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Getting to Enough
Old 02-17-2005, 01:29 PM   #1
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Getting to Enough

I have posted this elsewhere, but didn't want to deny you all my pearls of wisdom.
-----------------------------
What does it take to FIRE? *I'm going to concentrate on the analysis here and I'm only going to talk about my own experience, because everybody's situation is different. *I hope others add on about their experiences,

I started thinking seriously about FIRE about 1992. *I was just realizing that the work environment was not working for me. *For starters, though
* * *I had always maxed my retirement account
* * *We never cared about the Jones, so LBYM came pretty naturally. *When I became serious about FIRE, I started budgeting so I could see where the money was going. *That was an eye-opener that allowed me to save more to after-tax accounts.
* * *I had a small after-tax account where I would periodically stuff money
* * *My husband enjoys learning about stocks and has his own little method of determining if a stock is at a good buy point. *He isn't always right, of course, but he's bought some pretty nifty stocks early on (Microsoft would be one). *So I have my own built-in stock advisor.

As I started to get into FIRE-mode, I fired up the spreadsheets and started keeping track of my portfolio, retirement accounts, etc. *I also read Your Money or Your Life. *Just the exercise that forces you to compute your real wage (after taking out travel time, wear and tear, work clothes, etc) was worth the price of the book. *The main thing, though, was that these people had retired early. *Not sold on their financial advice, though.

In 1995, I received a small inheritance. *While not large, it did jumpstart my thinking about when to retire. *I switched to consulting, and doubled my salary in 1997. *I immediately opened 2 Keoghs with Fidelity so I could once again max my retirement funds. *I rolled my 403b from TIAA/CREF into a Vanguard Rollover IRA. *I also started seriously adding to my after-tax fund. *In 1998, I discovered The Retire Early Homepage (http://www.retireearlyhomepage.com/ ) which had a lot less stuff than it does now. *It did, however, have famous study about the 4% SWR. *I poured over that, downloaded the spreadsheet and played.

Let me put a word in for playing with spreadsheets. *They allow you to do "what-ifs" scenarios where you can put in data that is relevant to you. *Of course, the results are only as good as what you put in. *No sense putting in 10 years longevity just to get a 8.5% spendout rate. *I have always felt that the REHP study was fine within the limits of the study. *People who try to use it inappropriately are going to get burned. *I also have only used it or any other study as one piece of data among many used to come up with the decision that it was relatively safe to quit working. *I'll also say that I was never a big fan of number crunching in the sense of moving data around to give you better results. *The amount of error attached to any such SWR would swamp the benefits of slicing and dicing the data. *I don't think fine-tuning works in this case. *So I use the SWR as a mildly interesting rule of thumb.

I was getting pretty tired of work. *I knew that according to the Schiller data, a SWR of about 3.5% would get me through 40 years. *And that's just a worst case scenario, according to the data. *If I could entertain a little more risk (95% level), the SWR could be about 4%. *I thought I'd get a second opinion, so I ask my husband. *He just looked a kind of average inflation rate and an average rate of return and came up with 5%. *So I was home-free, because I could do the 4% amount (realizing that I don't have the same asset mix, and so on as the REHP study). *Remember, to me it is one piece of information - a rule of thumb. *I also relied heavily on knowing what my budget would be, the steadyness of my various assets, the fact that I heavily padded the budget just in case, and so on.

So I quit!

For the record, since 1999, I've taken out 20% of my assets as stated in 1999, but my actual loss of assets is only 6%. *This swag was done in constant dollars. *My spendout ranged between 2.9-4% (the high end were expected one time large expenses). *And my portfolio is something like 51% equities, 41% mutual funds (retirement accounts), 1% REITS (recently sold some) and 7% money market funds. *I've been naughty and never set up a CD ladder or the like. *Oh, well.

arrete
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Re: Getting to Enough
Old 02-17-2005, 01:36 PM   #2
 
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Re: Getting to Enough

Good Post!

What a lot of folks seem to forget here, is that the 4% number is the worst case number (based on past history).

