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View Poll Results: Are you FI but not yet RE? Is there anyone? (Choices below are yearly expenses as a percent of inv
3.75-4.0% 28 50.00%
3.5-3.75% 4 7.14%
3.0-3.5% 7 12.50%
2.5%-3.0% 6 10.71%
<2.5% 11 19.64%
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Re: Are you to chicken to RE?
Old 03-10-2007, 06:36 PM   #41
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Re: Are you to chicken to RE?

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Originally Posted by mb
So if you are FI but not RE what's the excuse?
My excuse?? I have to wait to RE until I turn 50, in order to qualify for my full DB pension!!

That would be in 4 weeks....19 w*rking days that I'm supposed to show up. I pretty much quit w*rking the 2nd week of January...but still have to show up to punch the time-clock, 'til April 6th.
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Re: Are you to chicken to RE?
Old 03-10-2007, 06:51 PM   #42
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Re: Are you to chicken to RE?

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Originally Posted by tryan
Yup, and then Brad Delp dies at 55. A vegitarian for 4 decades.

Sad day here in Boston.
Nicest guy in rock... more than a feeling, indeed. Sorry to hear about that, grew up to the music.
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Re: Are you to chicken to RE?
Old 03-10-2007, 09:41 PM   #43
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Re: Are you to chicken to RE?

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

At about 3.75% here.
1 - Kids are 12 and 14, need to go to college, drive, have insurance. Expenses will go up.
2 - Health insurance. I'm 50, DW is 49. We're pretty healthy but just enough nagging/chronic problems that we may have trouble getting insurance. Even if we do and we can afford it, what do the premiums do over the next 15 years before medicare, given the current rate of increases?
3 - Extraordinary expenses - Cars, etc. Would like a bigger cushion
4 - US position in the world, demographics. I think 4% may be too optimistic as returns may be lower in the future
5 - Market has done very well for a number of years. Don't want to retire into a down market.

Yes, I'm a worrier! My target is a 2.5% SWR and if I do really well on the investments it will take two more years.
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Re: Are you to chicken to RE?
Old 03-10-2007, 10:47 PM   #44
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Re: Are you to chicken to RE?

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Originally Posted by Surfdaddy
. . . My target is a 2.5% SWR and if I do really well on the investments it will take two more years.
A 2.5% initial withdrawal rate would support 27 years in retirement with a 3.5% inflation adjustment every year if you did nothing but burried the money in your back yard.

Assume a 4% annual return on your investment along with the 3.5% inlfation adjustment and you're good for 46 years.

Four percent is a very conservative number. It is based on the worst case ever faced by US investors in the past 130 years. It is not based on averages. It is also based on pretty modest diversification (S&P 500 fund + 1 bond fund). Today with additional asset classes it is easy to have greater safety.

If you want to be more conservative than 4%, it is useful to understand that longevity risk reduction is not a linear function of initial withdrawal rate. Beyond about 25 year retirement planning, historical SWR assymptotically approaches a number of the order of 3% to 3.5% (depending on the bond fund choice).

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Re: Are you to chicken to RE?
Old 03-11-2007, 12:51 AM   #45
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Re: Are you to chicken to RE?

If the question really is "Are you to chicken to RE?" since I am FI then the answer is YES. The next question is "why" and "how do I face my fears"?

Please help, I think I want out.
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Re: Are you to chicken to RE?
Old 03-11-2007, 12:49 PM   #46
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Re: Are you to chicken to RE?

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Originally Posted by kumquat
If the question really is "Are you to chicken to RE?" since I am FI then the answer is YES. The next question is "why" and "how do I face my fears"?

Please help, I think I want out.
Most fears, I believe, are irrational:
- what if something happens that may wipe out my nest eggs.
- what am I going to do all day?
- what if I have to return to work, but my skills are obsolete?
- what if I run out of money (because of under-estimating the amount required to retire?
... etc.
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Re: Are you to chicken to RE?
Old 03-11-2007, 01:16 PM   #47
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Re: Are you to chicken to RE?

