FIRE on 4%

[daylatedollarshort]

Thanks Day Late. I had never heard of this. A senior membership, which gets 2 tickets seems to cost $6.50/mo., after the $25 three month intro.

Later I will see if I can view a sample of available events.

Ha

I hadn't heard of them either until last fall. I stumbled on one of the lists last year online, then we met some retired people at a play who told us about another list, and since then I have found a few more. Many of the improv groups / theaters / symphonies / dance companies here have some way to deal with unsold tickets, like Goldstar, lotteries, the tixtoday app, a hotline or a subscription service. I've got a list I check each day.

 

[FreeBear]

For me, the difficult decision was how much over 4% I would be willing to go in the early years to safely cross the chasm of no income and sequence of return risk to a more sustainable spending rate after I collect social security. FIRECALC was helpful as it permits modeling this exact scenario.

+1

Yep, in the same boat. Sure, I'd be more comfortable with a lower initial withdrawal, esp. due to sequence of return risk. On the other hand, DW and I were not getting younger and we've got other things we want to do other than w*rk all the time. A calculated risk for sure...

Agreed that tools like Firecalc and others are greatly helpful in running somewhat complex scenarios that are generally representative of the real world (non-zero expense ratios, SS at various times, various AA's, etc). I wish I had these tools earlier during the accumulation phase. Heck, I wish I knew more about this LBYM and early retirement subculture years ago. I would have even been more motivated and maybe saved even more. In the end, no worries since I got to FIRE anyway!

FB

 

[FreeBear]

Same conclusion - SPIAs are expensive and cola'd SPIAs even more so, very few SPIAs protect against inflation. In this era of super low rates, one is probably better to go it alone with a relatively high AA tilted toward equities. Especially to fund 30 or 40 years in retirement.

I'm also a believer in equities since I didn't save an overwhelming amount for ER. The money still has to go out and w*rk for me. I ran 90% to 100% equities during the accumulation phase. Just stopped looking at the balances during the Great Recession...

I've trimmed to about 50% equities over past 3 yrs, including my first year of retirement, as a defensive move against potential bad sequence returns early in ER that can be so toxic long-term. I plan to move to 60% equities in about 5 yrs or so, whenever we decide to start SS. "Rising glide path", I think.

FB

 

[DrRoy]

I think that the 4% rule was workable in the period of our lifetimes, but the future may be different. Global population and productivity growth have decelerated in recent years, and these are important factors for economic growth and corporate profits, and thus for higher equity prices. I will RE next year at age 58, and am not comfortable with a 4% WR. I will have a modest pension and my additional WR will be under 2%. Without the pension I would still only need 2.4%.

 

[FreeBear]

Your numbers on the graph are looking great! Unfortunately, my portfolio has taken a dive since my retirement (last April) - that is even if I hadn't taken any money out. I have several years of cash reserves and that's what I am using for expenses anyway so no worries, but I think I will feel a whole lot better once the market picks up again. Anyway, yeah, it looks like you are doing great! I wouldn't mind spending some extra if I were in your shoes.

I feel your pain. I too am glad to have a few years in cash plus even more bonds to tide me over (and rebalance!) if needed. A major saving grace is that I sold high equities through 2014 and 2015 to transition to my current 50/50 AA.

Now I'm a bit a of Nervous Nellie. So I avoid looking at egg nest and just revisit plan to reduce unnecessary expense. A bit of a character building experience... Still, I'm finding that I don't have to buy as much crap and services to bribe me to go to w*rk now that I'm retired. So far, so good!

 

[jcretire77]

I am probably repeating, so apologies - Looking at NPV of Social Security I found this interesting article - https://www.kitces.com/blog/valuing...s-as-an-asset-on-the-household-balance-sheet/

 

[papadad111]

This has been a very good discussion. It's a topic often discussed but always some good new angles or perspectives.

Coolio !!

 

[NW-Bound]

Not sure one has to give up anything ... Just have a big enough egg that 3% or something along those lines is enough to play the long game. ...

For most workers, a 3% WR coupled with a really early retirement means a reduction in living standards, unless they have a very good income during their short working years. Most would have to be very frugal both during the accumulation phase as well as during retirement.

