How to retire with $ 30,000 a year


Seven in ten millennials believe they will spend less than $ 36,000 per year in retirement.

The question is whether they are frugal or overly optimistic. When this research came out recently – from the Institute for Insured Retirement and the Center for Generational Kinetics, which also noted that today’s 65 to 74-year-olds spend an average of $ 46,757 per year – a large chunk of the reaction reflected the latter point of view.

But more than half of Americans earn $ 30,000 a year or less, according to Social Security Administration salary data. So surely it must be possible to retire on that amount – or, in the case of millennials, an equal amount in future dollars. How? ‘Or’ What?

Start budgeting now

A lot of people don’t know what they are spending money on today, let alone what they will be spending money on 30 or 40 years from now. Enter budgeting, which solves both of these issues.

Besides its obvious benefits – people who budget tend to spend less and save more – your budget today can help you get control over your budget tomorrow, says Jason Preti, certified financial planner at Unleashed Financial in Kirkland, Washington. .

“If you currently have a good working budget, you can identify what’s going to stay in retirement, as well as what’s not going to stay,” says Preti. “You can see that you won’t need dry cleaning in retirement, but without worrying about vacations, you could increase your travel costs, for example. “

The most notable line item you can remove when you’re retired? You will no longer have to save for your retirement.

Say no to debt

Or at least pay it. People who retire with debt – whether it’s a mortgage, car payment, credit cards, or personal loans – dramatically increase their cost of living.

Even a small mortgage of $ 150,000 at 4% interest carries a monthly payment of $ 700. Add in a $ 200 car payment and credit card debt and you could easily be paying over $ 1,000 in debt payments each month. That’s 40% of your monthly budget when you live on $ 30,000 a year, or an even higher percentage if your income is taxed.

Be ready to move

Where you decide to live can have the biggest impact on your retirement spending, says Preti. “It definitely dictates the cost of basic living. If you retire in Florida where the cost of living is lower, you could live like royalty on $ 30,000. “

If you are truly determined to retire on this type of income and currently live in a city or state with a high cost of living, you may need to relocate. Florida has a reputation for being a retirement-friendly state for a reason, but it’s not your only option. A NerdWallet Analysis shows that Texas, Louisiana and Arizona are also inexpensive places to retire; specifically New Orleans, El Paso and Mesa. If you are interested in a small town, you will find many options on this list.

Count on social security

There are many fears that Social Security will become insolvent before today’s younger generations retire. In reality, this is unlikely to happen, although there may be changes in the system, Preti says. “It could be eliminated significantly as retirement incomes rise, but it’s a system of societal support that won’t go away. “

social security own projections save that, so you should add this benefit to your budget. (Calculate what you might expect to receive here.) The average monthly benefit today is just over $ 1,300; in a few decades, it will be several times that, even taking into account the proposed reductions.

Keep in mind, however, that health care costs will weigh on your retirement budget: According to a 2014 analysis from the Kaiser Family Foundation, Medicare beneficiaries spent an average of $ 4,734 out of pocket in 2010. This number will also increase two or three times before reaching retirement.

To be realistic

Just because you can retire on $ 30,000 – today or in inflated dollars in the future – doesn’t mean you should or want to.

“I would like my clients to have the same standard of living or a better standard of living in retirement. And if you really want the same or better, you’re going to spend more. You will have more free time, you will hopefully be healthy and you will want to go somewhere and do things, ”says Preti.

It’s a valid point: When you get out of college, pay off student loans, and share a cramped apartment with a roommate, $ 30,000 isn’t a challenge, it’s a luxury. But as your income grows over the years, it’s harder to cut back, especially when you have – as Preti says – a lot of extra time available to you. Time is not just money; in some ways it fresh money.

So while it’s comforting to know that it’s possible to live on $ 30,000 a year, it’s also a good idea to aim higher and save more when you are young because you cannot know for sure what the future will cost you and you may want some flexibility. “You want to plan for the worst,” Preti says, “not for the best. “

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