How Early is Too Early?

[Spanky]

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

I tend to agree that money is not the issue. He needs to have plan in place to identify life after work.

 

[Martha]

Well, I think money is a big issue for the OP. The OP seems to have lots of stuff he enjoys doing but appears unsure if he has enough to retire safely. Well, nothing is ever absolutely safe. All we can do is look at history for guidance, hence the talk about historically safe withdrawl rates.

Run some calculators, like FIREcalc. http://www.fireseeker.com/ Put some fluff in your budget that you can cut out if times are tough. If it looks like enough and you want to retire, retire.

 

[Nords]

Ok, so:  Is there anyone here who has actually practiced taking a consistent 4% withdrawal for any number of years?

FIRECALC has been doing it for at least 75 years!  ESRBob also spent a lot of time & effort (and probably a good bit of money) doing a similar analysis for the book.

Our personal SWR has been clocking in at 2-3%, partly a function of whether spouse is working or not, but financial issues are in the minority.  Over the last three-plus years our SWR has largely been a function of a bunch of mortgage refinancings, a kid who's switched from dressage to martial arts, and a new passion for surfing & home improvement.  In other words our spending has dropped as a side effect of other lifestyle choices, not by the dictates of SWR.

It's worth critically examining a 4% SWR to avoid being blissfully ignorant, but there's no tool better than the ones we're already using.  I think that it's far more significant (perhaps even "life-saving") to consider the health effects of continuing full-time work AFTER you've achieved a 4% SWR.  If you're made to work or if your ego is wrapped up in having your employees validate your existence, then by all means keep bolstering my Social Security benefits. 

But if you have any possible expectation of being able to develop a life outside of the workplace, then stop fretting about a 4% SWR and pay attention to Martha's work experience.  Her part-time routine has been an eye-opener on how quickly your leisure time can destroy any remaining "pleasure" in showing up at the workplace.  Perhaps your body and your subconscious are trying to teach you something! 

I think it would be sad-- perhaps even life-threatening-- if fears over a 4% SWR kept you in the workplace instead of giving you the courage to start a new & better phase of your life.

 

[yakers]

One thing for the OP and other young retirees interested in a SWR (safe withdrawal rate) is have a look at that part of ESRbob's "Work Less, Live More". He really explores the issue (much better than another unnamed poster who thinks valuation is everything) and that would be more important for someone retiring in their 40s than for someone with a late retirement and for someone living off their savings & investments rather than a pension. His focus is on asset allocation as a critical element. Its a bit less relevant to folks like me who expect to retire at the old age of 57 or 58 with a COLAd pension,medical coverage and some low cost index funds.
And his general take on taxes is good, if you retire you will probably pay less tax than when you were working. .

 

[bbuzzard]

That written, what we are doing is slacking off and practicing retirement even though we continue to work. We no longer bank our vacations ... we take family vacations to spend all those weeks of vacations. We get to work around 9 am, leave around 4:30 pm or earlier. Take longer lunch hours to play basketball or whatever. We coach our kids sports teams which is 8 to 12 hours a week. We visit relatives on a whim ... take 4 day weekends. It's true that while the kids are in school you are kind of stuck, but that's only when everyone wants to go somewhere together. You can travel by yourself. My spouse has gone sea-kayaking with her friends while I stayed home. I've gone on manly-man vacations with friends while everyone else stayed home.

I have taken a similiar approach to date, which is part of why I like my job. I bill fewer hours than any other partner in the firm, and feel free to come and go as I like (within reason). I take all my vacation, although it was noted at one point (before I became a partner) that "no partner in the firm would actually take 4 weeks vacation." I have been open and honest with my peers about my work ethic/plan. When I was offered this position, I noted that I was a 40 hour a week man except in unusual circumstances. Fortunately, I have some unusual skills, and almost everyone seems to be happy with my work performance.

 

[bbuzzard]

Mr. Buzzard -- You are 41 years old. I may well be wrong, but it seems to me that the 4% WD rate rule-of-thumb is really pushing things for a retirement that could last for 50-60 years.

This does worry me somewhat, and is part of the reason for considering delaying retirement another 8 years.

