Avoid running out of money

[Midpack]

Quote:

Originally Posted by obgyn65 I was talking about absolute numbers occasionally when it's seemed appropriate, not relative ones. Being a non financial person, I find it reassuring sometimes to know other forum participants' absolute numbers because they help me in my decision to make the jump. No worries if you don't want to..

Many members have posted absolute numbers (I have), or all the pieces such that another member could put it together (ie, annual spending in one thread, WR in another, pensions in yet another), and AA/specific holdings as well (I have). And some members are uncomfortable doing so and only use %'s or base "something" or nothing at all. Since we're mostly anonymous here, it doesn't make much difference. And even if someone figures out who another member is, what harm would actually come from it? I don't care what someone else "has" - we can discuss just as easily with %'s or base something (I have my portfolio entered at an online site - except it's 1/15th my actual shares).

But I've never seen anyone pressure another member either way, and that's as it should be. There are periodic polls that tell us all where we stand among other members anyway which is enough information http://www.early-retirement.org/foru...ber-64965.html. As long as I'm within 1/10th to 10x of the average or thereabouts, I should be "able to relate" - that's good enough IMO.

Whatever each is comfortable with...

[mathjak107]

back in 2006 money magazine wanted to do a story about marilyn and i.

since i do all my own planning they wanted to pit us against their team of pro's.

at first my wife said no, she didn't want all our financial information out there.

i agreed but then we thought about it.

what was the problem?

were long lost relatives coming out of the woodwork? no

did we live a lifestyle that was a lie? no

were people going to stop being our friends because we had less or more then they thought? no

would i be kidnapped for ransom? not likely. they would pay to give me back

were charities going to call? maybe.

when all was said and done we realized we could not come up with one reason everything had to be secreat .

people tell strangers about their sexual escapades, disires and everything else but heaven forbid someone knows your financial situation.

needless to say not only did we do it with money magazine but we did one for fidelity investment magazine too.

[obgyn65]

Agree re: not pressuring anyone to share something they don't feel comfortable sharing.

The survey results you refer to are not valid though, for reasons already discussed in that thread.

Quote:

Originally Posted by Midpack But I've never seen anyone pressure another member either way, and that's as it should be. There are periodic polls that tell us all where we stand among other members anyway which is enough information http://www.early-retirement.org/foru...ber-64965.html. As long as I'm within 1/10th to 10x of the average or thereabouts, I should be "able to relate" - that's good enough IMO. Whatever each is comfortable with...

[Midpack]

Quote:

Originally Posted by obgyn65 Agree re: not pressuring anyone to share something they don't feel comfortable sharing. The survey results you refer to are not valid though, for reasons already discussed in that thread.

There have been several threads if you're interested, I just picked the most recent...

[ERD50]

Quote:

Originally Posted by obgyn65 I was talking about absolute numbers, not relative ones. Being a non financial person, I find it reassuring sometimes to know other forum participants' absolute numbers because they help me in my decision to make the jump. No worries if you don't want to..

We got some good replies from others that cover it pretty well. Yes, some have posted their absolute numbers. And I honestly don't recall those posts, as I said, it just isn't an important factor to me - it was probably in one ear (eye?) and out the other. But I think the majority refrain from that. No right/wrong to it. As mathjak says, probably no real good reason to be 'uncomfortable with it. But OTOH, I just don't see the value to it, and I just fall on the side to refrain. I'm not hardcore about it, but until I see a banefit to it, I will continue to refrain. Heck, if someone really was that interested, I'm sure they could reverse engineer it from the info I have provided, but why would anyone care? And I do think it can be a distraction, some will think that the concepts only apply to someone in that $ range?

But whether you have $500,000 and you want to draw an inflation adjusted $17,500 over 30+ years to fund your retirement lifestyle, or have $5,000,000 and want (or maybe even need - maybe you care for a special needs child/spouse?) $175,000 for the same reason, it's the same 3.5% WR and the portfolio will respond the same. FIRECALC results are not dependent on size, everything scales.

edit - I'm bolding this as my post got too long, don't want it to get lost: I think it is misguided to feel that other forum participants' absolute numbers are an important factor in your decision to make the jump. Their spending needs/wants pension/SS and other back-up plans can affect all of that. Percentages are far more telling. People on this forum have retired with far less absolute $$ than what I would even consider, but they will make it work for them, either by choice or necessity, and will probably find a way to be happy/satisfied. I suppose I could too, but it would not be my choice. So what would I learn from their numbers? I need to evaluate my numbers, it's my (and DW's) life. I also hope to not burden my children with my financial support.


