I Am 44 Years Old With $5 Million Saved — Can I Retire Early If I Live A 'Frugal Lifestyle' In Coastal California?

According to a 2024 Northwestern Mutual poll, most Americans believe they will require around $1.46 million to retire comfortably. Nonetheless, those thinking about early retirement in expensive areas like coastal California can expect to have considerably higher financial requirements.

A 44-year-old posted on the Bogleheads forum, asking if retiring early with $5 million would be enough for a modest life in such an expensive place. However, for those with large savings, this question touches something deep inside them because even five million dollars may not go very far in high cost living areas.

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The forum generated diverse responses. One member calculated: "With a 3.5% safe withdrawal rate, you’re looking at $175,000 a year, which might leave you with about $140,000 after taxes. That’s enough for a comfortable life in expensive areas, but forget about luxury." Another pointed out, "Just covering housing costs in spots like Manhattan Beach could eat up most of that budget. Add on other big costs like your kids’ education and potential health care needs, and it might not be enough."

Some participants suggested considering additional income sources or a spouse’s earnings to alleviate financial pressure. One forum member noted the personal nature of financial planning: "What’s enough money for one person might not cut it for another, depending on how they want to live and their financial goals."

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The discussion also touched on the definition of ‘frugal.’ One user commented, "If someone is living on $140,000 a year and calls it frugal, it shows how different everyone’s view of money is." In high-cost areas, frugality might mean skipping dining out, opting for more modest housing, or limiting travel and entertainment expenses, which can be quite different from what frugality means in other parts of the country.

In general, to retire early, financial expert Suze Orman says not to think about it unless you've got $5 million or $10 million or more saved. She mentions that many expenses arise as you and your family members age, which people tend not to consider when young. While Coastal California is pricier, the "frugal" lifestyle may balance things out and make it possible.

Determining an ideal retirement nest egg requires a personalized approach that considers various factors. It’s important to research the cost of living in your desired retirement location, as expenses for housing, groceries, and utilities can vary significantly between rural towns and cities. Be realistic about your desired lifestyle, factoring in costs for travel, hobbies, and entertainment. Don’t overlook health care expenses; research potential medical costs in your retirement area and consider strategies to manage these expenses, such as health insurance or an emergency fund.

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