64 Replies Latest reply on Jan 5, 2016 9:18 AM by Winterberry

    Anyone retired on $40K a year income?

    lstansbury
      Hello all, I'm Lisa, my first time posting here.  I'm Single, empty nester, 56 with 2 defined benefit pension plans starting at age 60.  400K in 401K funds and rental real estate equity. 
      Really really want to get out of the Crazy Cube.  It's starting to hurt my health. 
       
      My planner says I'm safe, it I figure 40K per year income, or the equivalent in inflation adjusted figures
      (using 1.5% personal inflation down side, only counting on 2% growth in bonds/equities/cash)
       
      Will have to buy my own health care insurance until 65.  Live in a state where I have to make 15K per year, or I don't get a subsidy off healthcare.gov palns.  So worst case will cost me at least 6K per year for insurance since I won't be employed  
       
      I'm really wondering if 40K is doable, is anyone else here doing it on that and enjoying retirement.  
       
      Thoughts?  Hope?  Experience?  Thanks!
       
       
        • Re: Anyone retired on $40K a year income?
          MyR Community Manager
          Istansbury, thank you for creating a new discussion thread! We appreciate and enjoy your participation in the MyRetirement.org online community and look forward to your future contributions!
          • Re: Anyone retired on $40K a year income?
            JerryD
            Boy! That's a complex question. As I have recommended many times before, it's time to build a spreadsheet that reflects your personal income and expenses situation to enough detail to make you comfortable with your decision.
            Is that $40k before or after taxes? Are you going to use some of your 401k because you are over 59 1/2? Do you own your home free and clear? How much are the real estate taxes? Are you free of other large expenses like a large car payment? Is your assumption of 1.5% inflation realistic (I use 3.5%)? Are you sure that you can't do better than 2% on your investments (I could recommend a preferred stock ETF that right now pays close to 6%, maybe your planner could do better than 2% for you too)? Do you live in a low-cost area or are you willing to move to one (this one is hard and a very, very personal decision)? Are you sure that you can obtain medical coverage at a cost that you can fit into a $40k budget? And many more questions that a flexible spreadsheet could allow you to run the what-ifs and see the numbers based on your new assumptions.
            We did this when we bailed from the working world finally at age 60 after getting really sick of looking for a new job every couple of years. We moved to a much lower cost-of-living area and bought a cheaper house (NOT smaller and not as small as needed for only two or three  people but it makes us happy). Fortunately, the kids were either already here or chose to move here too which makes it a much easier decision. We own our home and are fairly disciplined in our spending.
            Now, what about your question about living on $40k. If it wasn't our decision to continue to do large IRA to Roth conversions with the resulting large tax bill and if it wasn't for our decisions to replace our cars with new fairly expense ones and to pay for one at 0% interest over 4 years which results in a pretty big payment and if we had down-sized the house and the resulting costs of maintaining it as much as we could have (I refuse to say "should have"), we could probably live on that amount. We are off by about 25%, but given different decisions and analysis, I believe that we could have gotten down very close to that amount. 
            Lisa no amount of observing what others do/did is going to answer this question for you. I highly recommend that you answer it for yourself. You have a few years to think and compute. GOOD LUCK!
              • Re: Anyone retired on $40K a year income?
                lstansbury
                Thanks jerryD!  I don't have a need for a car note (my honda is paid off) and I rent a very small very nice apartment. . Although I do have some rental property still mortgaged that i could live in if renters are hard to find.  My only child is grown and gone.  Your comment about the 25% margin of error was very helpful and that you could have done it without those big ticket items was very helpful!  thanks you for the reminder.  I will compute that in, I do need to keep a margin do error in mind.
                  • Re: Anyone retired on $40K a year income?
                    smaneck
                    The advantage of living on 40K a year, or even 44K, is that it makes you qualified for ObamaCare if you are under 65. That means your health insurance will not exceed 9 1/2% of your income. 
                    My mother who is in her eighties lives on only about 35K a year and her portfolio is large enough she could certainly spend more if she wanted.  
                        • Re: Anyone retired on $40K a year income?
                          smaneck
                          lstansbury said...
                          Thank you so much!
                          You're welcome. A portfolio of 400K sounds like quite a bit to me when it is on top of two defined pensions. I opted out of PERS, so nearly all my retirement goes into TIAA-CREF. My own portfolio is only about 365K and I am 58. But I invest pretty aggressively and intend to continue to do so even after retirement. 500-600K is my goal for retirement at 62 or 63 but then I expect a much better return on my investments, say 8%. If the market is high I will delay collecting social security until there is a major downturn in the stock market. If that happens before I reach my FTE, I will will likely suspend Social Security when I reach my FTE and resume it at age 70. That presumes that the market has recovered by then. It also presumes I will have some inherited IRAs by then.  I think planning on 1 1/2 inflation is way too low. Historically it averages 3% and hopefully you will have a long retirement. 
                        • Re: Anyone retired on $40K a year income?
                          dlady

                          Thanks for the heads up about the earnings limit for participation in ObamaCare health insurance. My current COBRA health insurance plans runs out 6 months before I reach 65 and I'm going to need some kind of insurance during that time. I'm right on the borderline of income. I guess I need to make sure I keep my spending down so I meet those requirements. Thanks again.