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Originally Posted by UncleHoney
Using egg #1 and egg #3 in combination with egg #2 or egg #4 will take us over our yearly budget by about 40%. Add all four eggs together and we could almost double our yearly burn rate for a while.

If we keep expenses below about $55K a year the nest egg should last a long time.
Why are you not adding fun activities to your budget (travel, entertainment, toys, whatever floats your boat) so that your expenditures consume what you can easily afford? I'm relatively conservative in my spending habits vs. income as well, so I'm certainly not knocking what you're doing. But if you believe you could safely, conservatively spend much more than you're planning to spend, why?
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Re: Are you to chicken to RE?
Old 03-11-2007, 01:32 PM   #48
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Re: Are you to chicken to RE?

3.6% based on what I currently spend.

4.7% based on what I plan to spend.

For my ~60 year retirement, I don't consider 4% "safe". I'll be working to get my initial WR down to about 3% with the ability to cut spending in half, if needs be.
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Re: Are you to chicken to RE?
Old 03-11-2007, 01:53 PM   #49
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Re: Are you to chicken to RE?

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Originally Posted by 3 Yrs to Go
3.6% based on what I currently spend.

4.7% based on what I plan to spend.

For my ~60 year retirement, I don't consider 4% "safe". I'll be working to get my initial WR down to about 3% with the ability to cut spending in half, if needs be.
3% is a conservative but easily justifiable number for 60 years in retirement. With the right allocations and some assumed control over part of your annual spending, you could probably justify 3.5%, but making it 3% gives you some insurance against catastrophic events.

I don't think initial withdrawal rate will change much for a 50 year vs 60 year retirement plan. At 3% over these multi-decade time periods with some reasonable expectation on control of expenses, people could probably fund a lifestyle forever.
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Re: Are you to chicken to RE?
Old 03-11-2007, 02:00 PM   #50
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Re: Are you to chicken to RE?

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Originally Posted by donheff
No, it is simply wanting to not have to make a large adjustment later. We worked hard for 30 years and live a nice life. The last thing we want to do now is cut back below our LBYM earlier life due to some extended bear market or something........ But the idea that we could have to cut back significantly in our mid-70s or, god forbid, go back to work is scary. So we have a low SWR. We would also be happy to leave a pile to the kids and grand kids.
Our thoughts are very similar to yours......

Also, I think the size of your retirement income in absolute terms plays an important role in determining the WR you choose. For example, for folks with no pension or other income besides current or future SS, it would be hard to imagine being satisfied spending less than 4% of a $1,000,000 portfolio. But for some lucky dog who managed to assemble, inherit or otherwise obtain a $5,000,000 portfolio, it's easy to imagine being satisified with a WR as low as maybe 2.5%. Especially if that supports a lifestyle at least equal to what you've lived all your lives and is similar to friends and relatives that you participate in activities with.
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Re: Are you to chicken to RE?
Old 03-11-2007, 02:00 PM   #51
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Re: Are you to chicken to RE?

In the range of 3.75 - 4.0

I'm 6 months into a 2 yr. contracting commitment. Will use the next 18 months to furnish and landscape retirement home - then hope to move and rent out primary residence. Then I will look for PT work <20 hrs week. DH will continue to work until 58 (to get full benefits from USPS) although I'm trying to get him to consider 55. We are both 49.
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Re: Are you to chicken to RE?
Old 03-11-2007, 02:03 PM   #52
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Re: Are you to chicken to RE?

Quote:
Originally Posted by youbet
Why are you not adding fun activities to your budget (travel, entertainment, toys, whatever floats your boat) so that your expenditures consume what you can easily afford? I'm relatively conservative in my spending habits vs. income as well, so I'm certainly not knocking what you're doing. But if you believe you could safely, conservatively spend much more than you're planning to spend, why?
Not to worry, I'm sure we'lll find more than a few things to spend the bucks on. I have a whole pile of hobbies and fun things on the list once the big day gets here.

