Wes Moss in the Atlanta Journal Constitution – Happy Retirement Without Millions in the Bank

Here’s a question for you. What’s the number one thing people want from their retirement? Got your answer? If you said financial security, that’s a great guess, as building a nest egg is a top objective when it comes to retirement planning. But I would argue that the correct answer is happiness.

While money can’t buy happiness, it does give you more options on how to spend your time. So, planning for a happy retirement inevitably includes planning for financial freedom.

While some financial commentators claim you need something like $2.5 million stashed away to have a good retirement, my work with lots of very happy retirees makes me question that number. I have seen folks live rich, fulfilling post-job lives on far less.

The amount of money necessary to achieve financial security looks different depending on how you envision your post-career life. Most of us aren’t planning for “champagne wishes and caviar dreams.” Supreme luxury is nice now and again, but that’s not the lifestyle many happy retirees create for themselves.

In my experience, retirees are most satisfied when they have the ability to enjoy their time doing what they love. This can range from twice-yearly vacations, gardening and lots of time with the grandkids, to jet-setting around the globe, building a second home at the beach, or even starting a small business.

With this in mind, let’s talk about what size nest egg and annual income we need to make our own individual retirement dreams come true. My research on what makes for a great retirement has uncovered a magic number, of sorts. From my research, retired couples who claimed to be the happiest have a gross household income of $82,770 a year. That’s gross, so their net income or spending money will vary depending on their tax rate.

“But Wes,” you ask, “haven’t you talked about how there’s no one-size-fits-all approach to retirement?” Yes, I have. And that’s true. That $82,770 is simply a benchmark; it’s not a number etched in stone.

Everyone’s individual spending needs will be, well, individual. To find your unique happy place, you may need less or want more spending money.

Let’s talk through the math to see how you can get close to an annual spending amount of $82,770. I want to show you that you might not have to have millions stacked away in your investment accounts to hit a happy retirement sweet spot.

To make our numbers easy to remember, let’s use a round number figure of $100,000 of gross yearly income and a typical tax rate of 17.23%. Multiply these two, and you get a net yearly income of $82,770.

The first thing to remember is that your investments likely won’t be your sole source of income during your post-career life.

Depending on at what age you choose to say adios to the 9-to-5 world, you may be eligible to start drawing Social Security or pension benefits. You may receive rental income from a house that you own. You may decide that you’d like to dabble in part-time work. There many possible ways to boost your total retirement income.

Social Security (“SS”)

Under the current regulations, you can start claiming your SS benefits when you hit 62. Remember, however, that for every year you choose to wait (until age 70), you’ll receive a higher monthly benefit.

I realize that some folks may be questioning whether SS benefits will be available to them when they hit retirement age. My answer is “probably,” especially if you’re in your late 50s or early 60s now. For those who are just starting their careers, I say it never hurts to plan for a retirement that doesn’t include this monthly check.


Teachers and government employees, I’m looking at you. If you’re among the lucky few who still earns a pension, remember to include it in your monthly retirement income calculations.

Rental Income

Considering downsizing? If you decide (and can afford) to buy a new house without selling your current home, then why not rent out the old place? Think about it this way: If the rent is more than your monthly mortgage payment, taxes, upkeep, etc., you’ll be generating extra monthly income. Also, your tenant becomes the one footing the bill as your house (hopefully) appreciates and you build equity.

Part-Time Work

Taking on a part-time job in retirement is a great way to generate additional income. Just be sure it’s on your own terms. Any side gig should entail hours that allow you to live out your retirement dreams, work you enjoy and that, ideally, connects you with a passion. And let’s not overlook the bonus of part-time work – you get added socialization and the chance to expand your friend network, both of which are good for your health.

If golf is your thing, get a job as a starter or tournament marshal. Love clothes and fashion? Put in a few hours a week at a boutique. Your imagination is the limit!

Investment Income

Now, we arrive at the central piece of our income puzzle.

Generally speaking, for every $240,000 in your retirement savings, you generate about $1,000 per month in income. Things like dividends on stocks, interest on bonds and distributions from such alternative investments as REITs (Real Estate Investment Trusts) or MLPs (Master Limited Partnerships) are the main vehicles in your portfolio that produce this income. Under this scenario, we are focusing on a favorite strategy of mine – income investing – and operating under the goal of leaving our principal intact.

Now, let’s pull all of these potential income streams together with an example of how a couple could get to our “happy retiree” income level. Rather than using the exact amount, though, let’s just round up to $100,000 of total gross income to make this easier to remember.

$24,000 – SS Spouse 1 ($2,000/month)

$18,000 – SS Spouse 2 ($1,500/month)

$8,000 – Annual Pension ($666.66/month)

$12,000 – Part-Time Work ($1,000/month)

$ 0 – No rental income

$38,000 – Investment Income ($3,166.66/month)

Total = $100,000

Our estimated tax rate of 17.22% (taxes vary for everyone) brings that $100,000 down to $82,770 net for the year. Remember, this is well above our happy retiree average income since that’s $82,770 annual gross income.

Notice that for our example couple to fill the gap, they needed $38,000 per year in income from their investments. To generate this level of income (based on our general rule), you’d need about $950,000 to withdraw the 4% per year of investment income. That’s less than half of that $2.5 million we talked about before! And, it’s a number that’s attainable with a bit of discipline and determination – especially if you start early.

If you’re cringing here, fear not. Yes, $950,000 is quite a bit of money. But it’s key to consider what your retirement goals are and to remember that some retirees live happily on far less. In fact, some of the folks I work with who have millions stashed away spend less than $82,770 number each year.

And as it turns out, some of the happiest retirees have saved only half of the above amount – $500,000 to be exact. If we use this number and apply the 4% Rule, our annual investment income for the example above decreases by only $18,000. Plug the new number into our hypothetical formula, and you’re still looking at a net income of $67,000, or over $5,600 a month. That’s enough for many retirees to live happily, too.

Read the full article here.

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