Poll: How long could you survive without income?
Hello HN. I've been spending the last couple of weeks reading as much as I can on figuring out the right balance between what remains of my life (I'm very close to 50) and how much money I should save up. I have been self employed for the vast majority of my career and have always aimed at providing for my own pension rather than to have some external party take care of that (because I don't like to give that kind of control to institutions that I really do not trust and that lack transparency).
So I've been saving like a squirrel over the years and even though it's been adding up nicely I never could shake the feeling that it wasn't enough. I also do not have a disability insurance (it is absolutely un-affordable where I live).
Suppose all your income streams related to work would dry up tomorrow and you'd be stuck with withdrawing from savings or living off the interest / dividends of your money or investments (technically of course also a source of income), how long could you survive?
(reminder that a vote in the poll is not a vote for the poll!)
150 comments
[ 3.5 ms ] story [ 220 ms ] threadAs an older guy who was into sailing and boating as a youth, possibly the only positive effect of the hyperinflation in housing prices / "housing bubble" is spending $5000 to install a toilet has gone from an insane outrageous expense to "you got a pretty good deal compared to what home depot wanted to charge". And the permanent long term decline in wealth/income means what used to be "middle class" sailboats are getting really cheap, what with the decline of the middle class. A used 30 footer used to cost about 4 of my dad's new commuter cars in better economic decades, now its less than the cost of my commuter car because the buyer pool is drying up.
The old line about a boat being a hole in the water you throw money into doesn't sound so bad now that houses are an even worse "investment".
The economics have definitely shifted in favor of that scenario, something I wouldn't have imagined 10-15 years ago.
2) Health insurance (moderate to expensive, depending on my income and available subsidies). Or possibly seeking care in a country with a real (i.e universal) healthcare system. Cuba is in the Caribbean, and fairly accessible by boat.
You can't plan for every scenario; if I have terminal cancer I'd rather die surrounded by family and friends then exhaust my retirement in weeks or months to extend my life <1 year.
Life is more complicated when have contract jobs or live on land, but if you retire on a boat, you simply move out of the way. If you have a couple days warning, hurricanes simply aren't big enough.
Boats are destroyed in hurricanes when the owner is freaking out about his house on land, or frankly, insurance scams. So some hull insurance won't pay out in tropical waters during hurricane season. So don't go there or get a different policy.
You can run into sudden squall issues, that is true.
One thing to think about is it might not be 10% cheaper it might be 75% cheaper. Even if you had to buy a completely new boat every decade because it sank (unlikely), it still might be cheaper than living on some land.
Actually, I've been designing my own small cabin[1]; nothing fancy, solar panels, a decent cooker, pellet stove heat etc... And it occurred to me that the thing would fit perfectly atop an old steel work barge. I never thought about living in a houseboat, but considering how little I'd have to spend for land use, it seems like a good idea.
I just need a bit of extra space for supplies and I'm good to go already.
[1] http://eksith.wordpress.com/2014/08/02/cabin-progress/
A word of advice for anyone who wants to start a company, do not go into debt doing it. You'll regret it.
EDIT: I added realistic, as not just anybody can get venture capital or have rich friends/family willing to invest a little.
Yes: go slowly but stay within your means.
Whether this is a good strategy depends on the nature of the business and the people involved with running it.
Being broke and in dept, after your startup failed and you closed, it is not a good situation to be in.
Emergency savings to live on should be 6 months to 1 year, depending on how easy it is for you to find work, and for retirement/voluntary reduction in hours worked, you'll want to plan on having saved up enough that you can draw 4% of the retirement savings every year; at that burn rate that should last until death.
Don't discount social security if you're entitled to it. You may not receive full benefits, but you will receive something. I suggest http://www.ssa.gov, calculating your benefit, and then reducing it by 25%. That takes into account the chance that Congress won't top of the SS trust fund with general tax revenue when the trust fund is exhausted.
State Unemployment Insurance
http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp
In EU it can be easily 1000 USD/month. Compulsory!
If my income dried up tomorrow then probably only 3-6 months.
