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Episode 178 How Much Money Is Enough?

Relativity is a word we associate with Einstein and physics. Relativity is a word I closely associate with retirement. The amount of money you need is relative to the way you wish to live. The wife of the owner of the Los Angeles Dodgers baseball team recently asked for one million dollars per month in a divorce settlement so that she could live in the manner in which she is accustom. We could assume she is use to living relatively well. Most of us would probably consider a million dollars a month more than adequate. You can live on a lot of money or you can live on little. When considering retirement, in most cases, the choice is about how you want to live; not weather or not you can afford to retire.

This is Retirement Talk. I’m Del Lowery. Today's program is entitled, "How Much Money Is Enough?"

Of course retirement costs are closely tied to time we have left to live. How much does that cost? None of us know do we? Several friends of mine in Alaska had planned well for a long, comfortable retirement. They had invested carefully. They planned on traveling to exotic places. The investments and carefully researched destinations didn’t help them. One died within months of retirement in a car accident. The other within two years of cancer.  They were in their early sixties.

My mother lived to age 92. Her only income after reaching 65 was social security. She saved money every month. Health care was covered by Medicare. She lived in a home that was mortgage free. She didn’t own a car. She could walk to the grocery store, drug store, post office and doctor. She lived a very low keyed life focused around family, church and community. It suited her. Financially, retirement was easily realized.

When we retired we tried to assess our financial position by letting some very basic numbers speak for themselves. There were two factors to consider. First, how much would it cost us to live in a manner that would please us, and secondly, how much money would we receive in retirement income?

We got out a piece of paper and wrote down some basic expenses. Two major expenses were covered. We had just paid off our mortgage. And our retirement package included comprehensive health care for life. (Years later a university financial professor told us that we had the best health care package he had ever seen.) We were lucky. We would still have to provide for taxes, insurance, utilities and upkeep. We wrote down what we considered a generous sum to provide for these housing costs. Then we listed food expenses for a month. Again we tended to be generous. Next we listed automobile and travel expenses. A few other factors were considered and listed: travel, education, entertainment, savings, etc.

It was easy to draw a line and determine a total. It amazed me at how little money it would take to allow us to live the way we wanted. The next step was to look at what our  retirement income would be. It was obvious that if we were to continue working at our jobs it would be because of something other than money.

We always joke that our comfortable retirement was provided by the decision to not buy a boat, an RV, or another new car. Not sure this is true but these items never appeared on our radar as necessary nor desirable in our retirement.

I’ve always thought the best financial advice ever given was the line, “Spend a little less than you make”. I know that when we were working and gaining increases in wages each year our spending always increased to keep pace. When the yearly total decreased our expenditures seemed to decrease right a long with it. Not a problem.

It has been 23 years since we figured out, "How much money is enough" for us. Our calculations were correct. We still save money every month. And, I think our friends would all agree that we live very well. We have never had regrets about retiring early.

 

This is Retirement Talk.