                      • Re: Anyone retired on $40K a year income?
                        lstansbury
                        Also, jerryD. Please do share the ETF name,  would love to research it!  And I use the Early Retirement app for iPads as an awesome flexible predictor tool, along with several spreadsheets scenarios I created myself. That app and the personal inflation rate tool were recommended by the kind commenters at the earlyreirement website forums
                          • Re: Anyone retired on $40K a year income?
                            JerryD
                            I would give the name but TIAA-CREF rules are very firm about not giving investment advice. I suggest that you ask your advisor or do research on either your investment broker web site or morningstar.com that provides a very wide selection of information on all kinds of investments. I am glad that our experience is of value to you. Again, take the time you have to firm up the answers to your questions before committing. I am sure that with the right planning you can get it done. GOOD LUCK!
                              • Re: Anyone retired on $40K a year income?
                                The answer is YES, it is doable. I'm doing it and feel like I'm on easy street. My salary when I retired was much higher than this so it worried me a lot whether I could live on this "small" amount but I assure you it can be done. Now, you can't go take a $9,000 trip to Europe every summer but you can certainly pay your bills and have plenty of money to buy things. I made a budget before retiring that was pretty detailed to see what I would REALLY need. And the numbers kept pointing to the same conclusion - that it can be done. So, two years ago I retired and I'm living on that (actually a little less). Make that budget out. Add up all your routine expenses and throw in some extras as well. You can't plan for the unexpected but if it looks like your expenses will come in well under 40k, you should be in good shape. Good luck to you.
                            • Re: Anyone retired on $40K a year income?
                              tamas
                              "I could recommend a preferred stock ETF that right now pays close to 6% ..."

                              So you could or could you not recommend one? :-(
                               
                              I do not think it I always assumed the past performance is no guarantee for future performance of these kind of investments, so the more conservative the estimat, the better you are with planning. 
                               
                              I do not think it currently pays 6%, it migh have "payed"  or better increased during the past year.
                              Most everything increased 6% or more during the past year. 


                              • Re: Anyone retired on $40K a year income?
                                goatie
                                A very thoughtful answer. Congratulations.
                              • Re: Anyone retired on $40K a year income?
                                dirbe
                                I am managing on half that amount.  My health care insurance is covered and my mortgage has been paid off.  I also tried to get some bigger expenses paid for just before I retired.  I live alone and don't have children as long as you don't count the pets.  I do have a large savings/investment portfolio that covers some of my larger or unexpected expenses. I also did a pre-retirement spreadsheet to get an idea of what my expenses would be.  And I worked with TIAA/CREF to get a very close estimate of my monthly income. All that said, all lot of what you need depends on your location and lifestyle.  So far I haven't regretted a day of retirement.  Good luck.
                                • Re: Anyone retired on $40K a year income?
                                  Rjspin
                                  Your concern is realistic. My wife and I are looking at the retirement dynamic, but I also teach Personal Money Management at two colleges. The key here is your monthly budget manageable. Hopefully you fixed obligations are down to just utilities, and maybe a car. Presuming as a single person you have maintained a modest lifestyle, 40K is realistic. Yes health insurance will cost but under Affordable Health it should be manageable. Note the keys to good health (and lower health care costs) are diet and exercise. We are working on those as should you. Try to time your retirement when your company is downsizing and get the payout (an extra bridge). But, 40 k can still work if yo go now, but you may have to adjust your lifestyle to enjoy more of the free things in life (get a library  card). Remember at 62 you can collect SS and that will up you income (look at the trade offs before you do this). With my wife and I, one of us will take it early and the other will hold off. Hope this helps.
                                    • Re: Anyone retired on $40K a year income?
                                      robertjbraxton
                                      Like the "improved" web site for community.
                                      Yes, $40K meaning "hers" $40K and "his" $40K
                                      We two began our social security 2011 September (first payment that October - direct deposits) so it has been less than three years -- we were both age 67 at the time.
                                      2014 my spouse (slightly older) is taking Minimum Required Distribution from traditional IRA which was rolled-over from her 403(b) voluntary retirement savings. This is enough to cover all our 2014 Contributions including tithe to church PC(USA).
                                      We continue to live in high-cost northern Virginia very near Washington, D.C. Also, we have been to Kenya one month 2011 July; two weeks 2013 August; and now one month 2014 February (four weeks, actually). Estimated price (not including air fare) of $4,000 turned out to be more like $5,000 total and we paid another $1,000 to our long-term friend in Kenya making all the arrangements for the three of us. This latest trip was in celebration of half a century ago when my spouse first went to Kenya for the summer (1963) with Operation Crossroads Africa. 
                                        • Re: Anyone retired on $40K a year income?
                                          Sharon
                                          Even in expensive Southern California with a $2000 a month house payment we could live on $80,000
                                          But living on $40,000 for a couple, just gas, electric, phone, water, and property taxes and food...no going out...would be $40,000.
                                          Hopefully we won't have spent all our savings by the time the house is paid for...and then the $60,000 in retirement (annuity, and social security) will be just fine.
                                          How can a couple live on $40,000...just property taxes and food and utilities, insurance and gas in a paid car comes to more than that. 
                                          I wish you luck.
                                          It really does depend on where you live and what food costs.
                                          Forget going out and having fun or vacations.
                                            • Re: Anyone retired on $40K a year income?
                                              lstansbury
                                              Hi Sharon, I live alone and in a part of the Deep South that is relatively inexpensive,  but I'm not quitting my day job yet!  im saving as much as possible every month so I can get out as quickly as possible without spreading the dollars too thinly over my remaining years.
                                              • Re: Anyone retired on $40K a year income?
                                                JerryD
                                                Sharon, you put your finger on some very big factors for how much you need to live. Where you live and how big, what debt you have, what you spend on vacations, how often and where you go out to eat, how often you buy a car (if at all), etc. all are huge. But as I remarked previously, the Internet and a little restraint when buying can get one most things in life. When you are retired, you have lots of time and less money. Maximize the use of your time to research and shop and minimize what you pay and increase the quality to get longevity for what you buy.
                                                  • Re: Anyone retired on $40K a year income?
                                                    JerryD

