August 17, 2014

What Would it Take For Me to Retire Without Moving and/or Cutting Spending?

The other day I figured if I could retire  or not and how much income we'd have.   That plan depended on moving to a cheaper city and cutting our spending level a fair amount.  But what if we wanted to stay in our current house and didn't cut our spending?  How far away are we from being able to hit that target?

To retire yet not change our current standard of living would require a higher income target.  We'd have to pay off our house and have about $67,000 of income to cover our current spending levels.   That would cover health insurance and out of pocket costs of $10,000 since with that income level we wouldn't get a subsidy.  Our property tax and other expenses would be a lot higher if we stay where we are as well.   Plus right now we do spend a fair amount and this wouldn't include any cut backs in spending or additional frugality.  

Our current retirement funds would get us $12,000 towards the goal.   The rentals we own out of state generate about $6000 of profit.   That leaves us $49,000 short of the goal.

Our current rental properties don't have a great return on capital.   Profit after expenses is only about 4% of the total capital.     If we paid off our mortgages and bought more rentals in this area with similar return it would take roughly $1.1 M total more than what we've got now to get to the point that we could stay where we are and maintain our current spending level as well as pay for health insurance.

Don't move or cut spending = $1.1M short of target

Another option would be to move back to my home city yet keep our current level of spending.   This would be cheaper since housing, taxes and overall cost of living are cheaper there plus you can get better returns on rentals.     That route would probably cost around $670k more than what we've got now.   That would cover the cost of more expensive and nicer house as well as more rental properties to provide higher income level.

Move but don't cut spending = $670k short

One last way to go would be to stay where we are yet cut back on spending.   This option would require an income of about $43k and a bit cheaper paid off house.   TO hit that level I think we'd need about $300k more than we've got now.   The difference with this option is that I'd get a lower return on our rental properties in our current city since cost of real estate is higher here.

Cut spending but stay in current city= $300k short

These figures are all very rough estimates.



  1. This is a great exercise, and useful if you can compare it to prior time periods to mark progress (or lack thereof). A few years ago, I did move and was very happy with the decision; my prior residence was good because there was a lot of work in the region, but once that became less of a priority I explored new options. Also, as I grew older and appreciated a quieter lifestyle, things like 'privacy/quiet/light-and-noise pollution' all took priority over 'culture/dining/entertainment'.

    You are making great progress, Jim, continued success to you.


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