 

[audreyh1]

Given I can't rebalance between SS/pension and my portfolio and there are age restrictions to when you can access those funds, instead of using NPV of SS/pension, I just reduce expenditures by the expected SS/pension benefit (adjusted by some safety factor). My planned WR is then based on that reduced amount.

Ah, sanity!

 

[audreyh1]

For most workers, a 3% WR coupled with a really early retirement means a reduction in living standards, unless they have a very good income during their short working years. Most would have to be very frugal both during the accumulation phase as well as during retirement.

Or had some stock options turn into gold.....

 

[Nords]

This has been a very good discussion. It's a topic often discussed but always some good new angles or perspectives.

After over a decade of rediscovering and rehashing those angles & perspectives... not so much.

I'll summarize the last ~130 posts :
1. 4% is "good enough".
2. If you want to be even safer, then work longer. It's called "Just One More Year" Syndrome.

But if another 130+ comments would boost your confidence, or at least make you feel satisfied about working longer, then carry on!

 

[Danmar]

After over a decade of rediscovering and rehashing those angles & perspectives... not so much.

I'll summarize the last ~130 posts :
1. 4% is "good enough".
2. If you want to be even safer, then work longer. It's called "Just One More Year" Syndrome.

But if another 130+ comments would boost your confidence, or at least make you feel satisfied about working longer, then carry on!

Agree. There are only so many ways to say the same thing. But I guess new members or those in changed conditions, might pick something up.

 

[misshathaway]

Still, I'm finding that I don't have to buy as much crap and services to bribe me to go to w*rk now that I'm retired.

Isn't that the truth. I had a Starbucks right across the street and that was the highlight of every working day. I used to put $100 at a time on my card.

Just traded in my gigantic iPhone 6 Plus, which I used to consume media and try to escape during my horrendous stop-and-go, mostly-stop, commute all the way home. Even with the Sprint cancellation fee I am saving a boatload. My phone is just a receiver of calls now, not a pacifier. I have Ting. I still haven't cracked $20 for this month.

 

[papadad111]

Agree. There are only so many ways to say the same thing. But I guess new members might pick something up.

Well. I've been on this forum since some time in 2007, so I guess if I'm a newbie with just a decade on here ... and I can pick up a few things ....so be it.

I fired in 2015... Perspectives change when in spend down versus accumulation phase .

 

[Danmar]

I fired in 2015... Perspectives change when in spend down versus accumulation phase .

Ok, if your conditions change and you are now thinking a lot more about how much you can spend in draw down mode, you will pick up a lot. I've been in draw down mode for almost ten years and have basically solved this issue for myself.

 

[sengsational]

I am probably repeating, so apologies - Looking at NPV of Social Security I found this interesting article - https://www.kitces.com/blog/valuing...s-as-an-asset-on-the-household-balance-sheet/

It sounds like Kitces is saying that Social Security is similar to a government TIPS bond that will start paying in the future. I don't include it in my asset allocation, but I think I will add the NPV of my SS to calculate an "including SS" asset allocation...it will make me feel better about the money I've been losing in equities, hehe!

Given I can't rebalance between SS/pension and my portfolio and there are age restrictions to when you can access those funds, instead of using NPV of SS/pension, I just reduce expenditures by the expected SS/pension benefit (adjusted by some safety factor). My planned WR is then based on that reduced amount.

I agree that you can't reduce the fraction of your assets that Social Security creates. If you buy Kitces idea that SS is like a TIPS bond, it would be part of your current asset allocation calculation and you could reduce your current bond holdings to a certain point, anyway.

The idea of reducing the spending in your model by the amount you receive as Social Security sounds like it will work. For me, having a model where expenses suddenly stepped-down seems kind of weird. But it's one way to model it, I suppose.

 

[Dcharles]

Thanks for everyone's input on this topic. It has helped me feel more secure in our plan to draw 5% in our case before SS and see where things go. I fired 2 years ago and I am glad I did! It is hard to put a price tag on your time and freedom from the daily commut, email management, phone calls, employee reviews, company programs, new software, more restrictions and less control. That is how I can justify a slightly higher withdrawal rate of 5 % Until SS kicks in 3 years from now. My grand kids still want me to become their bus driver!!! Guess that wouldn't be the end of the world if we needed the extra income. Ha! I a, still pinching myself when I reflect on the mega Corp office environment. Now a have a beer and rejoice in the freedom!


Sent from my iPad using Early Retirement Forum