If you are a little flexible in your withdrawals - Less after a down year for instance, you can solidify your plans a lot more. This outlook leads to less worry and you can just go Fishing. 8)

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Re: Getting to Enough
Old 02-17-2005, 03:37 PM   #3
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Re: Getting to Enough

Quote:
For the record, since 1999, I've taken out 20% of my assets as stated in 1999, but my actual loss of assets is only 6%. *This swag was done in constant dollars. *My spendout ranged between 2.9-4% (the high end were expected one time large expenses). *And my portfolio is something like 51% equities, 41% mutual funds (retirement accounts), 1% REITS (recently sold some) and 7% money market funds. *I've been naughty and never set up a CD ladder or the like. *Oh, well.arrete
Arrete, I second Cut-Throat-- very infromative post. Also, if I have understood correctly, since 1999 you have withdrawn 20% (real) of your starting sum but at this time you still have a real 94% of your starting sum. Given your high allocation to stocks, and the starting year of your retirement, I am very impressed.

Good Job!

Mikey

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Re: Getting to Enough
Old 02-17-2005, 03:44 PM   #4
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Re: Getting to Enough

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if I have understood correctly, since 1999 you have withdrawn 20% (real) of your starting sum but at this time you still have a real 94% of your starting sum.
That would be a yepper. I'm pretty pleased myself. Diversification has a lot to do with it. I took a bath with my techs like everyone else, but the other stocks held up, and a lot of the techs came back better than before.

I have my losers (WCOM, LU). It's just that my winners outweigh them.

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Re: Getting to Enough
Old 02-17-2005, 06:22 PM   #5
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Re: Getting to Enough

Arette:
can I ask how old you were when you ER'd?

I'm 45 and I've run the numbers. At 3.5% I still think I'm ok...(husband wants to work another year or so, his choice),but I think I could live a good long time!

Thanks for telling your story. It is inspiring to know that it can be done.
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Re: Getting to Enough
Old 02-18-2005, 01:23 AM   #6
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Re: Getting to Enough

I use the SWR as a mildly interesting rule of thumb.

I've heard a lot of people say something along these lines.

I would be grateful, Arrete, if you would see if you could get intercst to say that he does not intend for the REHP study to provide more than a rule of thumb. If he would say that, it would seem to me that the friction that has surrounded our SWR discussons for a long time now would dissipate.

If intercst does not mean for his study to do more than provide a rule of thumb, then obviously others should be able to put forward their own analyses suggesting their own rules of thumb. I would like to be able to talk about the SWR research that I did in the mid-90s (beginning prior to when intercst published his study) and a good number of community members at a number of boards have expressed an intercst in hearing about it. I think it would be a positive development if we could open up the floor to discussion of a variety of rules of thumb, not just one.
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Re: Getting to Enough
Old 02-18-2005, 05:47 AM   #7
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Re: Getting to Enough

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if you would see if you could get intercst to say that he does not intend for the REHP study to provide more than a rule of thumb
Talk to him about it yourself. *You already post on his non-TMF board.
http://www.retireearlyhomepage.com/cgi-bin/yabb/YaBB.pl

Heck, it dawns on me that he's moderator of this forum. *Talk to him about it here, but start your own thread.

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Re: Getting to Enough
Old 02-18-2005, 07:39 AM   #8
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Re: Getting to Enough

Talk to him about it yourself.

I've tried, Arrete, I've tried.

I thought that you might have a little bit of influence with him. It may be that no one does.
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Re: Getting to Enough
Old 02-18-2005, 01:52 PM   #9
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Re: Getting to Enough

Quote:
I use the SWR as a mildly interesting rule of thumb.

I've heard a lot of people say something along these lines.

I would be grateful, Arrete, if you would see if you could get intercst to say that he does not intend for the REHP study to provide more than a rule of thumb. If he would say that, it would seem to me that the friction that has surrounded our SWR discussons for a long time now would dissipate.

