Goldman Sachs banker who retired at 34 reveals the best ways to combat inflation – as he says a family-of-four needs MORE than $230,000 a year to live comfortably
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 left the rat race in 2012 to live on the west coast in expensive San Francisco and managed to provide his family with everything they needed thanks to passive income obtained from stocks, bonds and real estate.
Although Dogen doesn’t say specifically how much he had to put away to generate impressive annual returns, in a recent post 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 part 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 34 with a net worth of $3 million, revealed that his family of four needs $230,000 annually to live comfortably
Dogen’s annual costs include $80,400 for private grad 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 to cut. But overall it is a realistic and comfortable lifestyle, he writes.
In a post, Dogen does the math and calculates his family needs an annual income of more than $230,000 to maintain the comfortable lifestyle they’re used to.
Dogen projects that he needs pre-tax income of about $420,000 to handle the 2024’s projected expenses of at least $288,000.
H notes that he does not seek sympathy or empathy for what he describes as his family’s upper-middle-class lifestyle.
However, he believes that his expenses may be similar to those of other families living in similarly expensive cities such as New York.
His annual costs include $80,400 for private grad school tuition, $24,000 for health care, $26,000 for food and a massive $68,400 for housing expenses that 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 that he needs a massive $68,400 for housing expenses covering everything from property taxes, maintenance and insurance to live 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 has less recreation expenses and more childcare costs
Dogen notes that he could have relocated his family to a lower cost of living area to save money, but was drawn by the appeal of San Francisco’s career opportunities and economic potential.
However, he acknowledges that other families across the country are having a hard time economically, with rising costs and inflation.
“The good thing about living in San Francisco is that there are so many career and money-making opportunities… There’s just too much excitement right now to leave for a lower-cost area of the country to try and save money,” says Dogen.
Dogen, who has an MBA from the University of California, Berkeley and also worked as an executive director at Credit Suisse, even suggests he might consider a return to the workforce, perhaps as a consultant, to more than a decade of retirement.
Despite inflationary concerns, Dogen suggests that people save aggressively and consistently.
He notes that assets such as real estate and stocks perform well over the long term and beat inflation.
The average annual salary for working Americans stands at $59,400. In California, the average is $73,220, according to Forbes.
Dogen notes that he’s not looking for sympathy for what he describes as his family’s upper-middle-class lifestyle and believes he may even have to start working again
Similar budgets will 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 red-hot inflation hammered savings plans.
A report by America’s largest 401k plan provider Fidelity Investments found that a mere 29 percent of people are on track to cover all their expenses in retirement, down from 38 percent in 2020.
Despite managing to negotiate a healthy severance package when he left the workforce in 2012, Dogen now thinks it was a “reckless” decision.
In retrospect, he thinks he should have stuck it out until he was at least 40.
“I now admit 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 13 years in investment banking at various firms. He calculated that college tuition costs for his two young children could exceed $1 million
More than half of retirees who returned to the workforce said they returned out of boredom
Dogen’s wife also retired early from her role in financial operations, and the couple are concentrating on being full-time parents to their two children, but he warns that his lifestyle means there is more stress and less stability.
‘For example, there is not that security blanket of subsidized healthcare insurance. We pay $2,300 a month unsubsidized plus many other health care expenses.
‘There is also no retirement match and no paid holidays. So I would say you’re never really completely at ease because there’s always these unexpected variables.’
One big variable is college tuition for his two children. Dogen calculated that the maximum it could cost over 15 years, given a 5.5 percent annual growth in current tuition, bed and board costs, would be $750,000 per child—or a staggering $1.5 million for both.
He is currently weighing his options for what his next job will be. He ruled out returning to finance, and in an ideal world would go to 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 job teaching there, you can help your kids get into school and watch them – and you get a tuition discount. ‘
For older retirees, it’s important to consider the financial implications of not retiring before taking the leap to return to work.