Six Months Into a "Shoestring" Retirement

[Pilot2013]

Wow! What a great and refreshing post! you have given me a really good feeling about myself, my financial situation, and my sometime ability to pull the trigger hopefully a little sooner than I was thinking just a few days ago.

Reading through posts here for some time now, and I often kicked myself and felt a little stupid when "comparing" my situation to those here that have 1, 2 or more $MM portfolio's that they have amassed to make this journey.

Your post, and the number of other replies to it, of those in similar situation is very heartening for me.

Maybe we should start a Forum Topic for those of us that are "Shoestringers"?

Please keep posting so I can see how your doing and gain courage from your story!

[2017ish]

Congrats and welcome!

What one spends is at least as important as how big the pile is. You sound like you have that well under control. Plus pension to cover day-to-day and at least some help on health insurance. Bet you'll do fine.

[ERD50]

Quote:

Originally Posted by CaptTom Hi group! Just collected my sixth pension check, and so far so good. I retired at age 56 after 36 years, the last 32 in IT. Unlike the majority here, I am probably not financially where conventional wisdom says I should be to retire. I don't have a million-dollar nest egg. My pension is adequate, but not overly generous. My savings would probably last two years if all else failed. My 401k would go quite a bit longer, but it's still below what all the "experts" recommend. ...

Welcome! I think you may have a misunderstanding of 'conventional wisdom' (at least as generally defined by the 'FIRE' philosophy).

'Conventional wisdom' is that you should have sufficient resources to cover your expenses (accounting for inflation as well). That doesn't set any dollar amount for savings. If it can all come from pension/SS, then zero $ in savings is required.

A million dollar next egg is only required if you need $40,000/year and no other income source (assuming 4% WR, but many would prefer to be a bit more conservative). If half is covered by pension/SS, then $500,000 nest egg, etc.

How do your numbers look if you run them into FIRECalc for a 40 year cycle?

-ERD50

[ERD50]

Quote:

Originally Posted by Pilot2013 ... Maybe we should start a Forum Topic for those of us that are "Shoestringers"? ...

'Shoestring' is relative. I'm not sure what would be gained by a separate thread on that subject. Investment wise, there is no difference in drawing down 4% (or whatever) from a $100,000 portfolio or a $10,000,000 portfolio. They both have the same success rate - it's % that matter, not amounts.

Expenses vary by location, situation, and wants. Bets to focus on how to get the most value for the things you feel you need, then to compare with others on absolute $ amounts. And we have plenty of threads on those topics (cable cutting, autos, DIY, etc).

-ERD50

[Pilot2013]

Quote:

Originally Posted by ERD50 'Shoestring' is relative. I'm not sure what would be gained by a separate thread on that subject. Investment wise, there is no difference in drawing down 4% (or whatever) from a $100,000 portfolio or a $10,000,000 portfolio. They both have the same success rate - it's % that matter, not amounts. Expenses vary by location, situation, and wants. Bets to focus on how to get the most value for the things you feel you need, then to compare with others on absolute $ amounts. And we have plenty of threads on those topics (cable cutting, autos, DIY, etc). -ERD50

Be that as it may, when you are looking at $800k NW verses what a lot of people on here discuss as their net worth, it is difficult to fathom RE. (Not saying that is my NW, just picking a lower $ to illustrate point).

So, maybe not a separate thread, but more posts from people that haven't been smarter than the average bear and created multi million $ portfolios to fund there RE?

That just might be more comforting to some who sit on the sidelines about their RE experiment experience.

[ERD50]

Quote:

Originally Posted by Pilot2013 Be that as it may, when you are looking at $800k NW verses what a lot of people on here discuss as their net worth, it is difficult to fathom RE. (Not saying that is my NW, just picking a lower $ to illustrate point). So, maybe not a separate thread, but more posts from people that haven't been smarter than the average bear and created multi million $ portfolios to fund there RE? That just might be more comforting to some who sit on the sidelines about their RE experiment experience.

