Are you to chicken to RE?

[Dog]

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.

 

[UncleHoney]

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

 

[Gone4Good]

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.

 

[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

 

[sgeeeee]

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.

 

[Alan]

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.

 

[firewhen]

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.

 

[eytonxav]

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.

 

[youbet]

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.

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.

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.

 

[eytonxav]

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.

 

[youbet]

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.

If you have those anticipated 15%/yr health care costs included in your RE budget and are at 3.75%, things are looking good! Especially since, as you said, you can trade down from the McMansion and lower that WR rate to even less. Good for you!

It sounds like you'd be pleased to find a job for the next couple of years. Or something part time. But isn't it great to know you don't have to accept a situation that you don't want?

 

[eytonxav]

Yeppers!

 

[genghis]

This is a great poll to call out the chickens

Our current SWR is at about 3.72% (The "big crash" of February-March temporarily knocked me over 3.75, but now we're back under)

I am 44. I am planning on 6/15/07 RE date (vacation will ride the actual date out to 8/6/07 - but I haven't yet officially announced).

Reasons I am delaying FI
1) 3 kids, ages 6, 10, 12. I have most of their college covered in the Guaranteed Tuition program. But the two older ones are currently getting braces, so I want to make sure I milk that benefit for close to $4k before I quit (plus I got Invisalign braces for myself - so that's another $2k in benefits)

2) The last of my stock options vest on 7/20/07, not a huge amount, but I hate leaving that $ on the table

3) Wanted to work past the date my '07 raise kicks in (it helps with the value of the pension - but it turns out it is a large one - so, of course, it becomes yet another factor in making me wonder about the intelligence of my RE)

4) We have a few large expenses we want to take care of (mostly remodeling) before I bail...

5) Health insurance really scares me

6) Deep down, the thought of not having a job makes me uneasy....

I had thought about going until I turned 45 ( Jan 08) - but I just don't think I can take it anymore - in fact, right now, even June 15 seems too far away.......

 

[Spanky]

Although I agree with Ha's post, I also admit that I am chicken when it comes to bungee jumping.

You might want to start sky diving first.

 

[sgeeeee]

You might want to start sky diving first.

Okay, Spanky, I admit that I'm too chicken to sky dive too.