                                                    I am surprised that nobody has recommended looking into an annuity with some of or all of your retirement savings. I did not think to mention it because my disposition and our circumstances no not make it necessary, but over on another TIAA-CREF forum there are some really, really savvy university types that swear by annuities.

                                                      • Re: Anyone retired on $40K a year income?
                                                        mamajana
                                                        Actually, I meant to mention it on my reply.  An annuity is definitely the way to go.  I converted both of my IRA's to annuities but have not begun drawing from them yet.  I will get about $500 a month from one ($100,000) and the other ($130,000) is for emergencies .  Hopefully I won't have to touch it.
                                                      • Re: Anyone retired on $40K a year income?
                                                        robertjbraxton
                                                        Not necessarily less money. It depends on what you were doing with your income before retirement. For us, we both had 403(b) voluntary retirement plans which we both maximized - including over age 50 "catch up" and for her, 15- years (in same job) additional catch-up AND we maximized our Roth IRA contribution(s) every year - that is a lot of money that suddenly becomes available once we are no longer allowed to add to either kind of retirement savings (other than automatic re-investment).
                                                  • Re: Anyone retired on $40K a year income?
                                                    Topsey
                                                    I am retiring at age 65, and my husband is retiring next year at 68.  He doesn't want me to collect my ss, but claim directly on his when I will be 66. So in other words I will have no earnings for 12 months. He says doing it this way will maximise our ss.  Do you think that is right as you seem to know about SS?
                                                      • Re: Anyone retired on $40K a year income?
                                                        lstansbury
                                                        Hi to posey, I'm not sure....there is good info on the My Social Security website regarding this and it's very easy to understand.  Maybe someone else here can help
                                                        • Re: Anyone retired on $40K a year income?
                                                          robertjbraxton
                                                          What I (male) did - my last day of paid work was 30 June 2009 but my "golden parachute" paid my Base for 11 months through 2010 May.
                                                          Then I went without (social security) until my wife's retirement. Our direct deposits began October 2011 - however, in the meantime I got a small ($250 slightly more) Pension from the insurance company where I worked 1974 to 1985 (part year) and was "vested." We are Ok. My wife made very good pay.
                                                          • Re: Anyone retired on $40K a year income?
                                                            herbyreed

                                                            It sounds as if your husband is suggesting that you take the spousal benefit at age 66, which can be a good plan because that would allow your own SS to continue to grow until age 70 and meanwhile you will be getting the spousal benefit which is half of your husband's FRA benefit.  However, if you need the income it could be a problem. It might be worth delaying retirement until 66 if possible.  But I would consult with a financial adviser.  There may be some other options, such as taking some distributions from a deferred compensation retirement account.  A good adviser can run the numbers and give you some options. 