If intercst does not mean for his study to do more than provide a rule of thumb, then obviously others should be able to put forward their own analyses suggesting their own rules of thumb. I would like to be able to talk about the SWR research that I did in the mid-90s (beginning prior to when intercst published his study) and a good number of community members at a number of boards have expressed an intercst in hearing about it. I think it would be a positive development if we could open up the floor to discussion of a variety of rules of thumb, not just one.
You've talked at length about your "40 binders of information" and a so-called "study" that predates some of the more reputable research on the subject, but you haven't been able to convince anyone of your more preposterous claims. Many people have visited the Mother-lode of Hoco-mania at the 'SWR Research Group' (see link: http://nofeeboards.com/boards/viewforum.php?f=10 ) but few have found anything of value there.

On the slim chance that anyone has missed it, I'm happy to provide a link to the SWR Research Group so that those interested can experience Hoco-mania in its full and unvarnished glory.

intercst
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Re: Getting to Enough
Old 02-18-2005, 05:03 PM   #10
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Re: Getting to Enough

I obviously missed this

Quote:
can I ask how old you were when you ER'd?
I retired at 50 - but I didn't start working until my mid-30's (stayed home with the bairns). 3.5% sounds good to me, especially if you have 1) a well-padded budget (can't stress that enough), 2) a diversified portfolio and 3) figured out what you are doing about health care insurance. An emergency fund is good, too, though I don't have a real one. I just know I can go on margin.

DH yammered about retiring about the same time, but 6 years later he's still consulting part time. Maybe you'll luck out. Having a member of the family still in the work force is at least psychological padding even if it isn't really needed.

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Re: Getting to Enough
Old 02-18-2005, 05:05 PM   #11
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Re: Getting to Enough

BTW, intercst, do I have any influence with you? :

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Re: Getting to Enough
Old 02-18-2005, 05:32 PM   #12
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Re: Getting to Enough

arrete: *thanks. *The budget is pretty padded ,check. *We need to work on diversification some...I have a lot of my company's stock and I'll need to decide how to handle moving that around. *The stock is pretty steady, but has had some very strong gains recently so that may be a signal that now is the time to get out. *

We do still need to work on the health insurance issue and have been *lax about that since DH is still going to work. *I have some time to work on that as long as he doesn't spring a sudden decision on me!
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Re: Getting to Enough
Old 02-19-2005, 05:01 AM   #13
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Re: Getting to Enough

You haven't been able to convince anyone of your more preposterous claims.

There have been scores and scores of community members who have asked you to knock off the funny business, intercst. As always, links are available for newcomers on request. I watched every effective on-topic poster leave the Motley Fool community because of your unwillingness to be responsive to those requests.

I have no intention of watching your ugly posting tactics destroy a second fine Retire Early discussion-board community. If you have nothing constructive to offer this community, please direct your posting energies elsewhere. You are wasting our time.

As Ray Charles put it so well in a song featured in a recent movie about his life, "Hit the Road, Jack."
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Re: Getting to Enough
Old 02-19-2005, 05:34 AM   #14
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Re: Getting to Enough

Quote:
I have a lot of my company's stock and I'll need to decide how to handle moving that around. The stock is pretty steady, but has had some very strong gains recently so that may be a signal that now is the time to get out.
You don't say if this stock is in a retirement account or not. A lot of companies only allow you to sell a certain amount of their stock a year if it is such an account. And again, you don't want to be in the position of those poor people at Lucent and World Com.

My husband faces a similar situation with a lot of stock in GE. He can't sell the stock within the 401K (he no longer works for GE), but he does get the dividends from the GE stock and puts that in into other stocks for diversification.

Concerning health care insurance. You do have some time - you can always get 18 months of COBRA from your husband's company after he retires (unless it's a really small firm). Things change so much, it might not be worth worrying about except to kind of get a ball park figure for health care insurance in your state.

The beginner's guide for stat by state health care insurance is
http://www.healthinsuranceinfo.net/

Good luck.

arrete
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Re: Getting to Enough
Old 02-19-2005, 05:37 AM   #15
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Re: Getting to Enough

***** -

Would you stop screwing up the thread I started and take your fight somewhere else? This diversion is very selfish of you. Hit Start New Topic and begin there.

arrete
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Re: Getting to Enough
Old 02-19-2005, 06:10 AM   #16
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Re: Getting to Enough

arrete:

Yes, I should have mentioned that some of the stock is in 401 K but a lot is in taxpaid accounts as well. When I leave I will be able to move that to something else, question is what.

