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Hit the "magic number"
Old 02-17-2011, 07:33 PM   #1
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Hit the "magic number"

Remember those commercials that seemed to be airing endlessly over the past year or so, where people walked around with this big sign on which a dollar amount was printed, and it ended up being a financial firm advertising they could help you reach your "magic number"? (my favorite of that batch of commercials was a guy who was trimming his hedges, and his magic number was "a gazillion". His neighbor stopped by - with his own number - asked about it and how he expected to get there, and the answer was "I just throw money at it and hope something good happens!")

Anyway, around 2005, I decided to get serious about figuring out and tracking my own magic number. Factoring in expected pension, expected inflation, % income replacement desired, and so on. Turned out to be a pretty complex spreadsheet. I've been updating it with current numbers reasonably regularly since then. I think I'm pretty knowledgeable about making a conservative set of assumptions, so I am comfortable with the calculations.

This week, I was happily surprised to learn that I've attained that number. What made it even better is that it is a number calculated on the basis of needing it in 2017, which is when I'll start the withdrawals against that, not today (I have sufficient bridge funds to cover the gap). So I am early ! I recall looking at it when it tumbled big time in 2009, and thinking oh well... nice try.

But it is a nice feeling. Anyone else recall their feelings when they hit the milestone?
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Old 02-17-2011, 07:49 PM   #2
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Congratulations - it must be a really really nice feeling to get there (and, even more, to do so several years ahead of schedule). I'm not quite there but am close enough to know that it will take something catastrophic to derail my plans to FIRE sometime between early 2012 and early 2013.

I suppose your next question is, "what now"? Are you going to FIRE soon?
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Old 02-17-2011, 07:57 PM   #3
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Congratulations - it must be a really really nice feeling to get there (and, even more, to do so several years ahead of schedule). I'm not quite there but am close enough to know that it will take something catastrophic to derail my plans to FIRE sometime between early 2012 and early 2013.

I suppose your next question is, "what now"? Are you going to FIRE soon?
Thanks, traineeinvestor. Yes, it is a really, really nice feeling. I hope as many people as possible who participate on this forum get that same feeling soon (if they haven't gotten it already, which it seems that many thankfully have).

Of course, I will do what we probably all would. My plans are to leave work at the end of this contract year (in August '11), and formally retire in 2012 (I define "formally retire" as beginning to collect the pension I've earned, which I won't be old enough to do until then).

Good luck with your plans. I am glad to hear you are on track!
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Old 02-17-2011, 09:06 PM   #4
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Originally Posted by steelyman View Post

This week, I was happily surprised to learn that I've attained that number. What made it even better is that it is a number calculated on the basis of needing it in 2017, which is when I'll start the withdrawals against that, not today (I have sufficient bridge funds to cover the gap). So I am early ! I recall looking at it when it tumbled big time in 2009, and thinking oh well... nice try.

But it is a nice feeling. Anyone else recall their feelings when they hit the milestone?

Congratulations on making it ahead of schedule !
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Old 02-17-2011, 09:56 PM   #5
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good for you. What a huge relief, isn't it? Being mindful and a good steward of your money really pays off.

We remember when our numbers all added up and we realized we were there. We had to stay in the game for health insurance purposes for a few years but let me tell you, the pressure was off big time.
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Old 02-18-2011, 07:17 AM   #6
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Don't worry, if history gives any past clues, you will get to enjoy hitting your number a few times.

It's an even better feeling when you know that you have progressed so that you will never hit your number again coming from the high side of things.
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Old 02-18-2011, 07:33 AM   #7
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I came home from work growling about some stupidity or another a few days ago and told DW that I might not make it to the end of the work plan...she just smiled and said, " you know we have enough to cover our needs and most of our wants, so if it turns out that way, so be it". That was the boost I needed to keep hanging in there for a few more years, at least until end of 2012 when we are scheduled to slow down a bit...and hopefully I will find the strength to carry on in a semi retired form of this for a year or three with that. If not. Well, so be it. The support felt great.

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Old 02-18-2011, 08:51 AM   #8
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I had my number, but it got run over by a bus and burned on a Japanese grill.
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Old 02-18-2011, 09:51 AM   #9
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Congrats Steelyman! I'm sure it's a wonderful feeling.

Just curious - this is probably personal for each unique situation, but when you say "magic number", is it based 4% SWR and/or 100% success via FIRECalc? or something else?

I was playing with FIRECalc and other tools, and think that 100% success on FIRECalc along with a SWR of 3% or less will do it for me. Of course, family variables and health insurance will tell me what I can do once I get there.... still a good few years away.
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Old 02-18-2011, 12:34 PM   #10
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excellent! some peace of mind gained I'm sure!!
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Old 02-18-2011, 01:08 PM   #11
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Don't worry, if history gives any past clues, you will get to enjoy hitting your number a few times.

