First, let's look at how much income you can expect the $100,000 to
generate. Using the T. Rowe Price Retirement Income Calculator,
available at http://www3.troweprice.com/ric/RIC/?scn=Online_Features&rfpgid=8304,
we can gain an idea of how much income you can expect to receive.
Assuming you are 65, need the money to last 25 years, and are willing
to live with a 20% chance of running out of money before 25 years are
up, "[y]ou can receive $430 of monthly income (increased 3% per year
for inflation)..." from an investment mix of 80% stocks and 20% bonds.
You may also be eligible for Social Security benefits. "For every
$780 of wages you earn in any given year, you get one credit, up to
four per year. Once you have 40 credits, you are eligible to receive
full benefits when you reach age 65. You can start to receive partial
benefits at age 62 and persons who delay retirement beyond age 65
receive higher benefits." "Social Security Primer" About, Inc. (2005)
http://usgovinfo.about.com/blssaprimer.htm.
You can calculate your Social Security benefits using "Choose A
Benefit Calculator" Social Security Online
http://www.ssa.gov/planners/calculators.htm or by referring to the
benefit statement Social Security sends you every year. The average
monthly Social Security benefit for men in 2002 was $1007.81 "Average
Monthly Social Security Benefits, 1940-2002" infoplease (2005)
http://www.infoplease.com/ipa/A0780010.html.
At age 65, you become eligible for Medicare. Consult the "Medicare
Eligibility Tool" Medicare (December 9, 2004)
http://www.medicare.gov/MedicareEligibility/home.asp. This will give
you some medical benefits in the event you need them, although it does
not cover all of your potential medical needs.
As you can see from the above information, your Social Security
benefit is likely to be significantly larger than the sustainable
income you can get from your $100,000. Obviously, if you are older
than 65 and/or have a medical condition that will shorten your
expected longevity, then you could be more aggressive in taking income
from the $100,000. You can change the data inputs to the T. Rowe
Price calculator if my assumptions do not reflect your situation.
Given that you have at least $100,000 in assets, you will not be
eligible for welfare/food stamps/etc. Even if you were, you could
only collect welfare benefits for 5 years anyway: "Eligibility and
Benefits" Welfare Information Network
http://www.financeprojectinfo.org/win/eligibil.asp.
Assuming you are going to have an income of around $1500/month
($18,000/yr) at best, some of which may be taxable, you do have some
options.
You could live in the wilderness as you suggest, living a
hunter-gatherer-type of lifestyle. This assumes you remained healthy.
If you did not, you would probably have to use all of your remaining
assets on medical care and then try to qualify for Medicaid.
A much better bet is to consider moving to a foreign country with a
much lower cost of living. $18,000 per year can go a long way in
Third World nations. The following article describes how this is an
increasingly popular option: "Money: Running Away to Retire" by Linda
Stern, Newsweek (March 14, 2005)
http://www.msnbc.msn.com/id/7102314/site/newsweek/. Mexico, Costa
Rica, Panamá, and Belize are all popular destinations. There are many
other countries you could consider as well. Note that Medicare does
not cover care in foreign countries, so you would need to buy health
insurance.
A website that appears to have a great deal of information about
retiring to foreign countries is: "Overseas Retirement Havens"
Escapeartist, Inc. (2005)
http://www.escapeartist.com/retirement/havens.htm
You could also try living on the road. The following website offers a
book purporting to allow the reader to "Retire and Travel For $1000 a
Month" http://retirementtips.homestead.com/Retire1000P1.html.
I hope these ideas aid you in figuring out if you can retire with your
$100,000 and how best to do it. I hope you enjoy your retirement.
Sincerely,
Wonko |
Clarification of Answer by
wonko-ga
on
06 Jun 2005 21:24 PDT
Thank you for clarifying your situation. I suggest that in the future
you provide all pertinent information in your question to receive the
most applicable answer.
If you are not going to invest the $100,000, then it is really not
likely to last long at all. A significant portion of even the modest
monthly amount I referred to in my answer comes from investment gains
over time, especially the ability to increase the withdrawal amount
each year to compensate for inflation.
