Magic # to Retire

Bajadock’s top ten tips to understanding your personal financial retirement number:

  1. Financial planners have vested interest in keeping you working($$$) as long as possible.
  2. Housing and health care are your  biggest financial drains.  Latin America may help you with both.
  3. Owning or renting your home is as an individual decision with pros/cons for either.  Do the math, including maintenance.  
  4. Many expats within driving distance of USA use Mexican medical treatment for minor ailments and dental.  They use their USA medical for major issues.  
  5. How easily entertained are you?  The less still and restless you are, the more you will need sights, sounds and smells.  Translation:  Eating and entertaining at home is a whole lot less expensive than dining out.  My $.75USD beer on my patio tastes just as good as your $5USD restaurant beer.  Try meditation.
  6. Without your daily work commute and clothing expense, you may see significant saving in vehicle expense and wardrobe.  Without driving by store on way home from office, you may also save from “temptation expense”.
  7. What does your travel adventure map look like?  If your wanderlust is international, that can be a big difference v. weekend road trips.  
  8. If your genetic indicators(parents) give you optimism of living beyond 80, what is your realistic travel and entertainment expense at that age?  Ok, Gidget and Moon Doggy, we know you are party animals.  But, do you really think you will be jetting to Macau, Monte Carlo or Maui and drinking Cristal when you are 85?
  9.  What is THE number?  It is highly personal for an individual and a couple.  Talk to other retirees about their experiences.  Income is not the answer.  OUTGO is the mystery number to seek, grasshopper.
  10.  Nearly every new retiree I know continued spending for first 2 years of retirement as if they still has a nice income.  Old habits die hard.  Start an expense spreadsheet.  Make a monthly appointment with yourself to evaluate your spending and habits.  Simple awareness will help you make better choices.  Er, well, excuse my optimism.  Some of you are no hope shoe shoppers or mall junkies or hobby addicts that must have the newest, shiniest toy.  I  have shared this George Carlin video in the past…  

Here is the article I stumbled across this week to share… budgetsaresexy.com  

I almost vomited a little in my mouth, but that headline needed to be written.

How many times have you heard that you need $X million in the bank in order to retire safely? Or that you can’t even think about retiring until you’re XX years old?

Now how many times have you then thought about punching yourself in the face because trying to save $X Million is harder than having a civil presidential debate? (Totally random, but did you know that Marco Rubio’s net worth is only $100,000? A chunk of you reading this right now has more than him!)

I came across this TWICE in the past week and it’s quickly becoming one of my biggest irritations. Not because they don’t mean well and aren’t genuinely trying to get people to save more (they are), but because they gloss over the single most important factor in everything.

See if you can spot it…

Example #1) A conversation I had with a long lost friend.

Friend: “Hey Jay, you love money right?”

Me: “Right.”

Friend: “Let me ask you something… HR had me sit down with a financial advisor the other week which was awesome ‘cuz it was free, but within minutes he scared the $hit out of me. He told me in no uncertain terms that I need at least $3.5 Million if I wanted to have any chance at retiring. Is that true?”

Me: “Did he look at your expenses?”

Friend: “No”

Me: “Then how the hell does he know how much you’ll need in retirement?”

(My friend has fully paid off debts, barely spends anything because he’s a homebody, and will have his house completely paid off within 10 years. Sounds like he’s in trouble – watch out!)

Example 2: A PR pitch I just got in my inbox

SUBJECT: The New Retirement Number

EMAIL: Two-million dollars. That’s the minimum amount Generation Y and Millennials will need just to retire comfortably. I thought you might have interest in learning more.  Money doesn’t go as far as it used to, and according to financial site [redacted], $2 million isn’t even all that much. Millennial financial experts outline the reasons Why You Will Need $2 Million to Retire and offer ‘how to’ tips and advice.  I’m happy to provide the content for your review.

*DELETE*

I took out the blog name because it’s actually a friend of mine and not trying to put him on blast here (something tells me it’s the PR person behind this anyways), but another perfect example of a blanket statement without any reference to the most important piece of the puzzle yet again. Though this time much less scary than the $3.5 figure.

Now I get that this was meant to grab my attention and the actual details could be in the interview or article or whatever else they were hoping I’d do with it (hey – it worked! I’m blogging about it now! :)) but it’s all nonsense at the end of the day and should be dutifully ignored in my humble opinion.

In case you haven’t guessed by now, the most important factor determining your “number” is your SPENDING.

How can anyone tell you you’ll need $2 million or $3.5 Million without having the slightest clue how much your lifestyle costs? Does a person living off $1,000/mo need the same as someone going through $10,000/mo? Do we all have the same hobbies and dreams and future goals in life? Or do we all just suck so bad that we need to hoard as much $$$ as we can ‘cuz we’re all doomed?? (That would be a slightly more reasonable statement based on the way our country’s going, but still no dice…)

Point is – without looking at your *specific* situation it’s all noise and you should DO YOUR BEST TO IGNORE IT. They mean well, but as our mommas like to say- we’re all unique snow flakes.

If you want to figure out what your own number is, do any of the following instead:

  1. Plug your #’s into a calculator
  2. Plug your #’s into a spreadsheet
  3. Multiply your yearly expenses by 25

This will give you a much more accurate – though still rough – look at what you can expect down the line. And THEN you can determine whether you’re happy with it or changes need to be made.

Going back to the $1,000/mo vs $10,000/mo example – you’ll see this becomes the difference between needing $300,000 to retire safely ($1,000 x 12 x 25) vs $3,000,000 ($10,000 x 12 x 25) – based on the generally accepted 4% Trinity Study. Quite a drastic gap if you ask me.

(For further reading on this stuff, check out this awesome article by Rob Berger on how much you need to retire, or the ever feisty Mr. Money Mustache on the same topic.)

At the end of the day it all comes down to your expenses. And without knowing that (hint hint) no one can tell you how much you’ll need to hang up the job when it’s time.

So make that your #1 mission this week if you’ve been putting it off like Kanye and his $53 Million debt woes… Don’t let these forecasts scare you!! Focus on your own specific situation and if it turns out you really DO need $X million to comfortably retire, well, time to decide if you finally need to make a change or not. Just please don’t listen to the hype.

kanye west debt

*****
Today’s rant was brought to you by The Federation of Financial Bloggers Against Crimes Towards Money – working hard for you since the invention of the internet.

[Photo credit: Mark Morgan]

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