But I don't understand what's different in budgeting between someone with a plan for expenses of $40,000 a year who gets 80% of that from a COLA'd pension/SS and plans a 4% withdraw from a $200,000 portfolio, and a person with zero pension/SS who has expenses of $40,000 a year who plans a 4% withdraw from a $1,000,000 portfolio.

$40,000 may be looked at a 'shoestring' budget by some, and far more than adequate for others. It depends on circumstances.

I guess my point it that the individual issues should be discussed (pension /SS concerns, controlling X expenses, etc), rather than trying to fit them in a cubby labeled 'shoestring budget'. I think it just clouds the issues, or excludes people who think they don't fit that description, but still might have something to add. A multi-billionaire might have a good suggestion on how to save on car insurance that could apply to anyone, for example.

-ERD50

[Koogie]

Quote:

Originally Posted by CaptTom You retired folks sure reply quickly. Thanks for the warm welcome! Brewer, I did the "Down East Loop". Sorry to hear about your seasickness. We all get it you know, just have different thresholds.

Great trip report.. a very enjoyable read.

[CaptTom]

Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input.

I'm also glad I struck a chord with some other, less-well-capitalized retirees.

Imoldernu, thanks for the link to your sharing post. Adjusting expenditures to match income is such a simple concept, but so rare in this era of entitlement.

I still don't see myself as "FI". To me, that would mean being free from the influences of political and economic change. There have been a number of rumblings lately that bring into question how long medicare, SS, health insurance as we know it and even my own company's obligation to fund my pension might last. An economic downturn could wipe out my 401k. One major health setback could deplete my savings.

Very few have reached a level of independence from these factors. Good for them! But I don't count myself among them.

To my way of thinking, I did "RE" but I'm nowhere near "FI".

[Montecfo]

Quote:

Originally Posted by CaptTom Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input. I'm also glad I struck a chord with some other, less-well-capitalized retirees.

Welcome CapTom! Hey, after reading your post, I came away thinking you probably have more net worth than you even realize, if you consider as an asset the capitalized payment stream your pension represents. Most Americans do not have private pensions (meaning outside of SS). In fact, there was never a time when most did.

So it follows most people are retiring on savings and SS. You need a lot of savings to do that, as you have no pension.

Now, for fun you could multiply your annual pension by 25 (it is the inverse of the oft-cited 4% SWR) and add that the other elements of your net worth. That total would make it more of an "apples to apples" comparison of net worth with people who lack pensions.

And as others mentioned, it is the relationship of cash flow to your needs that is most important

In any event, congrats!

[Walt34]

Quote:

Originally Posted by CaptTom Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club."

Oh, far from it! There are incomes ranging from ~$20k/year to $200k+ that I've seen posted. Many, like me, have pensions that do the bulk of the heavy lifting keeping us solvent and have a NW nowhere near a million. If one has a COLA'd well funded pension then you don't need anywhere near that much. Others have no pension but saved/invested early on and made it that way, and there's a mixture of everything in between.

[CaptTom]

Quote:

Originally Posted by Montecfo Now, for fun you could multiply your annual pension by 25 (it is the inverse of the oft-cited 4% SWR) and add that the other elements of your net worth.

That WAS fun. If I do that, I become a member of the Millionaire's Club.

Someone pass the caviar, please.

Not sure I'm 100% on board with the math though. I guess if I collect for 25 years (I didn't take the time to look my life expectancy up in the actuarial tables) that would make sense. A million bucks sure doesn't go far these days, huh?

[Mdlerth]

Quote:

Originally Posted by FireBug Welcome Capt'n. Yours is a refreshing post. I think it gets back to the essence of what this forum is meant to be. Sounds as though your decision is based on a number of pragmatic approaches...$, living within your means, an appreciation of what happiness means.

+1

To the OP: Welcome. You're doing it right. An optimum retirement is way different from the most lavish retirement.

[Montecfo]

Quote:

Originally Posted by CaptTom That WAS fun. If I do that, I become a member of the Millionaire's Club. Someone pass the caviar, please. Not sure I'm 100% on board with the math though. I guess if I collect for 25 years (I didn't take the time to look my life expectancy up in the actuarial tables) that would make sense. A million bucks sure doesn't go far these days, huh?