RE - 'obsolete' 50 YO engineers:

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Originally Posted by clifp That is really interesting. I never faced that, I guess I was vaguely aware that engineers over 50 were considered dinosaurs because one of my first bosses was one. But in my many interviews I conducted, I think I only talked to one guy over 50 and that was just a formality since he was going to be hired anyway. I guess HR did a "better" job of screening than I realized. However, watching the devastating impact the great recession has had on my 50+ year old friends, many who've lost their jobs, I realized how lucky I've been. You were wise to have figured that out at a young age.

It made a big impact. I think I would have taken that path anyway, I had already purchased a townhouse, taught myself to cook, drove cheap cars, and did the LBYM and saved/invested (even though my salary was pretty modest in those early days), and married a like-minded woman. But some of those 50 YO faces are burned in my memory.

Quote:

And yes the correct answer is both Ginger and Mary Ann.

Only small minds would miss that Although the Mrs Howell $$$ connection might work for some. Hmmmm, maybe Mrs Howell would pay to watch?? Win-win-win!

-ERD50

[pb4uski]

Quote:

Originally Posted by ERD50 I knew I'd need a "BAM!" in there! And there is only one correct answer: ....BOTH! - ERD50

I was going to make the same response, but I didn't want anyone to think I was a sexual deviant.

..... Oops!

[photoguy]

I'm surprised by the response to the video. I think it was effective at getting the main point across although it did not go in depth into the issues/alternatives/etc.

A video /short 5 minute talk cannot have much in the way of details or cover all of the various issues that might come up. In fact you can really only get in one good point in that you'd like the audience to remember. And from the discussion here, clearly everybody remembers it.

Another thing to consider is who was the speaker's audience -- probably people who are unsophisticated about investing but have a lot of money like the couple. These people may not even have heard the term or know what is an "asset allocation".

I know someone who was just like the couple (except was much younger). Had 5-10 million in exercisable options but failed to cash out because the stock dropped a little and he decided to wait for it to go back up (it never did and he never sold). I think this story would have made an impact on him.

[ERD50]

As a related aside, writing up that response to obgyn triggered me to take another look at that staggered WR that I (and many others) will have. Basically, filling the gap between loss of income and taking pensions/SS. Obviously, my WR goes up for those years, and I took a fresh look at my own volatility/risk/comfort level.

A few of our members have discussed being in this gap just as the market tanked (REWahoo is one I recall). IIRC, a common answer was to start pension/SS earlier to reduce draw-down of an already sinking portfolio. I really want to try to avoid that, as I like the longevity insurance aspect of taking SS (and maybe pension) later. I'm basically thinking in terms of putting ~25% to 35% in something less volatile, to cover 5 years or more of a higher WR% period, w/o excessively tapping into a possibly depressed stock portfolio, or depleting my fixed investments and being near 100% EQ at the end of that period. Once I'm back to a lower WR, that's not such a concern.

I'll start a new thread and link to it here later when I have some thoughts organized on that.

Thanks,

-ERD50

[sheehs1]

Quote:

Originally Posted by okapi Ginger or Maryann? I"ll take Mrs. Howell{Lovie} any day.Thats were the bacon $$$ is.

O.K. O.K. sadly I'll take Mr. Howell.

Minus the jacket.



But the Professor is more to my liking...

[Katsmeow]

Quote:

Originally Posted by ERD50 edit - I'm bolding this as my post got too long, don't want it to get lost: I think it is misguided to feel that other forum participants' absolute numbers are an important factor in your decision to make the jump. Their spending needs/wants pension/SS and other back-up plans can affect all of that. Percentages are far more telling. People on this forum have retired with far less absolute $$ than what I would even consider, but they will make it work for them, either by choice or necessity, and will probably find a way to be happy/satisfied. I suppose I could too, but it would not be my choice. So what would I learn from their numbers? I need to evaluate my numbers, it's my (and DW's) life. I also hope to not burden my children with my financial support.

I sort of have mixed feelings on this. I do agree that basically how much money others have doesn't really tell you whether you have enough to retire.

That said, sometime there is value in knowing the totals that people are talking about.

