you need to live can be subjective. Do they mean how much a very frugal person would need to live on? Generally not. It is usually more than that.
Occasionally I will look at budgets for how much you "need" each year for new clothes, vacation, dining out, etc.
The question becomes more what kind of life style do you want during retirement.
I am also not sure if they are including rent or mortgage or they assume you have paid off a mortgage by the time you retire. That makes a huge difference, especially in some high COL areas where $2000 a month or more is considered normal rent.KathyB