Can You Retire Comfortably On $31,722 per year?
Last week, I wrote an article about minimizing tax on Social Security income after retirement. Basically, if you receive $15,000 of Social Security benefit and withdraw $17,500 from your IRA, then you will pay very little income tax. Using the standard deduction and exemption, you will only pay $778. That’s a 2% effective tax rate and you’ll have $31,722/year of after-tax income to spend in retirement. Anyway, this article was syndicated on Yahoo! and it received a bunch of comments.
A bunch of whiners
There were the usual complaints about Social Security and nitpicking about the amount of deductions you get. What surprised me were the vehement comments about how $31,722 means you have to “live in a cave, boil moss for dinner, wear rags, and are in abject poverty.” That’s $32,500 minus $778 federal income tax. Oops, I forgot about the state tax. Let’s just assume our imaginary retiree luckily lives in one of the states with no income tax.
Here is a popular comment –
“So in order to not pay taxes on my Social Security, you want me to not make money and lower my standard of living? What six kinds of a fool do you think I am? I tell everybody that I wish that I paid TEN TIMES AS MUCH IN TAXES because that would mean that I was making A WHOLE LOT MORE MONEY! You turkey!”
Yeap, you need a thick skin to deal with those Yahoo! comments. That’s why I usually just ignore them. However, I really have to disagree with people who think $31,722/year means you are living in poverty. Working folks have a lot of expenses and they spend a lot of money. I assume most readers are still at working age and that they didn’t take into account the following:
- My article is meant for a single person with no dependents. All the numbers are pulled from the single column, so a couple should have more income assuming they both have social security benefit.
- The article is geared for retirees with no debt.
- I suggested that it’s best to have paid off your mortgage before retiring.
- I’m assuming you can get Medicare, although I didn’t explicitly put that in the article. Most people pay about $105/month for Medicare Part B.
- I’m also assuming our retiree doesn’t have any financial obligations like alimony or child support.
Budget Your Retirement
If you are single and own your home, do you think you can live comfortably on $31,722/year? That’s $2,643.50 per month. I’m pretty sure I can live quite comfortably on this level of income. Let’s come up with a budget for our imaginary retiree.
- $800 Housing – property tax, HOA, maintenance, repair, insurance, etc…
- $300 Transportation – car maintenance, gas, and insurance.
- $200 Utilities
- $400 Groceries
- $200 Prescription, co pay, and other medical needs
- $105 Medicare
- $50 Clothes
- $588.50 Entertainment and misc. – eating out, vacations, etc…
OK, so it’s not exactly living in the lap of luxury, but this is NOT living in poverty. Does this look unreasonable to you? In fact, if we remove the mortgage payment from our monthly expense, we already spend quite a bit less than $2,643.50 per month.
Anyway, I think people need to examine their expenses and see what they are really spending money on. If you are making a lot of money, then it’s your prerogative to spend what you want. But don’t tell me a single retiree with no debt can’t live on $2,643.50/month. I guess it depends on location too, but if you don’t have a lot of money, you probably shouldn’t live in Manhattan or San Francisco.
Do you think you can comfortably retire on $31,722/year? Assuming your health is reasonably good, I think it’s just fine. I don’t know what the Yahoo! readers are complaining about. BTW, the federal poverty level for 2013 for 1 person is $11,490.
Related post: Do we really need $6,340,998 to retire?
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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