Well, people that are living off savings have learned that spending 4% of your investible assets constitute a "safe withdrawal rate", which can last 30 years. Some adhere to lower percentages due to recent market conditions, longer expected retirements, on conservativity.

Thus to "safely" with draw $20K per year one would need $500K of investible assets. (500K times .04=$20K). So one who has a $20K pension has $500K of "implicit" investible assets (20K times 25 =500K) under this logic.

Another approach would be to go and see what an annuity in the amount of your pension for someone your age would cost. Add that to you net worth.

Just methods of measuring the value of a pension to make it comparable to savings.

Grey poupon?

[CaliKid]

Congrats!

[IMATERP]

Quote:

Originally Posted by CaptTom Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input. I'm also glad I struck a chord with some other, less-well-capitalized retirees. Imoldernu, thanks for the link to your sharing post. Adjusting expenditures to match income is such a simple concept, but so rare in this era of entitlement. I still don't see myself as "FI". To me, that would mean being free from the influences of political and economic change. There have been a number of rumblings lately that bring into question how long medicare, SS, health insurance as we know it and even my own company's obligation to fund my pension might last. An economic downturn could wipe out my 401k. One major health setback could deplete my savings. Very few have reached a level of independence from these factors. Good for them! But I don't count myself among them. To my way of thinking, I did "RE" but I'm nowhere near "FI".

Great Read, Capt. Tom...

I've just started my last year of work and am in a very similar position as you. A paid off house, a nice little Pension at age 60, and enough $$ to get me to age 60, + healthcare at age 60.

You talk about "living on a shoe-string" well I wouldn't know how to live any other way as I have always had the same spending patterns. It would actually upset "my apple cart" if I tried to squander monies on things that didn't provide me enjoyment. I guess that is just how I was raised.

Anyway, my ship comes in on December 16th as I (along with my wife) will be passengers on a retirement cruise just before the end of the year. I can't wait and am feeling better about this decision every day.

Be Free and Be Happy!

Michael

[Teacher Terry]

We don't have as much $ as some others. Mid life divorce for me where ex hid most of our $, had full control of finances etc even though I worked. Anyways my dh and I each have 20k pensions , retiree health insurance that costs 10k/year, paid for house and small savings. We love to travel and have not done much until the past 3 years. We are spending between 10-14k/year on vacations. We have had many friends die in 50's and 60's, cancer scare for dh at 49, etc so intend to travel while we can. I work teaching an online college class by choice past 4 years and my dh was laid-off at age 53 and sometimes he works and sometimes he doesn't. At ages 62 and 58 we are happy with our lives. WE could always take $ out of our house, sell and buy condo, etc in the future. Welcome!

[ttvjef]

Welcome! Refreshing thread. Sounds like you are prepared and have put a reasonable amount of thought into your plans. We are in the red zone for ER and struggle with just what should be the final number for us. We do have a FA and a plan laid out but the medical wild card is a concern. We're currently w*rking good paying jobs and are a bit shy to pull the trigger just yet.
Looking forward to the day when we take our retirement cruise! In our case we're planning a cross country trek :-)

[Pilot2013]

Quote:

Originally Posted by ttvjef We do have a FA and a plan laid out but the medical wild card is a concern.

I think this is the primary driver/concern for me (us). That, and wanting to be able to leave at least a small legacy for DD's.

[Pilot2013]

Quote:

Originally Posted by Teacher Terry Mid life divorce for me where ex hid most of our $

Similar story here, except my ex did not work, and hid numerous CC's acquired during the tumultuous time and proceeded to max out. Couple that with tens of thousands of $'s for custody attempts (the South is very far behind in Father custody) and you have some financial challenges to overcome. Luckily, I had the income to mostly and recover.

[Fermion]

No pensions, a relatively small nest egg of $1.4m and we are making it work by keeping spending at about $35k per year plus whatever healthcare is each year (about $2800 a year under ACA, #willmissthat)

Helps a ton not having to pay property tax or income tax.