View Poll Results: 51 YO, 3.25% WR - yes or no ?
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Yes and did
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18 |
31.58% |
Yes, but I haven't ER'd yet
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29 |
50.88% |
No and didn't
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7 |
12.28% |
No, but I haven't ER'd yet
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3 |
5.26% |
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51 YO, 3.25% WR - yes or no
11-27-2013, 10:37 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,866
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51 YO, 3.25% WR - yes or no
Hello again - its your friendly worry wart here.
Thanks to diligent savings, good market returns (50/40/10 AA), and revised budgets I am now at a 3.25% WR.
I have set aside 320k in "contingency money" which is not used in calculating the 3.25% The contingencies cover LTC (110k), 2 used vechicles (33k plus 2k for year for the replacement of these 2 vechicles), major home repairs which I don't have in my "normal" maintenance budget (39k vs normal maint budget of 4k / year), expensive travel (4 trips total 72k, vs "normal" travel budget of 5k / year), potential dog emergency (5k), and stuff I might want to buy (60k). I have NOT included a contingency for asteroids, but I am willing to take that risk
Theoretically my WR would go down when I start to collect SSI in 19 years. At that point, my WR would be 3% (I've used 65% of the SSi estimate in my calculations).
I've included a poll to see if you would (or have) or wouldn't (or haven't) taken the risk with this portfolio.
Comments (good or bad) always welcomed !
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11
ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
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11-27-2013, 10:54 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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I can't answer your poll because none of the options apply. I am a little older than you are and ER'd at 56 with a WR around 3%, no pension or "contingency money" but I do have an investment real estate portfolio. You did not mention whether you have a pension. My response would be that if you do have a pension, you have a good handle on spending and you are psychologically ready, finances should not be a problem. Without a pension I personally would probably not RE at 51….and didn't. But that's just me.
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11-27-2013, 10:55 AM
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#3
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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I would go ahead and do it, but with the intention of cutting back severely if/when the market crashes again as it did in 2008-2009 or if yield decreases a lot for any reason.
(I voted "yes and I did", but really I have been living on less than that. In my case my ER date was delayed while I waited to qualify for retiree medical.)
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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11-27-2013, 11:00 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Yep, do it!
Just as the results of this thread concluded.
http://www.early-retirement.org/foru...ear-65317.html
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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11-27-2013, 11:02 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,361
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Yes and did. ER was 3.8% when I retired at age 56. However, it will be a lot lower (about 1% once pension and SS start).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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11-27-2013, 11:15 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,866
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Thanks. To answer some questions, neither DH or I have a pension, so the only "guaranteed" income is SSI.
As far as cutting back, I could cut back 20% of my spending but that would be very lean and mean, and just about "survival" levels. I'd have to forgo any entertainment that costs money, and I wonder if I'd end up bored and P-O'd at myself for jumping too soon.
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11
ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
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11-27-2013, 11:20 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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Not sure what to advise you. Overall that's a relatively low, conservative WR.
We are 56 years of age (our average ages), and we use a 3.33% of Jan 1 portfolio value withdrawal rate every year.
BUT
We could drop to a withdrawal rate under 2.5%, and still match our current budget/spending habits. And we could still cut back some expenses to achieve an even lower WR.
SO
That means, God forbid, our portfolio could take a hit of 25% and we would have to figure out how to start cutting our budget (yet).
or, our portfolio could have no growth for 8 years before our retirement fund would drop so much from withdrawals that we have to start reducing our current budget.
I'm not sure how much padding a 50 year old should plan for. I just observe that if a recent strong market run has boosted your nest egg such that you've reached your magic number, you might be a bit more vulnerable to setbacks than someone who retired say two years ago. Not sure how much padding you need or how much budget cutback you would still feel comfortable with, but it's probably worth taking a look at that too.
I've perhaps given you a few ideas of how to quantify things?
Knock on wood!
Edited to add - I look at things this way because we withdraw the % of portfolio value each year, so our withdrawal goes down after a good year.
__________________
Retired since summer 1999.
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11-27-2013, 11:22 AM
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#8
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Recycles dryer sheets
Join Date: Jul 2012
Posts: 103
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If your spending is only 20% above a survival budget, that would suggest you don't have a lot of slack to work with should the markets turn sour. (Your sizable contingency does help mediate that a bit). That would worry me, especially across such a long time horizon.
__________________
Jeff
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11-27-2013, 11:49 AM
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#9
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Recycles dryer sheets
Join Date: Nov 2002
Location: Alajuela, Costa Rica
Posts: 222
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With your AA, if your TER = 0.00% you can spend 3.36% per year with 100% certainty of success. Boost your TER =1.00% and you can spend 2.87% with a 100% success rate.
TER = ER + TR. (Total Expense Ratio = Expense Ratio + Tax Ratio).
Make sure you KNOW what your portfolio costs are.
__________________
KISS & STC.
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11-27-2013, 11:55 AM
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#10
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Dryer sheet aficionado
Join Date: Mar 2011
Location: New York
Posts: 44
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I would say go for it.
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11-27-2013, 11:55 AM
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#11
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Recycles dryer sheets
Join Date: Feb 2010
Posts: 293
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Quote:
Originally Posted by Jager
If your spending is only 20% above a survival budget, that would suggest you don't have a lot of slack to work with should the markets turn sour. (Your sizable contingency does help mediate that a bit). That would worry me, especially across such a long time horizon.
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I think this comment ignores the methodology.
Methodology is to use a X% withdrawal rate and use that initial withdrawal amount and adjust annually for inflation.
