Dunno if I’m in the minority here but I would seriously consider “retiring”, at least in the sense of no longer doing paid work, after reaching a net worth of, say, about $2 million in today’s dollars.
$50,000 a year (2.5% after tax real return) is enough to raise a small family in all but the highest cost of living areas and it can reasonably be achieved with a simple low-risk passive portfolio. It’s more than enough to raise a family on one income or to travel the world as a single guy.
$50 K might be enough to live as a single guy in low cost areas if you don’t live the high life, but I have a hard time believing it’s enough to raise a family on one income. From what I hear, children are expensive.
Raising a family on $50k would be a pretty bare bones existence. That’s far below the median household income in Canada. It’s half the median household income in my town. For a family of four, that’s actually slightly below the poverty line for where I’m at.
At 2.5% you could just buy munis and enjoy that sweet tax-free drip. So, the tax-equivalent salary would be way higher.
Also, I recently found out that the US is one of the rare countries that continues to tax you even if you live abroad. This sucks. If I were Canadian I would move outside Canada to a low tax country damn fast.
My parents retired in their later 50’s at right around the $2 million mark in their investments. They aren’t exactly living the high life, but that was never their style. The #1 thing that my dad cites is the insurance. He was offered a buyout at his company and part of the buyout was that he got to keep the company insurance through age 65. WIthout that in place, they’d still be working for 2 more years.
I’ve always thought that I’d retire the day that I woke up with enough money to never have to work again. I’m yet to meet someone who followed that plan.
I pay less tax where I am in Canada than all but 6 U.S. States. The idea that the U.S. is a low tax jurisdiction depends a lot on state, just like Canada depends on province. I would easily be paying much more tax in New York or Boston. I’d have to go to Texas to pay less. In any event, a family of four making $50k in Canada would pay no tax and have free health care.
So basically your plan is to live frugally your entire life. Frugal to get to the $2 million mark and then frugal in your retirement.
People tend to forget how expensive retirement can be. You spend most when you have free time. Working not only allows you to make employment income, it also prevents you from spending money by trapping you in an office for 10 hours a day. I once asked a wiseman who worked 7 days a week why he never spoiled himself from time to time. He answered me he had no time to spend his money.
It seems like there are some other taxes to consider, like sales tax, import tax, gas tax, property tax, etc. These things are cheap in the US; bromion would have to pay 20% more for his Nissan Z if he bought it in Canada. The US also gives people a lot of tax deductions - mortgage interest tax deduction is particularly important. Once you add everything, the numbers are not so clear.
I think 50k per year is doable, especially if it’s in munis (being tax free) and you’re debt-free and own your own home.
That being said, I think most people, once they get a lot of money, tend to want more money. When you get $2m, you’ll want 2.5. When you get 2.5, you want 3.
I doubt it? They’re 5+ years into retirement and haven’t spent a penny of their nest egg. He made a good living, but he’s criminally cheap and extremely worried about not having enough. He picks up contract work every spring for a few months and tries to live off that, like it’s a game. I’m well beyond the point of trying to make economic arguments to him when he asks for advice. He’s a multi-millionaire and he saves glass jars and plastic food tubs like a depression era widow.