July 14, 2006

The Good Life, Revealed

RECENTLY, I READ this fascinating column in a Boston newspaper about a couple in the Southwest who retired in their mid-50s, travel around the country frequently, and are having the time of their lives. The fascinating part is that they're doing it on a net income of $2,000 a month.

As writer Scott Burns notes:

Jim and Chris Rett aren't rich. At least they aren't rich by the usual definition -- having lots of money. I call them Reimagined People.

Officially, they are domiciled in South Dakota, but they have never lived there for any period of time. Instead, they are ``full-timers" -- people who live in an RV and travel the country. Earlier this year they were living in Big Bend National Park. Come October, they will be moving on. Now 58 and 55, they have been full-timing for three years.

``This is a surprisingly inexpensive way to live," Jim told me. ``We're Escapees, and we spend a couple of months a year in Benson, Ariz." (Escapees is the name of the organization that provides services and campsites to full-timers and aspirant full-timers.)

How inexpensive?

Try $2,000 a month for expenses, including medical insurance, and an additional $200 a month for federal income taxes. That, he told me, is what they've averaged per month so far this year.

Two thousand a month! Gad, that's -- you know -- reasonable!

I have to say I found this story incredibly cool, even after doing my own analysis about the Retts' living situation. As Mr Burns relates, the Retts paid for all their travel equipment (truck, trailer, and so on) with cash from their home. Also, Mr Rett converted a "major part" of his savings into an immediate life annunity.

I did some back of the envelope calculations and found that a 55-year-old man could expect to pay about $350,000 for an immediate annuity paying about $27,000 per year. This would result in about $2,000 per month net of taxes.

Now, in a way, that figure is a bit disconcerting. After all, $350,000 is a lot of money to a) scrape together and b) put in an immediate annuity. After all, if one inconveniently dies, the money stops (although there are certain guarantees against that for which one can pay extra).

At the same time, though, the figure is also very heartening. It's natural for people (myself included) to look at their Magic Numbers and groan because it seems impossible they'll ever reach them. Yet this makes retirement seem both possible and fun on limited means, and that's rather nice.

(via Boston Gal's Open Wallet)

Posted by Benjamin Kepple at July 14, 2006 02:12 PM | TrackBack
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