It's an even better feeling when you know that you have progressed so that you will never hit your number again coming from the high side of things.
Assuming another 2009 doesn't happen again, this will likely occur only a few times before you're over the hump. If you have some cash lying around, perhaps another 2009 wouldn't necessarily be a bad thing, assuming the markets recover the same way. (Ha!)
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Old 02-18-2011, 02:46 PM   #12
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I've hit my magic number 3 times over the last decade. It felt good to hit it for the second and third times. The first time I thought the magic number was much higher. The third time felt especially good since I had started to re-position the portfolio in preparation for retirement in 3 years and was still able to hit it early with a conservative allocation.
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Old 02-18-2011, 03:54 PM   #13
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We hit our magic number for the first time last year. I was happy of course (especially because we hit the number years ahead of schedule), but since I monitor our portfolio every day, I saw it coming in advance. DW on the other hand is very hands off with our finances and didn't have a clue we were anywhere near the magic number. The last time she asked me how we were doing was in late 2008 when the headlines really spooked her. We had taken a pretty big hit in the market and we were miles away from the magic number. But a number of factors contributed to a spectacular increase in our portfolio value during the recovery. At the time, I didn't really share my excitement with her because I really thought the recovery wouldn't last and I didn't want to give her false hopes. But the recovery did last.

I took a lot of pleasure in telling her we had reached our number. I had bought some Champagne and one night, as she came home form work, I broke the news. She was totally surprised and ecstatic.
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Old 02-18-2011, 04:58 PM   #14
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I've hit my magic number 3 times over the last decade. It felt good to hit it for the second and third times. The first time I thought the magic number was much higher. The third time felt especially good since I had started to re-position the portfolio in preparation for retirement in 3 years and was still able to hit it early with a conservative allocation.
We hit ours in 2007 and then again in 2009. It felt really good the first time, but it was even more reassuring to reach "the number" a second time, and now well beyond. Class of 2011.

And I too have the full support of DW, though I know she really doesn't have any idea if we can afford it (before you flame me, I'd love to see her take an interest), she just believes it when I tell her we're FI and then some. But it's nice to have her on the same page nonetheless...
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Old 02-18-2011, 05:42 PM   #15
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Hit the number. Locked in enough fixed to secure it.

I will FIRE later this year.

Like Midpack, my DW see the numbers and calculations but is taking it on faith.

This is one of the reasons I am considering a SPIA to round out a base income in case anything happens to me. She is not an investor and does not understand it.
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Old 02-18-2011, 07:07 PM   #16
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Congrats Steelyman! I'm sure it's a wonderful feeling.

Just curious - this is probably personal for each unique situation, but when you say "magic number", is it based 4% SWR and/or 100% success via FIRECalc? or something else?

I was playing with FIRECalc and other tools, and think that 100% success on FIRECalc along with a SWR of 3% or less will do it for me. Of course, family variables and health insurance will tell me what I can do once I get there.... still a good few years away.
Thanks, Aiiming_4_55! That's a good question. Initially (and most of the time that I have been working towards it), I used a home grown spreadsheet which factors in various expectations. I am a pretty new addition to these boards and had never used FIRECalc before. But after reading about it, I tried it out with my own numbers this week and was pleased to see a 100% success rate, even when I extended the timespan to farther out than I think is realistic. Also, yes, the withdrawal rate I use is 4%. The replacement income percentage I use (on my spreadsheet) is 85% of my salary, with annual adjustments for inflation.

To be extra conservative, I factored in only assets that I personally own and control. It is likely I (and my siblings) will inherit a quite nice trust as well as inherited IRAs, so that may provide an additional comfort buffer.

I wish you great luck in your own efforts!
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Old 02-18-2011, 07:18 PM   #17
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Assuming another 2009 doesn't happen again, this will likely occur only a few times before you're over the hump. If you have some cash lying around, perhaps another 2009 wouldn't necessarily be a bad thing, assuming the markets recover the same way. (Ha!)
Great advice, Gatsby . I do have some cash lying around now, 3 years worth of anticipated needs in money market and stable value funds. Not too pleasant to see the basically zero rate of return at present, but I suppose that would have been sufficient to weather what happened in 2007-2010. We can't control for everything, but we can at least carry an umbrella.
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Old 02-18-2011, 07:34 PM   #18
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good for you. What a huge relief, isn't it? Being mindful and a good steward of your money really pays off.

We remember when our numbers all added up and we realized we were there. We had to stay in the game for health insurance purposes for a few years but let me tell you, the pressure was off big time.
Congratulations for your own careful planning! Yes, it is a huge relief. It never really was a concern to me about whether I would get there, but rather when. That's the question that was answered this week. I'm still in the working world for a bit, and have bumped up my contributions to a deferred compensation plan by 5X this year (!) for some added resources on which to draw. I am planning on doing the COBRA thing to bridge health insurance till actual retirement and have the money set aside for that.

Fingers are crossed for all of this to pan out, but yes, for now it is nice to not have the Pressure.
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Old 02-18-2011, 08:53 PM   #19
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Great advice, Gatsby . I do have some cash lying around now, 3 years worth of anticipated needs in money market and stable value funds. Not too pleasant to see the basically zero rate of return at present, but I suppose that would have been sufficient to weather what happened in 2007-2010. We can't control for everything, but we can at least carry an umbrella.
Actually, I meant that if there is a SERIOUS pullback in stocks, you can buy everything on the cheap with your "dry powder."
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Old 02-18-2011, 09:03 PM   #20
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Actually, I meant that if there is a SERIOUS pullback in stocks, you can buy everything on the cheap with your "dry powder."
I understand, and that's a good point. But that's the kind of thing I would do in my non-retirement accounts. Those aren't included in the "magic number" calculation, they contain money I can afford to (but hope not to) lose. The retirement accounts... well, those are the tortoise, not the hare.
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