                                                        • Re: Anyone retired on $40K a year income?
                                                          RUCerius
                                                          While creating a spreadsheet is very useful for doing analysis and running scenarios - I found using Quicken a little more accurate.  if you're one of those folks who live on cash - then your checkbook will show you the same thing.  It is surprising how trips to the local hardware store and unexpected auto expenses can make your anticipated budget run head-on into reality.
                                                          I found this post very helpful - so thanks for starting the discussion.
                                                          • Re: Anyone retired on $40K a year income?
                                                            yanushkevich
                                                            Hi, while 40K will not allow you to do extensive travel or pursue expensive venues, incl. shopping and dining, my belief is that whatever you have, you can live on it.  If it gets bad enough, you can always move into a town, forgo your car and walk to most places.  That alone would save you many thousands a year, even with a possible higher rent bill.

                                                            Also, exercising regularly at your age would do wonders as far as keeping the medical profession away.  You could then opt for a higher deductible insurance plan until Medicare kicks in.  Other than an unfortunate and voluntary prostate operation, I virtually ignored all doctor visits until I hit medicare age.
                                                             
                                                            I hope this helps, remember not to go into debt, that is for me a "Death Spiral", stay solvent as long as you can.  Good luck!
                                                            • Re: Anyone retired on $40K a year income?
                                                              Chuck9
                                                              I'm currently (barely) making it on $25K/year. It's awfully tight, and I don't recommend it. That's even though I have some financial advantages that almost certainly mean my $25K/year is not the same as your $25K/year would be.
                                                               
                                                              It's so tight that if I do nothing more than buy three used books for real cheap from Amazon, my monthly checking account balance (which I try to keep stable) drops noticeably.  An unexpected auto repair bill can mean staying at home all the time for the whole next quarter.
                                                               
                                                              Even though I've been a "kitchen" person all my adult life, I've found it's quite hard to stay sufficiently motivated to cook for just one. (And I get awfully tired of the same old rice dishes over and over:-) Food, which seemed like just a throwaway when I was first trying to figure out a budget, has turned out to be a major issue.
                                                               
                                                              The other major issue is transportation. Also, what seemed like just "incidentals" that were pretty much non-negotiable (telephone, electricity, Internet)  turn out to add up to a couple hundred dollars every month. (A cell phone wold be even worse, as would cable TV.)
                                                               
                                                              My health insurance provides only relatively minimal coverage (but not as restricted as "high deductible"), and accordingly has a fairly low cost. Also I live in an "exurb" (40 miles outside of Boston), so living costs like rent are accordingly lower. And I buy no presents at all (birthdays, weddings, Christmas). (I completely withdrew from "Christmas" for other reasons many years ago, which has turned out to be rather fortunate.) Without those advantages I'd be looking at your $40K/year instead, and I definitely wouldn't make it.  Several years ago I had another source of income so back then it was more like $30-35K/year. That wasn't so awfully tight (although there was no "extra" at the end of the year).
                                                                • Re: Anyone retired on $40K a year income?
                                                                  lstansbury
                                                                  Thanks for sharing your information, chuck, its good to consider what you have said and I appreciate it
                                                                  • Re: Anyone retired on $40K a year income?
                                                                    JerryD

                                                                    Chuck, I am no financial whiz, but saving on essentials is important as you point out. Regarding utilities, I rationalize the cost of a good Internet connection by using it for our Internet phone. May I suggest that you look at Vonage. The cable and regular carriers tend to play pricing games. Also, regarding Internet, I regularly go into our cable company and tell them that their bill is too high and ask what they can do. You might be surprised how willing they are to help out especially if you are in an area with competition.

                                                                    Another reason for good Internet service is it's an incredible research tool when buying anything. If you have the time, "shop until you drop" is a reality with the Internet. Just going to Amazon and researching items, checking recommendations, getting free shipping and then delivery right to the door can save you big bucks and minimize transportation needs. The bigger the item cost, the more important to research the heck out of it for price AND quality since you want it to last forever.

                                                                    Another idea that you may have already discovered regarding TV service is to purchase an amplified TV antenna for $30-40. In an urban area like Boston you should be able to get all of the channels like CBS, ABC, NBC, PBS, Fox and maybe a few more. We are in a small urban area and we can get many of these. Actually when I want the best quality picture and sound for PBS music programs I routinely switch to the antenna - it's great!

                                                                    A few degrees lower on the heat at night, a few degrees warmer on the AC, turning off the electric when possible, a little caulking/weatherizing, and things like this can save some needed dollars. Have you looked into utility help from your local utilities?

                                                                    Chuck, I hope that there are a few ideas for you.