Of course there's always a lot of contingencies in questions like this. In my case I could fall back on trade skills pretty quickly as they are always in demand in my area and thus would have an income of sort though probably less than half of what I make as a developer.
edit: https://twitter.com/ckserin/status/515172557532975104
Side note:current liquid savings: 16000.
But yeah I know some college towns where I could get down to 3-400 a month with out too much deprivation. And I could probably get a grand out of my car.
Which okay is more like 2 and 4 years I guess. Although I'd be due at least some tax return and a couple paychecks+unused vacation if it was me quiting to pursue the great american novel.
I think you would also want supplements, vitamins, etc.
Plus I think that while your body can theoretically make all the protein it needs from rice and beans, I think you'd also need to have fresh fruits and vegetables in your diet. I certainly wouldn't want to risk it without those. And unless you grew your own, they would probably cost more than the rice and beans.
But you shouldn't need to buy meat, which is comparatively very expensive.
If I don't have a stroke but perma-lose all income (uh, why?), I'm a pretty smart dude and will find ways to live rather cheaply. Can I spend 4 hours a day in my garden and 4 hours a day fishing as long as I don't sell the proceeds for cash? Move the family into mother in law's basement, and go all viking on the wilderness bringing in produce and hunted/fished animals? That might stretch me out quite a bit, like until I have a medical incident or my clothes wear out?
If I do have a stroke, I assure you my uncle-in-law's assisted living facility would drain my savings dry quite a bit quicker at the $8500/month facility he is currently at (actually Alzheimers not stroke, but its the same argument in the end). He will soon be going state aid, then again hes a couple years older than his brothers and sisters who died of unrelated causes, so who knows. But as a young-ish dude my family would go bankrupt in only a couple years, best case perhaps. This is assuming no unpaid medical bills (well, sorry we don't cover that particular thing even through we say we do in writing, and yes that is a valid charge that we do cover but we were hoping to fool you into not noticing and paying that, all stuff the medical industrial complex is famous for).
Worst case I guess would be having a stroke the day after medical insurance expires due to no employement/income stream. Then it would be insta-bankrupcty of course.
For example, I have enough in my savings account to maintain my current standard of living for 6 months. I have enough in an investment account to maintain another 6 months after that. So I answered 1 year.
However, I live in an apartment in Manhattan and pay $2400 a month in rent. If I were seriously hard up and didn't see any good prospects for finding employment in the future, I could move to Oklahoma or Nebraska or somewhere super cheap and find a place for less than $600 a month, which would extend my savings at least another 6 months (depending on when I decided to make the move).
I'm also 20 years younger than you and have only recently started investing (in the last 5 years).
Looking at my own retirement plans, it's estimated that I'll need about $1.8 million in savings to retire the way I want. For most people, the number seems to be between $1-2 million. So if you're wondering if you've saved enough for retirement, I'd judge it by those numbers.
Also, at your age, I'd suggest talking to an actual professional that can help you plan for retirement. Companies like Fidelity have people who can help you compare how much money you have to how much money you'll need, and also help you figure out how much money you'll need based on your expected lifestyle.
The investment rule he cites is that if you have 20x your annual expenses saved, you can live indefinitely off of the interest adjusting for inflation.
1. http://www.mrmoneymustache.com/
I have 30 dollars, and desktop PC and phone I could sell. I'm 25, never had any income.
I live with parents, so they would have to kick me out of the house.
Right now I'm gearing up to drive a 2 year lap of Africa, then Europe->SE Asia, then likely a lap of Australia/NZ.
Should be ~5 years without any income, and my savings will cover it nicely.
But if my income stopped tomorrow I'd be homeless and hungry real quick.
I used to see recommendations of one fifth of your income for safety and one third of your income for comfort. That was a long time ago so things might be different now.
I'm a freelancer, and a scare came up yesterday where one of my main income streams was about to dry out... just after going through a summery dry spell and just before the obligatory Christmas dry spell.
So, currently? A month, but considerably less once UK tax time comes in January.
(In case you're wondering, I've got a couple of more smaller income streams sorted, and as of an hour ago it turned out the main one might not be that dry after all.)