A former Goldman Sachs banker who retired at age 34 with a net worth of $3 million says his family of four now needs an income of more than $230,000 a year to live comfortably.
Sam Dogen quit the rat race in 2012 to live on the West Coast in expensive San Francisco and has managed to provide his family with everything they need, thanks to passive income from stocks, bonds and real estate.
Although Dogen doesn’t specifically mention how much he had to set aside to generate an impressive annual return, Dogen did mention in a recent message to his Financial Samurai Blog he notes how he has now jeopardized his family’s financial independence.
Dogen reveals how he was ‘forced to liquidate a significant portion of his investment portfolio’ to buy property: the family home where he now lives with his wife and two children.
Former Goldman Sachs analyst Sam Dogen, who retired at age 34 with a net worth of $3 million, revealed that his family of four needs $230,000 annually to live comfortably.
Dogen’s annual expenses include $80,400 for private elementary school tuition (file photo)
‘The budget is based on my ideal lifestyle for a family of four in a big city. Of course, there are areas that need to be cut. But overall it’s a realistic and comfortable lifestyle, he writes.
In a post, Dogen does the math and calculates that his family needs an annual income of more than $230,000 to maintain the comfortable lifestyle they are used to.
Dogen predicts that to meet projected expenses of at least $288,000 in 2024, he would need an income of about $420,000 before taxes.
H notes that he is not seeking sympathy or empathy for what he describes as his upper-middle-class family lifestyle.
However, he believes his expenses could be comparable to those of other families living in similarly expensive cities like New York.
His annual costs include $80,400 for private elementary school tuition, $24,000 for health care, $26,000 for food and as much as $68,400 for housing costs, to cover property taxes, maintenance and insurance.
In a candid post, Dogen does the math and calculates that his family needs an annual income of more than $230,000 to maintain the comfortable lifestyle they’re used to
Dogen calculates he needs as much as $68,400 for housing costs, from property taxes, maintenance and insurance to living in San Francisco
He calculates annual expenses of $24,000 for health care and $26,000 for food
A revised budget of $300,000 per year for a family of four reduces leisure spending and increases child care costs
Dogen notes that he could have moved his family to an area where the cost of living is lower to save money, but he was drawn by the lure of San Francisco’s career opportunities and economic potential.
However, he acknowledges that other families across the country are struggling economically, with rising costs and inflation.
“The good thing about living in San Francisco is that there are so many opportunities to build a career and make money… There’s just too much excitement right now to move to a cheaper area of the country to try to make money.” save,” says Dogen.
Dogen, who earned an MBA from the University of California, Berkeley, and also worked as an executive director at Credit Suisse, even suggests that he may need to consider a return to the workforce, perhaps as a consultant, after more than a decade of retirement.
Despite concerns about inflation, Dogen suggests that people save both aggressively and consistently.
He notes that historically, assets such as real estate and stocks perform well and beat inflation over the long term.
The average annual salary for working Americans is $59,400. In California, the average is $73,220, according to Forbes.
Dogen notes that he does not seek sympathy for what he describes as his family’s upper-middle-class lifestyle, and believes he may even have to return to work.
Similar budgets would also apply to New York, Seattle, Washington DC, Denver and Vancouver
Fewer than half of Americans are on track to retire comfortably after the pandemic and white-hot inflation disrupted savings plans.
A report from Fidelity Investments, the largest provider of 401K plans in the US, shows that a paltry 29 percent of people are on track to cover all their expenses in retirement, up from 38 percent in 2020.
Despite managing to negotiate a healthy redundancy package when he left the workforce in 2012, Dogen now believes it was a ‘reckless’ decision.
In retrospect, he thinks he should have lasted until he was forty.
“I now recognize that 34 was ridiculously young and I don’t think it was wise, it was more impetuous,” Dogen told DailyMail.com.
“Staying at work longer would have been smart because it would have given me more savings and more benefits,” he said.
Dogen retired in 2012 after working for 13 years at various investment banking firms. He has calculated that the cost of tuition for his two young children could be as much as $1 million
More than half of retirees who have returned to the workforce say they returned out of boredom
Dogen’s wife has also retired early from her role in the financial industry, and the couple is focusing on full-time parenting of their two children, but he warns his lifestyle means more stress and less stability.
‘For example, there is no security blanket of subsidized health insurance. We pay $2,300 a month, unsubsidized, plus many other health care costs.
‘There is also no pension matching or paid vacation days. So I would say you’re never really completely comfortable because there are always unexpected variables.”
An important variable is the tuition for his two children. Dogen calculated that the maximum this could cost in fifteen years, given a 5.5 percent annual growth rate over current tuition, bed and board costs, would be $750,000 per child – or as much as $1.5 million for both.
He is currently considering his options for what his next job will be. He has ruled out returning to the financial world and in an ideal world he would work for his favorite team, the Golden State Warriors.
However, he is seriously considering moving to Honolulu, Hawaii, where his parents live, and becoming an elementary school teacher.
He added, “I love teaching, and if you can get a teaching job there, you can help your kids go to school and keep an eye on them – and get a discount on tuition.”
For older retirees, it’s important to consider the financial implications of not retiring before taking the leap to return to work.