To tell the real truth, until about three years ago I hadn't paid much attention to the stash and how much it was really worth. After running Firecalc a number of times and looking at what others are planning on for income all I do is get a



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Re: Are you to chicken to RE?
Old 03-11-2007, 02:24 PM   #53
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Re: Are you to chicken to RE?

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Originally Posted by sgeeeee
With the right allocations and some assumed control over part of your annual spending, you could probably justify 3.5%, but making it 3% gives you some insurance against catastrophic events.
There are a lot of ways to skin this cat, but "safe" isn't always pleasant.

For a 1966 retiree, a 3.5% initial WR would grow to almost 9% by 1981 and would still be 6.5% in 2000, before the bubble burst. The stock market crash of 2000 would probably be the last straw for him just 34 years into his planned 60-year retirement. If that same person followed Guyton's capital preservation rule, or some such variation of spending control, he'd have to reduce spending by 30-40% to keep withdrawal rates below 6% in any given year.

After playing with various asset allocations and withdrawal schemes I've settled on 3% as the best compromise between maximizing my standard of living and minimizing the risk of significant future spending reductions. Your mileage may vary.

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Re: Are you to chicken to RE?
Old 03-11-2007, 02:31 PM   #54
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Re: Are you to chicken to RE?

I am retired, but I think there are lots of good reasons why someone may not want to retire no matter how much money he or she might have.

Maybe they like work. Maybe they like power, or do not look forward to being around the old man/ old lady all day.

Maybe they like getting rich. Maybe they feel they are performing an important service to others.

I think it is weird to imply that someone is "chicken" if he/she perhaps could retire but chooses not to. There are a lot of things that I could do, but choose not to, like bungee jumping for example. Is that because I am chicken?

I say retire if you want to, don't if you don't. I can't see that it should be a test of your courage.

Ha
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Re: Are you to chicken to RE?
Old 03-11-2007, 05:18 PM   #55
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Re: Are you to chicken to RE?

Quote:
Originally Posted by HaHa
I am retired, but I think there are lots of good reasons why someone may not want to retire no matter how much money he or she might have.

Maybe they like work. Maybe they like power, or do not look forward to being around the old man/ old lady all day.

Maybe they like getting rich. Maybe they feel they are performing an important service to others.

I think it is weird to imply that someone is "chicken" if he/she perhaps could retire but chooses not to. There are a lot of things that I could do, but choose not to, like bungee jumping for example. Is that because I am chicken?

I say retire if you want to, don't if you don't. I can't see that it should be a test of your courage.

Ha
Although I agree with Ha's post, I also admit that I am chicken when it comes to bungee jumping.
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Re: Are you to chicken to RE?
Old 03-11-2007, 06:18 PM   #56
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Re: Are you to chicken to RE?

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Originally Posted by Delawaredave
For me, I think there's 3 "employment periods" in life:

1. Working because there is no other choice
2. Able to say "take this job and shove it"
3. Not working

I'm trying to get to stage #2 above and see what that feels like - and will decide from there.
Last weekend I reached stage 2 (son graduated so expenses now less than 4%)

DW RE'ed August 2004 age 49, and now, at 52 myself, the only reasons I don't RE now are:

1. at 55 I get a DB pension, PLUS health insurance (If I quit now, I would have to wait until 62 to get pension) It id the Health Insurance that makes me chicken

2. I like the folks who I work with (and I like my current boss very much)

I have none of the RE fears about having nothing to do etc. I'm just a cautious chicken I guess.
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Re: Are you to chicken to RE?
Old 03-11-2007, 08:51 PM   #57
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Re: Are you to chicken to RE?