                                                                  • Re: Anyone retired on $40K a year income?
                                                                    suebarrton
                                                                    How possible it is to live on $40k depends on what your life style is now and if you are willing to live a simple life.  I live on $40k easily but while I was working I lived on half my salary and saved the rest so it was not a big change for me.  There are lots of things to do that do not cost tons of money.  Where I live most museums have periodic days when entry is free.  Being a member of AARP get you discounts for many things.  If you look around you can find many low cost or free things to do.  However as someone else remarked, I won't be taking a trips to Europe.
                                                                    • Re: Anyone retired on $40K a year income?
                                                                      beachbirder
                                                                      Yup as Jerry said this is your job to plan meticulously for retirement. I ran all the numbers every two months and looked at all kinds of scenarios. Health insurance was the biggest concern as well as staying healthy. Just because you have insurance doesn't mean it is all paid for. Expenses can run up quickly with a health issues especially if it requires surgery or hospitalization. I have not found the answer for that big unknown.
                                                                      I did retire at 60 on less than 35,000 a year, but I planned for every detail of it and downsized while still working. Good luck! I'm loving retirement.
                                                                      • Re: Anyone retired on $40K a year income?
                                                                        mamajana
                                                                        I'll be 67 this year.  I retired last year.  My annual income is about $37,000 and I'm quite comfortable.   I get about $1,100 per month in a defined contribution pension and $2100 per month in social security.  My pre-retirement salary was about $83,000 per year, but I started downsizing ahead of time.   I still have a mortgage, but I've placed my house on the market and hope to sell and rent a small house.  I have no debt other than the mortgage and property taxes.  Got rid of credit cards, except two for emergencies, downsized all of my utilities (satellite instead of cable, cheap landline, cellphone, and internet).  I paid off my automobile loan last year and take very good care of the car so it will last me a good while (Lexus).  My kids live in another state , but I still am able to travel to visit them a couple of times a year, and travel with my sister twice a year by planning and paying for trips in installments.  I live in south GA where the cost of living is manageable. I have about $250,000 in IRA's, but am deferring any income from it for as long as I can.  I receive healthcare through my late husband's employer so my medical expenses are not too high.  I also purchased a long term care plan 20 years ago and the cost is very reasonable ($44 per month) in the event I have health problems or need to go to a nursing home. The key is figuring out ahead of time what your financial needs will be, downsize, and plan to the extent that you can.
                                                                          • Re: Anyone retired on $40K a year income?
                                                                            pattersed

                                                                            I've considered a long term health insurance plan as you mentioned, but at 62 I'm not sure if the premiums would be affordable.  May I ask who your plan is with?

                                                                              • Re: Anyone retired on $40K a year income?
                                                                                yanushkevich

                                                                                To pattersed:  Since you ask of me a specific question (I assume, it is addressed to me only) and since we cannot use brand names, my answer is actually very easy:  I try to keep a healthy lifestyle, exercise, eat right, and opted OUT of any supplemental long term insurance.

                                                                                 

                                                                                My medical bills would be higher were Medicate not running interference for me and making my twice a year medic visit to $22.09 co-pay.  Eye care is more expensive since it eats up my deductible, but then all I need is another $75 to cover two additional visits.  My every three year colonoscopy is only a couple hundred bucks copay, blood work is covered by Medicare.  Without Medicare, some doctor visits would be over $300!  BTW, even all my drugs have been toally free for the past couple of years, but then they do not fall under long term care!

                                                                                 

                                                                                I figure I saved myself easily $50K over the past 18 years (born 1935).  Plus my wish is to lead life to the fullest so when I finally leave my apartment, it will be feet first.

                                                                                 

                                                                                I am not depressed, just cannot fathom how an army of financial advisers leech a living off poor retirees.  This is payback time for me, because frankly I do not want to live under long term care.  Just my personal point of view, to each his own.

                                                                                 

                                                                                Hope this helps pattersed

                                                                                 

                                                                                FYI:  Every man in my family dropped from a sudden strole.

                                                                                • Re: Anyone retired on $40K a year income?
                                                                                  herbyreed

                                                                                  Long term care insurance gets more expensive the longer you wait to purchase it.  You are correct in thinking you will probably not get a good rate at 62.  But it is worth checking anyway, particularly if your health is excellent and you would qualify for the good health discount. It is a broken record but consulting with a financial adviser would be a good step before committing to any kind of insurance, annuities, etc.  They can help you weigh the benefits and risks of various strategies.

                                                                                  • Re: Anyone retired on $40K a year income?
                                                                                    JerryD

                                                                                    I tried to see if I had addressed my views on LTC here and could not find it. I apologize if I am being redundant.

