For early retirees, what are your safety nets?

[Alan]

8th year of retirement and inflation has been good to us as the main income in our retirement has been from my non-COLA pensions. My backups for the long run include;

1. SS and UK SS for myself and my wife as we have simultaneously paid into both systems

2. Fully paid off house in a low cost area

3. All IRA money rolled into Roth to minimize taxes

4. Moved to a place with minimal healthcare costs.

 

[flintnational]

Our safety nets.

- 3% WR W/O SS or pensions
- Budget could be cut significantly if needed
- Paid for house not included in NW
- Moderate non-cola pensions in the future
- Two SS payments in the future
- Several years of cash/near cash
- Knowledge that, on average, as you age you tend to spend less
- Likely inheritance (normally don't count this)

FN

 

[rodi]

As many have mentioned - look at spending reductions in the case of a downturn.

Like pb4uski mentioned - SS is part of the plan (at least in our case)... especially since DH is already on it. (I have 7 years till I'll qualify for early SS... and probably w
on't take it till FRA or age 70.)

Our backup plan is our primary home. We live in an expensive real estate market, but out house is paid for... so that equity could be tapped if things turn icky. Options assume kids are grown and flown (so at least 5 years from now). Option 1: Move to the granny flat behind our house (currently providing rental income) and rent the main house for more rent. Option 2: stay in the main house - but rent out spare rooms to university students. We've had two neighbors work this plan for their retirement years... more than enough income to supplement the SS and live a comfortable lifestyle.
Both ended up with PhD candidates as renters who stayed many years. It helps that we're close to UCSD so there's a never ending supply of grad students. Option 3 (our LTC option): Sell the house, buy a much smaller condo. Use the cashed out equity to pay the bills for whichever spouse is in a nursing home. If both of us need assistance - skip the condo purchase and just move to the continuing care community.

Our current withdrawal rate is <3%... My SS is still ahead of us. No inheritances in our future. Kids will be launched someday dropping our expenses... I think our safety nets are covered.

 

[brett]

-DB pension with some vision/dental, and catastrophic medical coverage (drugs)
-social security type pension
-own our house
-universal medicare coverage-no premiums required
-drug coverage-pension and government

 

[Totoro]

Safety valves, in varying seriousness of options:

• Move to lower cost area
• Move to lower cost country (near family)
• Move to really low cost country part-time
• Reduce spending on food by cooking myself more
• Try a few high-paying consulting gigs (only available a few more years at most)
• Do a fun activity that also pays a bit (sort of what I'm doing now)
• Work part-time in a low paying job
• Start travel/work (e.g. help out in a hostel for free accommodation)
• Move to home country, work for a day, get unemployment benefits; rinse & repeat every 20 months
• Inheritance

And the lottery. Not in the planning: find a female with money and seduce her. That's just too much work Or do the blog thing? Seems to work for some.

It's basically like imolderu mentions: your health and age is a safety net.

 

[joeea]

(3) Back to work. I am an academics. There is no way to go back to work with a comparable salary once I quit. I cannot think of being a Walmart greeter in my late 70s, even if Walmart has not be replaced by Amazon by then.

Certainly if you are "an academics" you can find suitable work other than being a Walmart greeter. Perhaps not at a comparable salary, but why must it be comparable?

I know that I'm a smart, capable, sufficiently physically fit individual. I know that I could find a part-time job if/when it ever comes to that. I could likely consult within my field if I wanted to. Even if I couldn't, I would not consider any job to be beneath me if I needed the money.

I know that I could cut back on some expenses in retirement if necessary. We all have discretionary expenses.

I'm not worried about needing any of this. My wife and I have spent a long time saving and planning so that we won't have to worry.

If it worries you this much, it might be a sign that you need to keep working a while until the worry goes away.

 

[DrRoy]

I don't rely on 4% rule.

+1

My first safety net is realizing that 4% is not a rule at all, but a finding in a study that historically has worked over a 30 year period. It may or may not work in the future, over longer periods. So I had no plans to ER at 4%.

I'm around 3%

I think 3.5% or 3% WR target is better than 4%.

+1

Reduce expenses, sell some real estate, inheritance, cash balances.

I believe that historical returns will not be maintained going forward. The economic growth elements are spent. Use 3% or less.

 

[Meadbh]

I was an academic too, but to consult in ER, I would have had to spend a lot of money maintaining licences, insurance and continuing education. It would not have been worth it unless I worked at least half time, which I didn't want to do.

My backup plans include:
Eliminating travel expenses if SHTF
Universal health care
Long term care insurance
Critical illness insurance
Rental properties (future income streams and/or sales)
Cash buffer

I already live in a moderate cost area, in a modest home.
No family around to depend on.
Already got the inheritance, which enabled RE.