 

[bbuzzard]

I see every day in the obituaries about somebody 48 years old dropping dead - don't want that to be me.

My wife's mother died young (48), about 2 years before planned retirement. This has been a signficant factor in our desire for RE.

 

[bbuzzard]

Bbuzard, welcome to the forum and its grand debates. I am with those who distrust a 4% withdrawl rate when you are relying entirely on your investments to pay for your retirement and you have no retiree benefits.

This has also been a concern. I would have zero benefits until receiving SS. We are self-funded for everything.

 

[bbuzzard]

How about working a few hours a week auditing lawyers bills. Might be refreshing to be on the other side of the table and pick up some income.

Actually, I am an engineer. Since most of the jobs I work on are time & material, my practice is essentially very similiar to a law firm from a business standpoint.

I have considered cutting the hours by opening a one person consulting practice (which I am certain would be successful), but my wife has nixed this due to liability concerns. I must admit that engineering is a high liability profession.

 

[azanon]

Another vote for 4% at 41 is too risky.  At that age, i'd have twice the amount i thought i needed before i pulled the trigger.

For those that have already done so under a similar calculation, good luck 

Nords, despite there being a debate on this at other places, I think he was just looking for advise. That's my advise, and I'm a pretty intelligent person, so take it as you will.

Azanon

 

[bbuzzard]

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

I must admit there is probably some truth in this. I worked long and hard to get where I am at, and it seem irrational to throw it all away. My rational mind says I can keep working, spend everything I make plus 4%, and have 3X my current disposable income.

My irrational minds says I would rather spend 50% of what I currently do, and spend all my time hiking in the mountains.

 

[Nords]

This does worry me somewhat, and is part of the reason for considering delaying retirement another 8 years.

As much fun as another eight years in the workplace seems to be, you could at least worry constructively by researching the issue.

You could start by reading this FPA study, keeping in mind that it doesn't evaluate the effect of rising healthcare costs.  Then take a look at ESRBob's book discussion of the 4% SWR, modified for bad years, and Bud Hebeler's alternative system in a library copy of his book.

You could also consider Bloomberg's recent articles noting that retiree spending drops dramatically beginning at age 80.  Most financial planners have commented among themselves that retiree spending drops off when they reach that age and continues to lower slowly (until they die!).  It remains to be seen whether it's because today's 80-year-olds lived through the Depression or if it's a lack of appreciation for the fact that 78 million boomers will rewrite all the spending rules when they reach their 80s.

I can't pretend to be able to tell you the right answer-- only you can evaluate your own situation.  But staying at the job due to a lack of working through a fear (other than by working for another eight years!) sounds like paralysis by analysis.

When I found the Terhorst's book my first thought was "Damn!  Missed it by five years!!"  I hope you don't have a similar epiphany eight years later.

 

[bbuzzard]

Buzzard... why do you want to leave your job? What was your motivation for saving for ER?

As I mentioned, FI was more of a driver than ER, although that was alos a factor. I have many hobbies that I actively participate in, and would love to have more time to spend on them. However, I also worry that if I have 52 weeks a year to hike, kayak, etc, it would not be as much fun as when I only get to do it 4 weeks plus 12 weekeneds.

 

[Nords]

However, I also worry that if I have 52 weeks a year to hike, kayak, etc,  it would not be as much fun as when I only get to do it 4 weeks plus 12 weekeneds.

Again, the only way to learn the answer to that question is a vacation or sabbatical that's longer than four weeks.

I think that most of the ERs on this board, especially TH, will tell you that the sabbatical was the event that tipped their feelings from "work a little longer" to "get out now".

 

[bbuzzard]

Another vote for 4% at 41 is too risky. At that age, i'd have twice the amount i thought i needed before i pulled the trigger.

What you are essentially proposing is a 2% SWR. This sounds too conservative to me. I think that I would definitely retire today if I could match my spending with a 2% withdrawal rate.

 

[azanon]

But staying at the job due to a lack of working through a fear (other than by working for another eight years!) sounds like paralysis by analysis.