                                                                                     

                                                                                    We have looked at the cost and lack of uniformity in various LTC choices. We always come up with skipping it. Recently, as our Roth accounts have grown due to a lengthy period of IRA -> Roth conversions, it has occurred to us that our Roth's are a valid option for unexpected LTC costs. We get to save the premiums until or if we need them and any withdrawals are tax-free. Yes, it will cost us if the the LTC needs get large, but the uncertainty of the coverage by formal LTC insurance companies and the lack of clarity about their coverage make this feel like an acceptable alternative to us. GOOD LUCK!!!!  :-))))

                                                                                • Re: Anyone retired on $40K a year income?

                                                                                  I am 71 and still working part time plus collecting S.S.   I plan on retiring on income of S.S. and an annuity that will give me around $43000 a year minus income taxes.  I have a  young son who is just graduating from high school in May, who is 18  now.  I hope I will have enough to be comfortable.  I plan on down sizing my home to a smaller condo with less property tax plus less maintenance costs.  I will also have a  "cushion" of about $80,000 for unexpected costs.  I own my car but will       probably have to get a new one in a few years. My son will be going to community college for his first two years and living with me, I saved about $32,000 for  him and once that is gone, he rest of his education will be up to him.  I hope I  can afford my health insurance for the next 20 years!

                                                                                  • Re: Anyone retired on $40K a year income?

                                                                                    We do it easily.  But the trick is to get in good shape before you retire.  We paid off our house first and then began living on $40,000 and saving the rest except for emergencies, just to get used to it.

                                                                                     

                                                                                    I would suggest cutting back on your lifestyle to fit your retirement income several years before you retire

                                                                                    • Re: Anyone retired on $40K a year income?
                                                                                      ROSS

                                                                                      SURE  I GET ALONG FINE I LIVE IN ST LOUIS AND THE COST OF LIVING IS NOT AS HIGH AS OTHER PARTS OF THE COUNTRY.

                                                                                      I TRAVEL AT LEAST ONCE A YEAR

                                                                                      • Re: Anyone retired on $40K a year income?

                                                                                        I had a very similar situation, found myself at age 60 knowing that one more year sitting at that desk was going to cost me so much more than any future retirement savings would net. So I retired with 2 defined pensions plans, and less of a portfolio than you. And I'm fine!  Matter of fact, at just under $40k, living in a nice urban area, making a smallish mortgage payment, no car payment, no credit bills, I'm able to do pretty much what I want and still save money. I don't "shop" for entertainment or exercise, and my big vacations will be every other year, rather than annually, but I have plenty to spare for smaller vacations in between.  Sounds like you know more than enough about how to handle your money, make a budget, and stick to a plan. Make a change while you have your health!  And best wishes..

                                                                                        • Re: Anyone retired on $40K a year income?

                                                                                          How Delaying Social Security Can Be The Best Long-Term Investment Or Annuity Money Can Buy | Kitces.com

                                                                                           

                                                                                          This article is one of the best recommended on understanding delaying registering for Social Security.  Several people have posted on the significance of waiting and drawing on 1/2 of your spouse's SS. 

                                                                                           

                                                                                          I think $40K annual income is low for 2 people to live on in metropolitan areas.  For one it probably is enough generally. 

                                                                                          As we age, even though we cut back on our expenses you will still want extra income for travel or new car.  One way to gain extra income is you can rent out a room for vacationers on airbnb, or share your house monthly, or even rent your whole house and you go rent an apartment.  These additional funds help your budget and may allow you to travel and do more.  To travel when you are healthy, you could rent your whole house and use the money to pay for living costs in your destination.  To pay for airfare, you could use credit cards that reward miles for everything you purchase.  Pay your bills with your credit card and pay off the balance every month to avoid interest charges.  You can earn enough miles to get a *free* flight to Europe or across the USA.  There are many inexpensive places to live in Europe that do not require a car.  If you like cruising, some cruises can be very affordable at $50-60 a night.  I figured that once we become mobility-challenged and age has overcome our energy levels, we will not be travelling.  So the next step in my research found that the cost for assisted living centers around the USA seem to be fairly consistent at requiring $3-4K a month at this time.  Hope this helps.    

                                                                                            • Re: Anyone retired on $40K a year income?
                                                                                              lstansbury

                                                                                              To your point Smilesback, I think I will be working long term care insurance into the budget so that assisted living center costs per month won't break the piggy bank...

                                                                                                • Re: Anyone retired on $40K a year income?
                                                                                                  yanushkevich

                                                                                                  As a minimum, I expect I could survive on my Social Security benefit and my annuity ($10K/year).  I would not like it, and I suppose I could make it on $40K, but living like that would not make retirement fun.  I would probably lean on my kids for any social activity, would have to forgo my car; a paid up car is only good till the next big bill (new tires anyone) or until I have to pay my insurance premium.  I could manage because I am ambulatory and the nearest store is about a mile away, but what if I cannot make it, or must see a doctor.