 

[Mdlerth]

Early Retirement Package

My back up plan to to get a job as a porn star. May have to dye my hair and suck in my gut.

If I thought I could succeed in that career, I'd never retire.

 

[Cap_Scarlet]

I have a very simple approach.

Base expenses are c. 40k
Holiday and fun money is c. 30k
My budget is based on 90k

So, in theory, we have a 50% spending buffer.

Oh, and I don't include c. 500k in our plan

we should be ok

 

[FIREd]

No kid, no pensions.

1) We use a WR below what FIRECalc allows.
2) Our FIRE plan is based only on our stock/bond portfolio. It does not include social security, real estate, bank account balances, inheritances, etc... so all of those are backups
3) There is plenty of fat in our budget which could be trimmed back
4) Our house is too big for our needs and we could downsize
5) We have the option to move to Europe to reduce healthcare costs (our largest expense by far)

 

[Aerides]

Ouch, please tell your kids you were just joking and that they should never think of that again. Don't want them to have that burden in mind for the next 40 years...

Back up plans are take slack out of expenses, and I have a side gig small business i started on the side while still working. Covers about 25% of our expenses currently on a very casual basis.

 

[flyingaway]

Ouch, please tell your kids you were just joking and that they should never think of that again. Don't want them to have that burden in mind for the next 40 years...

Back up plans are take slack out of expenses, and I have a side gig small business i started on the side while still working. Covers about 25% of our expenses currently on a very casual basis.

I was not serious to talk to my kids when they were in high school and middle school.
However, my parents retired at 50 and 60 respectively and rely on their pension for their frugal living. They never asked me for any money, but I give them a small amount of money every year and pay their (large) medical bills.

 

[ejman]

1. Cruise Ship Giglio.
2. SS at 70 covers enough plus some.
3. Daughters townhouse has a basement.
4. Switch back to cheap beer.

In that order.

Not knowing what #1 "Cruise Ship Giglio" meant I Googled it. The answer from Google is all related to the Costa Concordia Ship disaster. I must admit to extreme befuddlement. #'s 2-4 I can relate to.

 

[NW-Bound]

Safety nets? We don't need no stinkin' nets! Got my modest 25' motorhome to move into, for full-time living under the blue sky of New Mexico, where an annual camping permit is only a bit more than $200.

Just kidding.

I do not know how old the OP is, but we will be eligible for early SS soon (which we do not plan to claim right away), plus a few more years to Medicare. So, the SS will keep us housed, clothed, and fed. Have the 2nd home to sell, and that reduces the expenses as well as bring in some cash.

My back up plan to to get a job as a porn star. May have to dye my hair and suck in my gut.

Sounds to me as if you might starve if that's your only backup plan.

But if Travelover starves first, he will not have to suck in his gut. He will be lean and mean, and that enhances the appeal.

 

[scrabbler1]

Not sure what you mean by safety nets. My ER plan consists of two parts: the first part are the years between when I ERed 9 years ago at age 45 and age ~60 which is about 5 years from now. I am using only the monthly and quarterly dividends from the after-tax accounts for now, but if I have to tap into principal that is okay.


Once I turn ~60, my reinforcements (an equivalent to your "safety nets?") begin to arrive. They are (a) unfettered access to my rollover IRA, (b) my frozen company pension, and (c) Social Security.


Just get me to age ~60 intact and then my financial picture only gets better.

 

[Marita40]

I'm an academic at a medium sized private university. We do not have pensions; there are lots of academics without pensions so I'm not sure where the idea came from that "all academics have pensions." My nest egg is a 403b that I will have contributed to 33 years when I retire. Safety valves will no doubt be, in this order: sell house and move to a smaller place in a lower cost of living area; reduce or eliminate travel; eat out less. Those are my three largest expenses, and it wouldn't kill me to have to adjust them.

 

[jjquantz]

I'm an academic at a medium sized private university. We do not have pensions; there are lots of academics without pensions so I'm not sure where the idea came from that "all academics have pensions." My nest egg is a 403b that I will have contributed to 33 years when I retire. Safety valves will no doubt be, in this order: sell house and move to a smaller place in a lower cost of living area; reduce or eliminate travel; eat out less. Those are my three largest expenses, and it wouldn't kill me to have to adjust them.

+1 on the first 2 of Marita's 3. I constantly tease DW that we could live very comfortably if we would move back to the place that she calls "the black hole of our life."

 

[Shanky]

Most of these back-up plans will not help in the really bad situations. Economic Collapse, Government Collapse, Zombie Apocalypse etc.