As miserable as that sounds to me, worse yet would be already having pulled a trigger you can't undue and then wondering for the next ~ 60 years whether all that theoretical research is right.  Now THAT would really suck (to me).  

 

[azanon]

What you are essentially proposing is a 2% SWR. This sounds too conservative to me. I think that I would definitely retire today if I could match my spending with a 2% withdrawal rate.

Careful.... you're generalizing. 

I'm proposing 2% SWR for a possible 60 year retirement span.    That is a heck of a lot of time for theoretical math to be monkied with by real-world events and situations..... 60 years at the 4% SWR that is.

 If he was retiring at 60, i'd be more than open to 4% SWR.  Heck, i might even go for 5% at 60, provided i had SS and a pension for support.

 

[bbuzzard]

I'm proposing 2% SWR for a possible 60 year retirement span. That is a heck of a lot of time for theoretical math to be monkied with by real-world events and situations..... 60 years at the 4% SWR that is.

Oh, no offense. I realized this.

 

[Jay_Gatsby]

I must admit there is probably some truth in this. I worked long and hard to get where I am at, and it seem irrational to throw it all away. My rational mind says I can keep working, spend everything I make plus 4%, and have 3X my current disposable income.

My irrational minds says I would rather spend 50% of what I currently do, and spend all my time hiking in the mountains.

That's how many professionals feel in law, medicine, accounting, and engineering.  It often takes 15-20 years to reach a solid level of income (e.g. $150k+) along with a certain degree of flexibility in one's work schedule.  Faced with the ability to coast for 5-10 years and collect a healthy paycheck, many professionals would prefer to just clock their time in the office, raise their kids in a way they might not have enjoyed, take expensive vacations, buy a few "toys", etc...  The idea of cutting one' expenses by 50% just to quit working, after fighting tooth and nail for 15-20 years, just isn't all that palatable.

 

[brewer12345]

I must admit there is probably some truth in this. I worked long and hard to get where I am at, and it seem irrational to throw it all away. My rational mind says I can keep working, spend everything I make plus 4%, and have 3X my current disposable income.

My irrational minds says I would rather spend 50% of what I currently do, and spend all my time hiking in the mountains.

Choices, choices, fear and greed - what an interesting stew.  BB, I think this is the sort of thing that requires most FIREd folks to be pushed to actually take the leap, rather than separate service on their own.  Its scary to make that kind of decision, so it is easier to put it off.  You don't sound that unhappy in your job and appear to make plenty of loot and have time to do what you want to do.  That's great.  If I were in your shoes, I would probably spend a few days seriously thinking about what I want in life.  Maybe that includes what you are doing now.  Maybe, instead, that includes chucking it all, living on a lot less and having the time to contemplte your navel, etc.  That's a decision you will have to make, since nobody is forcing you to decide (at the moment).

Personally, I value my free time quite highly.  If a couple of million bucks fell out of the sky into my lap, I would wind things down at work within 6 months and go play.  There are too many nteresting things in the wide wonderful world, and kids grow up fast.

 

[HFWR]

I must admit there is probably some truth in this. I worked long and hard to get where I am at, and it seem irrational to throw it all away. My rational mind says I can keep working, spend everything I make plus 4%, and have 3X my current disposable income.

My irrational minds says I would rather spend 50% of what I currently do, and spend all my time hiking in the mountains.

Me thinks you have this backwards... 8)

 

[tryan]

I am guessing - and spending like - we all have a higher probability of being hit by a bus than out living a 4% (or less) withdrawl rate.

One can only plan so much.

 

[cute fuzzy bunny]

I think that most of the ERs on this board, especially TH, will tell you that the sabbatical was the event that tipped their feelings from "work a little longer" to "get out now".

I dont know who that "TH" fellow is, but yep, sabbatical did it. Three months later I not only didnt want to go back to work, I couldnt stomach the stupid politics and horsepuckey that about 75% of my job consisted of.

It didnt hurt that the bull market gravy train had stopped and my stock options were all under water. If I was barely thrilled with doing the job for a million a year, doing it for a third of a mil sure at shootin' wasnt going to cut it.