                                                                                                   

                                                                                                  So you can see, while your financial needs in retirement are expected to be less, unforeseen expenses do crop up.  Short of getting yourself locked up in a Correctional Facility, you are on your own.  That message needs to be driven to the legion of future retirees who have even less of a future than you have.

                                                                                                   

                                                                                                  Life like marriage is good, as long as there is plenty of money!

                                                                                              • Re: Anyone retired on $40K a year income?
                                                                                                EB123

                                                                                                Many, many variables.  Where do you live.  I would suggest you keep a very careful record of your expenses during at least 1/4 of a year.  An entire year would be preferable once it would include birthdays, holidays, medical, etc.

                                                                                                • Re: Anyone retired on $40K a year income?
                                                                                                  rtalab

                                                                                                  From my estimation, unless you live in a really inexpensive area of the country, are currently healthy, plan to drive your car for many years, and have no hereditary illness possibilities, this is still not that easy to do.  Have you contacted a financial planner, accountant, etc.?  The inflation figure seems low at 1.5.  Everything will go up in 20 years, let alone 30, if you have good health.  Do you want to work again?  This may be necessary, should anything unforeseen happen.  Good luck!

                                                                                                  • Re: Anyone retired on $40K a year income?
                                                                                                    richj

                                                                                                    Lisa, I think there is plenty of good advice being offered about the potential devastating financial affects of unforseen medical situations.  Face it - there's not much good news in this getting old business!  We've been retired for 14 years, and we can guarantee you that you will need medical care at some point and it will not all be covered by Medicare or Medicaid.  You are going to have some out-of-pocket expenses, and if you are living on the threshold of poverty, life is not going to be much fun.  My advice is to tough it out and wait until you are 65 and eligible for Medicare.  Also if you are eligible for Social Security, the additional contributions will enhance your monthly payout.  I think most people make a mistake by taking an overly optimistic outlook when doing the financial planning for retirement and do not consider the reality that old people are going to get sick!

                                                                                                    • Re: Anyone retired on $40K a year income?
                                                                                                      DRJJG


                                                                                                      Go El Natural and get back to the Garden!;

                                                                                                       

                                                                                                      Plenty of people in Alabama live on 40k for a family of 4, which is right about the poverty level.. Get a small vegetable plot and grow, freeze, and cann all the vegetables you need in a year. If you are zoned for it get a small flock of chickens for eggs and meat. Nit and repair all your own clothes and learn how to fix all the appliances, small engine equipment, and cars you have by yourself. Shop at GoodWill, flee markets, and Dollar Stores, and use the food bank if they will accept you. Be resourcefull, use coupons, and never buy anything new, nor pay full price for anything.Have a yard sale and sell everying in your house that you have not used in the past year. A penny saved is a penny earned. You may think that is too draconian, but many millionares made their money by saving money and many still do. Don't worry about leaving your family members anything and have only enough money for a cremation. 

                                                                                                       

                                                                                                      Joe    

                                                                                                      • Re: Anyone retired on $40K a year income?
                                                                                                        BoBraxton

                                                                                                        The end of this August will complete our first three years. If by 40K per year you mean 40K each.

                                                                                                        • Re: Anyone retired on $40K a year income?
                                                                                                          NoMore925

                                                                                                          It's all relative.  $40k would be wonderful to some, but not to others.  My own dear mother would be absoultely thrilled with $40k income.  Her CD rates are near zero, and she is making it on her SS and some savings.  It's a stuggle, but she's cheerful, doesn't complain, and refuses financial help, as she wants to remain independent for as long as possible.

                                                                                                           

                                                                                                          For those of us who are easily over the $40k annual retirement income threshold, and would consider an amount below that to be sub-par living, we should know how absolutely fortunate we are.  Because there are many who can only dream of that income level in retirement, especially when that's not including SS or other pension income.  Not to mention a married couple who EACH receive $40k, plus SS and other pension income...  'Count your blessings,' readily comes to my mind; hopefully to yours, too.

                                                                                                          • Re: Anyone retired on $40K a year income?
                                                                                                            dlady

                                                                                                            Thanks for putting this question on the forum.  I was downsized from a job I didn't really like anymore and have spent the last year reducing my spending and trying to figure out if I really can fully "retire" on what I have (which is around the $40,000 mark you used) or do I need to get a part time job? Meanwhile I've been pursuing interesting career possibilities I wasn't able to commit to while working full time. I live in a big city, am rent stabilized, see plays and concerts on discounted tickets, volunteer at a museum so I can go to any museum in town for free, download books from the library, and there is always plenty of free entertainment around especially in the summer to go to with friends. All the replies here were extremely helpful and opened up some additional ways to think about how to downsize even more and still enjoy life with what I have. I find that so much of life is about attitude. Thanks again to everyone for sharing your ideas.