I was playing around in excel, and obviously this is nowhere near as complicated or robust as others have come up with in their models, but this is what I found:

Retire day 1 and stock market falls by 10% per year while still maintaining original 3% SWR amount and growing that by 3% for inflation. By the 5th year, portfolio lost about 55% of value and SWR equals over 7% of current portfolio. For next 5 years, stock market bounces back at 20% per year, as often good years are followed by bad and portfolio is back to 87% of original value (though granted it is worth less than 10 years before plus affects of inflation) and SWR is back to about 4.5%. After that market returns are 10%. By 30th year, portfolio tripled from its original value and SWR equals 2.3%.

This shows that even after retiring into one of the worst markets downturns 3% is safe. Change the above and assume after 5 years the market goes up by 10% per year and not 20%. What a difference!
After 10 years portfolio at 50% of original value and SWR at 7.6%. At 30 years SWR is over 11% and portfolio is exhausted after 45 years.

But the second scenario is pessimistic. It assumes the market returns 4% per year on average over 18 years. All this shows that mathematically you can come up with a busted plan even using a conservative withdrawal rate. But we would have to experience terrible returns, and the portfolio still lasted 45 years with the SWR remaining constant in real terms (with 3% inflation adjustment each year).

A final point, as the SWR rate gets low enough, it could be possible to live off dividends, and never touch the original portfolio, though dividends could be cut over time as stock prices fall.
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Re: Are you to chicken to RE?
Old 03-12-2007, 08:18 AM   #58
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Re: Are you to chicken to RE?

I am ~ 3.75%, maybe less and could drop that significantly by getting out of the MacMansion. I was laid off last October and have been collecting unemployment. I have one child in college and another that will be going in another 2.5 yrs, however, their expenses are pretty well covered; also paid off my mortgage last September.

Being 57, I have found very few companies that will even give me an interview, so unless I land something soon, I may bite the bullet and call it quits or perhaps investigate some alternative career options. Since most of my stash is in IRA, I would prefer to hold off retiring until 59.5 (don't want to 72t), and between now and then use my after tax $ to purchase some retirement real estate. Another two years of work would also provide a nice cushion and make RE even more of a no brainer.

Further, while I have been out of work these past several months, I am not sure that my psyche is retirement ready, although this might be due to spending time on the job search and not on developing a retirement lifestyle.
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Re: Are you to chicken to RE?
Old 03-12-2007, 11:18 AM   #59
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Re: Are you to chicken to RE?

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I was laid off last October and have been collecting unemployment.
Isn't that a sweet deal? I just loved it! I was layed off last June at 58 and just finished collecting my six month dole in January. It took no more than 30 mins to apply online to get it started and maybe five minutes every two weeks to "certify" via telephone. Never had to go to the office. It added up to over $9K in total! The only negative was paying tax on it at a high marginal rate since I worked half the year and also received a significant severance check.
Quote:
Being 57, I have found very few companies that will even give me an interview
Ditto. Admittedly, I never made much of an effort to look for a job, but I have kept in touch with friends who were laid off when I was and all feel the heavy hand of age discrimination. Often, by their description of the incidents, very blatant. IMHO, age discrimination is the single best reason to prepare to RE and not have to put up with it.
Quote:
Further, while I have been out of work these past several months, I am not sure that my psyche is retirement ready, although this might be due to spending time on the job search and not on developing a retirement lifestyle.
You say you're at roughly 3.75%. You know, if you have included everything in your budget driving that 3.75% with some discretionary cushion, you have a lot of flexibility. Especially if you have the health insurance issue taken care of.

Good luck.

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Re: Are you to chicken to RE?
Old 03-12-2007, 12:11 PM   #60
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Re: Are you to chicken to RE?

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You say you're at roughly 3.75%. You know, if you have included everything in your budget driving that 3.75% with some discretionary cushion, you have a lot of flexibility. Especially if you have the health insurance issue taken care of.

Good luck.

Thanks youbet. Agree that I have a lot of flexibility, especially since I have a healthcare subsidy through former employer. However, I am expecting year over year out of pocket premium cost increases to continue at 15%/yr which is the cap that my former company has implemented starting next year.
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