 

[Markola]

I look around my life and see exactly NO ONE who has saved the millions it supposedly takes to retire. Somehow, however, everyone eventually retires and muddles through, like my parents are, by avoiding debt, downsizing and making other changes to exist on SS + working some. I figure I should chill out. I figure, if pulling 4% from my planned $2M causes it to go to $1M, I'll be alarmed but will also still be far, far ahead of everyone I know in real life and still $1M away from sleeping in my car. If that should happen, I'll switch to a 3% SWR on $1M + SS and whatever other changes from the multitude of safety nets that posters have listed above, and still be far, far ahead. However, with all of the conservatism built into a 4% SWR and 90%+ Firecalc confidence, it is probable that I'm going to end up with a bigger pile at the end of 30 years than I started with, if even fortunate to live that long.

 

[ElizabethT]

Many, many 'safety' nets, which we think more of as Plan A, B & C, should things go to heck in a handbasket at some point.

As many others have already indicated, cutting back on our spend would be first. Our discretionary spend is around 50% of our total budget, so a lot of fat could be trimmed if necessary. In descending order we'd list this as follows:

A) Cut annual spend as needed
B) Start pulling SS (we are currently delaying)
C) Sell our $$$ home and downsize to a condo

If we ever reached a point of needing to evoke a Plan D, I'm thinking it wouldn't even matter. At that point the entire world would likely be in chaos, and our money worthless.

 

[RunningBum]

Most of these back-up plans will not help in the really bad situations. Economic Collapse, Government Collapse, Zombie Apocalypse etc.

Of course not, but they'll help a lot in the much more likely "pretty bad" situations, like a health issue, other unexpected financial issue, prolonged recession, etc. Just because you can't cover every single imaginable or unimaginable situation doesn't mean you shouldn't have a backup plan for the more likely ones.

 

[bradaz2488]

When I ER'ed 4 years ago I locked in a trend line to help guide me through our 48 year ER plan. Basically it shows us spending 50% of our starting portfolio (today's $). I want to spend every cent, but I was comfortable spending 50% by the time we hit age 95. I will use the trend line to help make changing to spending to keep us on track to plan. We will receive no pensions and our current ER plan assumes no SS benefits. Possible safety nets for keeping us on plan are:
1) Any SS benefits will be cream. Even a 25% haircut would be a nice safety net for any scenario.
2) Have 4 years of expenses in cash to ride out a bear market.
3) Reduce expenses. Currently spending ~10% less than plan. If we remove vacations and eating out that another 20% reduction.
4) Downsize house. We live in a 2600sqft house. I think we could live in something half that size and in turn save on other costs.
5) Not sure it is a safety net, but there probably no chance I'm living to 95. My Dad and his Dad died at age 70.. I know it will not cut DW expenses in half but should reduce medical costs in half. Maybe her backup plan will be to find a rich widow ....

Going back to work is not even a backup plan for us. I will exhaust all resources before I give up our freedom. We can live very simple if that's what it takes. Medical costs scares me more than any other possible scenario. It is out of our control. I can only sit on the sideline and hope they come up with a fair and cost effective solution... Not holding my breath of that happening anytime soon.

 

[flyingaway]

Onl

When I ER'ed 4 years ago I locked in a trend line to help guide me through our 48 year ER plan. Basically it shows us spending 50% of our starting portfolio (today's $). I want to spend every cent, but I was comfortable spending 50% by the time we hit age 95. I will use the trend line to help make changing to spending to keep us on track to plan. We will receive no pensions and our current ER plan assumes no SS benefits. Possible safety nets for keeping us on plan are:
1) Any SS benefits will be cream. Even a 25% haircut would be a nice safety net for any scenario.
2) Have 4 years of expenses in cash to ride out a bear market.
3) Reduce expenses. Currently spending ~10% less than plan. If we remove vacations and eating out that another 20% reduction.
4) Downsize house. We live in a 2600sqft house. I think we could live in something half that size and in turn save on other costs.
5) Not sure it is a safety net, but there probably no chance I'm living to 95. My Dad and his Dad died at age 70.. I know it will not cut DW expenses in half but should reduce medical costs in half. Maybe her backup plan will be to find a rich widow ....

Going back to work is not even a backup plan for us. I will exhaust all resources before I give up our freedom. We can live very simple if that's what it takes. Medical costs scares me more than any other possible scenario. It is out of our control. I can only sit on the sideline and hope they come up with a fair and cost effective solution... Not holding my breath of that happening anytime soon.

Only spend 50% of the starting portfolio at 95? You have a huge safety net.

 

[street]

I never really thought of a safety net. lol I would say I had some and one would be SS because it wasn't in my plan. My plan was to have enough money in liquid assets to live on for the rest of my life and never to touch my investments stock/bond portfolio ever. That was my plan so I guess that would be my safety net.