Lots of times pre-retirement people ask if they have enough to retire. It is interesting that generally people do post for those threads how much they have and expect to have and it does help in advising them. The person who wants to be able to spend $50,000 a year in retirement who has a portfolio of $3,000,000 will likely get a very different answer than the person with a portfolio of $300,000, but then it might be different if that person with $300,000 is going to get a $40,000 pension and $20,000 a years SS.

I agree that it isn't terribly helpful to make over-generalizations: You must have at least $2,000,0000 to retire or whatever. But it is easier to give advice and suggestions if you have a fuller picture of someone's economic picture.

Another thing is that knowing how much someone has can help in knowing if that person's opinions or what they are doing is at all helpful to you or not. If I know someone has $10,000,000 and plans to live on portfolio income only then I know that person's opinions on this have no relevance to me. On the other hand the person who has $1,000,000 and plans to live on portfolio income only might have something to say that is more relevant to my situation.

[Lazarus]

Quote:

Originally Posted by Katsmeow Another thing is that knowing how much someone has can help in knowing if that person's opinions or what they are doing is at all helpful to you or not. If I know someone has $10,000,000 and plans to live on portfolio income only then I know that person's opinions on this have no relevance to me. On the other hand the person who has $1,000,000 and plans to live on portfolio income only might have something to say that is more relevant to my situation.

Agree about the relevance. A lot of peoples situations would be of no use for me to look at. But there is someone out there that it will be relevant to.

[ERD50]

Quote:

Originally Posted by Katsmeow Another thing is that knowing how much someone has can help in knowing if that person's opinions or what they are doing is at all helpful to you or not. If I know someone has $10,000,000 and plans to live on portfolio income only then I know that person's opinions on this have no relevance to me. On the other hand the person who has $1,000,000 and plans to live on portfolio income only might have something to say that is more relevant to my situation.

I guess I don't see that. If they are both planning on taking only portfolio income, their situations are very similar investment-wise. Their portfolio income will be dependent on how they invest - how do they manage that? Do they want their portfolio to keep up with inflation? Do they expect the portfolio income to keep up with inflation? None of those decisions/strategies are affected by size, are they? I think they/we can learn from each other.

Sure, they are spending different mounts, maybe you can't relate to that, but I see that as separate from the investment situation. So sure, if people are looking to reduce (or increase) spending, the absolute amounts matter. Suggestions for things to cut are going to be different for someone spending $300,000 (sell the antique car collection, fire half the household staff, sell the third house, take fewer overseas vacations) than for someone spending $30,000 (review your cable/cell bill, eat in more often, watch OTA TV instead of going to the movies,etc), but that's a whole different kettle of fish, IMO.

-ERD50

[Midpack]

Quote:

Originally Posted by ERD50 Sure, they are spending different mounts, maybe you can't relate to that, but I see that as separate from the investment situation. So sure, if people are looking to reduce (or increase) spending, the absolute amounts matter. Suggestions for things to cut are going to be different for someone spending $300,000 (sell the antique car collection, fire half the household staff, sell the third house, take fewer overseas vacations) than for someone spending $30,000 (review your cable/cell bill, eat in more often, watch OTA TV instead of going to the movies,etc), but that's a whole different kettle of fish, IMO.

True generally speaking, and fine in most cases.

However along the same lines as Katsmeow's POV, I'd guess most if not all of us have basic/essential spending AND elective spending. I suspect someone spending $30K/yr would have a substantially higher % in the basic category than someone spending $300K/yr - IOW they're probably not proportional and therefore not as scalable as part of a plan B. Basic spending is harder to change by definition, elective spending should be expenses that can be cut dramatically if not entirely. For example if HC costs double in 10 years, it may be more difficult for the $30K/yr household to adapt than the $300K/yr estate. Just one of many potential examples.

Or from the nest egg perspective, I would have a slightly different mindset responding to someone planning on $30K/yr than someone else planning on $300K/yr even I'd they were both planning on a 3.5% WR.

YMMV

[ERD50]

Quote:

Originally Posted by Midpack True generally speaking, and fine in most cases. However along the same lines as Katsmeow's POV, I'd guess most if not all of us have basic/essential spending AND elective spending. I suspect someone spending $30K/yr would have a substantially higher % in the basic category than someone spending $300K/yr - IOW they're probably not proportional and therefore not as scalable as part of a plan B. Basic spending is harder to change by definition, elective spending should be expenses that can be cut dramatically if not entirely. For example if HC costs double in 10 years, it may be more difficult for the $30K/yr household to adapt than the $300K/yr estate. Just one of many potential examples.