I am not worried about a Lucent/Enron meltdown problem. I guess anything could happen, but my company is one of the safest most conservative investments around...after some strong gains recently it will probably go sideways or slightly down. Luckily I wasn't counting on the recent run up in my ER decision

Thanks for the health insurance link. It's a good starting place. You are correct that we could always go COBRA on my husband's insurance, but would be good to have a plan in place before that happens.
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Re: Getting to Enough
Old 02-19-2005, 08:09 AM   #17
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Re: Getting to Enough

Quote:
***** -

Would you stop screwing up the thread I started and take your fight somewhere else? *This diversion is very selfish of you. *Hit Start New Topic and begin there.

arrete
I've started a new board, "The Best of Hoco-mania", on the REHP forum as a clearinghouse for scholarship and research on this phenomenon.

http://www.retireearlyhomepage.com/c....pl?board=HOCO

Until we find a cure, I'd be happy to host a discussion and analysis of the ***** pathologies at the REHP forum. This might "clear the air" as ***** continues to make himself unwelcome at every other retirement-related community outside of the SWR Research Group.

intercst
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Re: Getting to Enough
Old 02-19-2005, 08:24 AM   #18
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Re: Getting to Enough

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I'd be happy to host a discussion *... at the REHP forum. This might "clear the air" as ***** continues to make himself unwelcome at every other retirement-related community outside of the SWR Research Group.
Thank you for your kind offer, intercst. *I can only hope ***** takes you up on it.

It gets quite annoying to try to start an interesting discussion only to have ***** hijack it with his intercst diatribes.

arrete
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Re: Getting to Enough
Old 02-19-2005, 09:08 AM   #19
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Re: Getting to Enough

Quote:
Thank you for your kind offer, intercst. *I can only hope ***** takes you up on it.

It gets quite annoying to try to start an interesting discussion only to have ***** hijack it with his intercst diatribes.

arrete
You're quite welcome. I see great promise in the new Hoco-mania-focused board.

Just this morning, ataloss started a thread on "retirement without retiring" where we're examining the three-year performance of one of *****'s most famous posts "My Plan" (it got 93 recs)

http://www.retireearlyhomepage.com/c...num=1108832302

intercst
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Re: Getting to Enough
Old 02-19-2005, 10:25 AM   #20
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Re: Getting to Enough

Would you stop screwing up the thread I started and take your fight somewhere else?

I don't have a fight with any community member at any board, arrete. I have an interest in learning about early retirement and then in sharing what I learn with others. That is what I use these boards to do. I have zero intercst in the personal attack jizz-jazz. It is not my cup of tea.

We deal with money questions at this board. That means that we have a responsibility to other community members to shoot straight. To fail to do so could cause busted retirements, and that defeats the mission of the board. So I feel that I have an oblgiation to point out to other community members acts of deliberate deception when I see them. When I see them, I do what I can to correct the record so that those community members seeking to use the boards to learn about the subject matter may do so.

I participate on threads started by you when I feel that I have something of value to contribute to them. The question of what is relevant to a thread of course depends on what comments have appeared on it. If all that appears is the thread-starter, then of course any response post should relate in some way to the thread-starter. Once other posts appear, posts related to material in those other posts also becomes relevant.

I'm not happy with what was done to your thread. It was a fine thread-starter and one of the response posts was entireled uncalled for and entirely non-constructive. I responded to that post in an appropriate way. I hope that we will see less of the individual responsible in future days so that this will be less of a matter of concern for all of us who try to make this forum a pleasant place to learn about the subject of early retirement.

It is not only your threads that have been disrupted by this individual. Arrete. This indiviidual has disrupted my threads as well. And he has disrupted the threads of scores of other community members as well. It is well past time for responsible community members to step forward and take the steps needed to bring the nonsense to a complete anf final stop.
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