All You Need Is Enough: You Could Retire, If You Wanted To

Yesterday I had an interesting conversation with a friend of mine. ?We were discussing a woman we know who I heard was going to retire in her 50's. ?This woman doesn't have kids, is an executive of a large?corporation? and makes a ton of money so it's no surprise to me that she would have the ability to do so.

My friend on the other hand seemed floored. ?"Oh my gosh, I would kill to be able to retire in my 50's!" she exclaimed. ?This left me floored. ?My friend makes significantly more money than me, and unlike our family, her husband also makes a lot of money, meaning this family takes in around $400,000 annually.

Yep, their family earns my entire networth in just one year and she can't imagine retiring in her 50's.

So she must live in a mansion or in downtown?Manhattan?right? ?Nope, she just lives a very typical consumerist lifestyle. ?She doesn't have sports cars or a 4 carat diamond ring, she just looks like any other American living a comfortable lifestyle, and one that she very much enjoys. ?But it makes me a bit sad for her that she doesn't see how easily she could retire in her 50's, and even her 40's if she only cut back a bit.

Here are some things her family spends on and my estimation of the cost:

• They have a nice home in a nice suburb ($500K total, about $3K monthly)
• They have 2 cars under 3 years old, ($30K each, $1268 monthly)
• They hire a nanny to come to their home each day ($30K annually, $2500 monthly)
• They hire house cleaners that come once a week ($200 weekly)
• They hire lawn care professionals that come once a week ($100 weekly)
• They have season tickets to at least one sports team ($1000 annually)
• They regularly golf, ski, and participate in other sporting events ($2000 annually)
• They regularly take weekend trips to Las Vegas and other locales ($3000 annually)
• They always have the newest gadget including iPads, iPhones ,and laptops ($2500 annually)
• My friend pays for a message membership to receive one at least once a month ($100 monthly)
• They just have a lot of stuff. ?Despite their large home, when I was last there carpenters were installing additional cabinets for storage. ?My ?friend has a lot of purses,?accessories? clothing and jewelry, and she and her husband have a ton of sporting equipment. ($500 monthly)
• They regularly go out to eat, and enjoy expensive wine ($300 monthly)

I'm sure there's more, but these are the items I'm aware of, and obviously these are just rough estimations as far as price goes, ?but notice how I didn't put down around any world trips, a multi-million dollar home, or luxury vehicles. ?They simply have what most people would consider, a nice and full life, but it all adds up.

Here are how our expenses compare:

• We rent a small house ($675 monthly)
• We have two old cars that only cost us maintenance ($1000 annually)
• When we have a child they'll being going to a very nice daycare facility in our town ($9000 annually)
• We clean our own house ($0)
• Our landlords take care of the lawn ($0)
• We don't have season tickets anywhere ($0)
• We don't participate in expensive sports and instead opt for tennis, basketball and other free activities ($0)
• We take one big trip each year ($2500)
• We don't buy a lot of gadgets. ?We each have an iPhone 4 which we bought last year at a discounted price and plan to have as long as they last ($70 annually)
• My?husband?is my only?masseuse?($0)
• We can buy as much stuff as we want, but only with our fun money ($200 monthly)
• We don't go out to eat and if my husband wants fancy beer that comes out of his fun money already accounted for above ($0)

With these tweaks in a few cost?categories?we spent $91,946 less per year than my friend does. ?With that money they could have quite the?nest egg?saved up and after 10 years with a return rate of 7% they could have about $1.7 million. ?At a 4% withdrawal rate that would give them $68,000 to live on annually which is more than most Americans. ?This would put her retirement date at 47. ?If she kept working another 10 years, retiring at age 57, she would have $5.4 million and at 4% withdrawal, $216,000 annually to live on.

I think each of these changes is rather easy to implement, except perhaps changing her housing situation. ?If she didn't, but still changed everything else she would have wound up with $5.3 million at age 57 with $212,000 annually. ?Retiring in her 50's with an extremely comfortable annual income is easily within her reach, but she doesn't see it.

Unfortunately I don't feel comfortable breaking this down for my friend, even though I so wish I could, allowing her to see how easily she could earn her freedom in her 50's. ?I feel blessed to have taken off the rose colored glasses myself, and feel?grateful?that I am not longer held captive by my spending.

Phoebe

Source: http://www.allyouneedisenough.com/2013/07/you-could-retire-if-you-wanted-to.html

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