Since you are receiving Social Security Disability, you are eligible
for Medicare, so that helps your situation somewhat. As a 21 year
old, if your disability does not impact your life expectancy, you are
looking at needing to fund living to age 90+. With the effect of
inflation, $100,000 that is not invested in anything is unlikely to be
all that material compared to your Social Security Disability benefit.
Assuming you lived to age 90, and you wanted to gradually draw down
your $100,000 so that there was nothing left then, you could spend
$120.77 per month. You are looking at a 69 year period. If inflation
matches what it did during the 69 year period from 1936 to 2005,
something that now costs $7424.88 will cost $100000 in 2074 when you
are 90. "The Inflation Calculator" by Steven Morgan Friedman (2000)
http://www.westegg.com/inflation/. The $120.77 per month will have
very little purchasing power even 20 years into the future, let alone
69. If you do not invest the $100,000, it will have minimal impact on
your standard of living.
The average Social Security Disability benefit in 2002 was $935.60. "Average
Monthly Social Security Benefits, 1940-2002" infoplease (2005)
http://www.infoplease.com/ipa/A0780010.html. Social Security benefits
are indexed for inflation, so they will not experience the drastic
decline in purchasing power that your $100,000 will if you do not
invest it.
So, you need to identify a lifestyle that you can live on your Social
Security Disability benefits if you do not want to invest the
$100,000. You also need to consider what would be compatible with
your disability. If you live a strenuous lifestyle, you will probably
eventually be discovered and lose your disability benefits. Your
disability may prevent you from undertaking a strenuous lifestyle.
The approach taken by Ted Kaczynski is certainly one that is low cost:
"Kaczynski moved in a cabin that he built himself near Lincoln,
Montana in 1971. His first decade there he concentrated on acquiring
the primitive skills that would allow him to live autonomously in the
wild."
"Kaczynski says he began an intensive study of how to identify wild
edible plants, track animals and replicate primitive technologies,
approaching the task like the scholar he was."
"Kaczynski spoke at length about the life he led in his small cabin
with no electricity and no running water."
"Interview with Ted Kaczynski" http://www.primitivism.com/kaczynski.htm
On the other hand, you may not need to go to this extreme. You
presumably have something on the order of $12,000/yr. coming in. That
actually places you over the federal poverty level, which is $ 9,570
for 2005 "Poverty in the United States" Answers.com
http://www.answers.com/topic/poverty-in-the-united-states. The
definition of being above the poverty level is that you are able to
afford "food, shelter and clothing needed to preserve health."
Instead of living in the wilderness, you could opt to live in an area
with a low cost of living. Portsmouth, OH is 15% less than the
national average. "Best and Worst Places For Your Paycheck" by Sarah
Lyman (2004) http://www.salary.com/advice/layouthtmls/advl_display_nocat_Ser294_Par428.html.
The following material includes a map showing counties with high
poverty areas. These areas have low median incomes, which would
suggest that the cost of living there is relatively low. "Anatomy of
Nonmetro High-Poverty Areas:
Common in Plight, Distinctive in Nature" by Calvin L. Beale, Amber
Waves (February 2004)
http://www.ers.usda.gov/AmberWaves/February04/Features/Anatomy.htm.
In summary, while $100,000 is a significant sum of money, it is not
going to materially influence your standard of living if you live to a
normal life expectancy. It is very unlikely to be of much benefit to
you if you do not invest it. Whether you invest it or not, the vast
majority of your income is likely to be from your Social Security
Disability benefits. Therefore, you should seek to identify a
lifestyle that you can fund from those benefits. While that could be
living in a remote area living off the land, your benefit should allow
to afford basic housing, food, and clothing in a low cost area of the
United States. You may be able to get food assistance from a food
bank even if you do not qualify for food stamps. You should also
consider accessibility of any medical care you need for your
disability, as well as your physical ability to perform the tasks
associated with the lifestyle you select.
Sincerely,
Wonko
|