In all scenarios, using historical data and either a) FireCalc or b) ORC (Jim Otar's Firecalc), a 3.2% WR using this methodology will withstand any historical market for any duration of time. Obviously, we have had fewer 50 year periods of time to "test" than 20 or 30 year cycles.
The point: At the OPer's spending level (3.2% WR), he doesn't have to worry about, or change his spending if the "markets turn sour" to survive historical market conditions.
Now, will the future look different than historical markets? That is a different question....
__________________
FIREd at 46, 8/31/11
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11-27-2013, 12:14 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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Quote:
Originally Posted by REattempt
I think this comment ignores the methodology.
Methodology is to use a X% withdrawal rate and use that initial withdrawal amount and adjust annually for inflation.
In all scenarios, using historical data and either a) FireCalc or b) ORC (Jim Otar's Firecalc), a 3.2% WR using this methodology will withstand any historical market for any duration of time. Obviously, we have had fewer 50 year periods of time to "test" than 20 or 30 year cycles.
The point: At the OPer's spending level (3.2% WR), he doesn't have to worry about, or change his spending if the "markets turn sour" to survive historical market conditions.
Now, will the future look different than historical markets? That is a different question....
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You are correct, however, most people will tighten their belt after a bad year even though it theoretically should be survivable and they don't have to. Human nature. Just something to take into account when you get ready to dive off the cliff.
__________________
Retired since summer 1999.
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11-27-2013, 12:18 PM
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#13
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Recycles dryer sheets
Join Date: Nov 2002
Location: Alajuela, Costa Rica
Posts: 222
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"Life After FIRE - we redesign it every 5 years!" = A very smart idea!
__________________
KISS & STC.
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11-27-2013, 12:57 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,866
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Quote:
Originally Posted by galeno
With your AA, if your TER = 0.00% you can spend 3.36% per year with 100% certainty of success. Boost your TER =1.00% and you can spend 2.87% with a 100% success rate.
TER = ER + TR. (Total Expense Ratio = Expense Ratio + Tax Ratio).
Make sure you KNOW what your portfolio costs are.
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0.35%. I do it all myself. Buy and hold.
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11
ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
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11-27-2013, 02:50 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Quote:
Originally Posted by Huston55
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Just to add a bit...we are 58 & 56 and will start RE soon using a WDR of 5% for a short period of time, then will reduce it to <3%% after pension and SS kick in. FireCalc and Fido RIP tell us we have 100% chance of portfolio survival.
Our ER is currently ~0.40% and will go down significantly after RE, when we can roll over the 401Ks. We will need to focus on minimizing taxes early in RE.
Soooooo L&L, I think you're in good shape and need to punch out.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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11-27-2013, 03:04 PM
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#16
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Recycles dryer sheets
Join Date: Aug 2013
Posts: 349
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Quote:
Originally Posted by galeno
"Life After FIRE - we redesign it every 5 years!" = A very smart idea!
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Audrey - not to hijack this thread, but would you mind describing what this looks like (perhaps on another thread?)
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11-27-2013, 03:43 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
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So FIRECalc gives you a 100% chance for a 3.25% WR with a 40 year period and your AA.
You have a contingency fund which is roughly 1/2 of what some retirees your age have in total.
You discounted social security by 35%. What is your withdrawal rate if you include 100% of social security in FireCALC I bet it is well under 3%
So I think you have belt, suspenders and hip waders to keep your feet from getting wet on a cloudless day. If you feel it is necessary to save enough to have helicopter circle above you with a rescue divers standing by in case of thunderstorm by all means do so.
Just because you have achieved financial independence, doesn't mean you have to retire. It is perfectly fine to keep working even if you don't need the money. But I wouldn't let the "I don't have enough money to sleep at night" keep you from retiring.
It seems to me that you have not reached the point where the BS bucket is overflowing when it does you'll want to retire.
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11-27-2013, 03:55 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,866
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Quote:
Originally Posted by clifp
So FIRECalc gives you a 100% chance for a 3.25% WR with a 40 year period and your AA.
You have a contingency fund which is roughly 1/2 of what some retirees your age have in total.
You discounted social security by 35%. What is your withdrawal rate if you include 100% of social security in FireCALC I bet it is well under 3%
So I think you have belt, suspenders and hip waders to keep your feet from getting wet on a cloudless day. If you feel it is necessary to save enough to have helicopter circle above you with a rescue divers standing by in case of thunderstorm by all means do so.
Just because you have achieved financial independence, doesn't mean you have to retire. It is perfectly fine to keep working even if you don't need the money. But I wouldn't let the "I don't have enough money to sleep at night" keep you from retiring.
It seems to me that you have not reached the point where the BS bucket is overflowing when it does you'll want to retire.
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The BS bucket is full - I spent a day last week in tears because of w*rk BS. Knowing I can actually do it has actually reduced my tolerance for BS ... I would love to think "look at these fools fretting over BS, not me. I don't need to be here !" but instead my thoughts are "OMG I do NOT have to deal with this cr*p - why am I here ".
We'll see if I jump or not.
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11
ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
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11-27-2013, 04:00 PM
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#19
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,706
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Quote:
Originally Posted by Live And Learn
The BS bucket is full - I spent a day last week in tears because of w*rk BS. Knowing I can actually do it has actually reduced my tolerance for BS ... I would love to think "look at these fools fretting over BS, not me. I don't need to be here !" but instead my thoughts are "OMG I do NOT have to deal with this cr*p - why am I here ".
We'll see if I jump or not.
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Is it possible you've reached the point where OMY affects your health?
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