                                                                                                            • Re: Anyone retired on $40K a year income?
                                                                                                              jkom51

                                                                                                              >>richj said "..we can guarantee you that you will need medical care at some point and it will not all be covered by Medicare or Medicaid.  You are going to have some out-of-pocket expenses, ">>

                                                                                                               

                                                                                                              Where many people go wrong in DIY planning is that (1) they're too optimistic - your 1.5% inflation figure is historically inaccurate; you need to 'stress test' your assumptions against the WORST that can happen, not assume that only one bad thing will happen intermittently. You need to be reasonably certain if two or three crises happen around the same time, you will be able to cope financially.

                                                                                                               

                                                                                                              And (2) most people are not experienced in estimating their mortality risk; in fact, on average they underestimate it. When studies say that the fastest growing group of people in the world is the group aged 80-100, this includes you too. My MIL literally could not wrap her mind around the idea of living to 100 until we moved her to a senior facility, when she met her new three tablemates in the dining room, she was told at 84-1/2 she was "the young one" - the oldest woman at the table (who has in fact now outlived my MIL) was already 101 yrs old and this month will celebrate her 103rd birthday!

                                                                                                               

                                                                                                              Putting aside the cost of long term care, which is not covered by Medicare, only by Medicaid (for the poor), financial planning needs to balance your expected morbidity/mortality risks. One of the reasons Medicare is running out of funds faster than SocSec is that 80% of its expenditures are spent on the sickest 20% of members. As it is, on average (IOW, averaging the healthiest and the sickest) Medicare pays approximately 51% of a senior's TOTAL lifetime medical costs.

                                                                                                               

                                                                                                              LTC costs will depend upon where you live. In high-cost labor areas like where I live, the cost for a good quality 24/7 care facility is around $96K/yr.; rate increases average 3-5% every year.

                                                                                                                • Re: Anyone retired on $40K a year income?
                                                                                                                  yanushkevich

                                                                                                                  Point of interest jkom51, I read a while back that 90% + of our medical expenses are incurred in the last year of life.  Also I had done my financial planning based on a 90 year life expectancy (Father lived to 76, mother to 92).  Tiaa-Cref is telling me to raise it to 92 when they do their calculations.

                                                                                                                   

                                                                                                                  Finally as I always said, it is more important  to live according to your needs, rather than according to your means or any other consideration like a windfall.  If you are honest, you will realize your needs are indeed quite modest, probably closer to $30 than $40K.  Beyond that, if you have anything leftover, the rest is gravy to enjoy the great life and to prepare for unexpected medical bills.

                                                                                                                   

                                                                                                                  Last thing you should worry about is leaving anything behind.  I would rather spend my money on my kids today, so I know where it goes, rather than hope they will do the right thing, when I am gone, and I shall not know where the money went.

                                                                                                                • Re: Anyone retired on $40K a year income?
                                                                                                                  herbyreed

                                                                                                                  I see a lot of people talking about the cost of owning a car here.  One thing to reconsider as you get ready to retire is your vehicle needs.  Depending on where you live and what kind of public transportation is available you might want to consider doing without a car and saving the cost of repairs, gasoline, insurance, etc.  Depending on your community, a bicycle can be a reasonable alternative.  The occasional taxi ride when necessary is quite affordable given what you are saving by not owning a car.  Some communities have Zipcar, etc.  When you really have to have a car for a trip you can rent one. There are variations on this - having a paid off older car which you only carry liability insurance on and only use for short trips around town where a breakdown is not so serious (But something like AAA is a good idea for peace of mind).  Then rent a car when you need the reliability of a newer car for a trip etc. 

                                                                                                                    • Re: Anyone retired on $40K a year income?
                                                                                                                      yanushkevich

                                                                                                                      I agree Herbyreed, this is why I chose my apartment to be just about a mile from a Wal-Mart.  This allows me to walk there, except when I have to carry heavy items, but it is Ok for prescriptions or just a few things I need.  I also made sure my three specialists (GP, eye and skin) are within walking distance, although they are a couple of miles away.

                                                                                                                       

                                                                                                                      Still you can lease a car for about $200 a month and not have to worry about repairs, insurance is as much as the lease value and gas is still cheap when cars nowadays get over 25 mpg.

                                                                                                                       

                                                                                                                      another good point, by walking I make sure I get at least some exercise.