I pretty much agree - but again, I see that as an issue on the spending side rather than the portfolio side. You can intertwine/exchange them, but IMO, it is clearer to look at spending as spending, and portfolio performance as portfolio performance.

The low NW person may need to be more conservative about their spending (add a fudge factor into FIRECALC or equiv) - as you say, unplanned increases cuts into basics, rather than just discretionary spending.

But offsetting that (and this gets very case specific), the low NW person is probably also getting some fair % of their spending covered by SS and/or pension. That might be much less %-wise for a high NW person.

Hmmm, trying to encapsulate this....

OK, I think what we are saying is that your ratio of planned spending to your floor spending, and your floor income are all important factors. And I'd agree, in general a high NW person probably has more wiggle room there. But NW alone isn't going to tell us that, I think we really need to look at those various figures, and % will work as well.

Quote:

Or from the nest egg perspective, I would have a slightly different mindset responding to someone planning on $30K/yr than someone else planning on $300K/yr even I'd they were both planning on a 3.5% WR. YMMV

I think it's just different ways of looking at it - but in the time I've been thinking about this as I write it (and I've edited it a dozen times ), I think those 'floor levels' I've talked about is the best way to think about it. Then, a 3.5% from a portfolio is just 3.5% - I don't think scale is an issue, that was adjusted on the spend side. And that's nothing new (surprise!), posters have long talked about having a basic income they need, and a discretionary income that they will spend as long as the portfolio holds up.

I've tried to be conservative enough in my projections that my discretionary is my floor. Being LBYM, I don't spend anything that I consider to be frivolous, so I really don't care to cut back on much of anything. Of course, if push comes to shove, I would find a way (and I do have a few ideas, just haven't penciled them out in detail). I've said it before, but most of us FIRE people got here by being able to adapt - we will find a way.

Does that help?

-ERD50

[Midpack]

Quote:

Originally Posted by ERD50 Does that help?

We disagree on a secondary POV, no biggie...

[heirloom]

DAWG52...

Where did you get that photo of a deer eating a flower? I would love to put that on my facebook page.

[REattempt]

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Originally Posted by W2R I read a book by him years ago, that I really liked and would recommend to obgyn65 and others, called The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today by Larry E. Swedroe The Kindle version is $7.99, and I am sure the book is available at many libraries.

Here is a nice "summary" of the book for those that would like to know what's in it before they buy...

http://www.kefferfinancialplanning.c...e%20070810.pdf

[REWahoo]

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Originally Posted by heirloom Where did you get that photo of a deer eating a flower? I would love to put that on my facebook page.

I'm not Dawg, but I believe that deer is eating a bowl of popcorn...

If you are on a PC, you can right click on the image and 'save as'...

[Katsmeow]

Quote:

Originally Posted by ERD50 Sure, they are spending different mounts, maybe you can't relate to that, but I see that as separate from the investment situation. -ERD50

Midpack did articulate a number of my thoughts so won't reiterate all those.

Not everything is a purely investment decision. There are factors that deal with how live is lived and what the possibilities are. Let's say I think that never using any of the principal during retirement would be a good idea. Let's say (and I'm not using real numbers here - just making a point) I think I will have $25,000 SS income a year in 5 years, but right now I want to retire and I have $1 million. If Joe over here said he retired before SS and did just fine not spending principal and it is easy then I might want to know how much Joe had. If he Joe had $10,000,000 I have no idea how he spent that $10,000,000 but I know that I could live just fine for 5 years without spending principal if I had that money. So, Joe's suggestion is perhaps of limited utility to me.

On the other hand if Mary said he retired with say $800,000 and bridged the gap to SS for 5 years then I might think that situation while not exactly mine might be more likely to provide relevant information to me. It may not be entirely relevant - maybe Mary was living rent free with a relative, etc. - but it might be more likely to have relevance. Regardless, it would be helpful to know.

I'm not BTW advocating that everyone should put their net worth in their signature since I know that most people don't really disclose that information. That said, it is interesting that many do disclose net worth information and details without much difficulty when seeking advice such as "do I have enough to retire" but then once they actually do retire are unlikely to provide that information later in giving advice.

[HighRoller]

Quote:

Originally Posted by Katsmeow I sort of have mixed feelings on this. I do agree that basically how much money others have doesn't really tell you whether you have enough to retire. That said, sometime there is value in knowing the totals that people are talking about..

+1