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How long can you survive without working???
Old 10-02-2012, 04:05 PM   #1
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How long can you survive without working???

Forget about income. Let's talk fact!! :-)

Suppose you got injury, lay off, or have to care for sick member of the family, How long can you survive without your paycheck??

It's very scare that many people are a few paycheck from homeless. Based on my 401k alone, I will last 1.5 year if I can cash it out assume 0% tax & penalty.

Enuff
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Old 10-02-2012, 04:17 PM   #2
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When I was working I also paid for LTD insurance which covered me for 6 months full pay followed by 12 months at 50% pay if sickness or injury stopped me working. LTD insurance was very cheap for the piece of mind it brought.

Sadly however, I realize that many folks don't have this.
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Old 10-02-2012, 04:42 PM   #3
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Forever, I guess, now that I'm retired.

However this question pushed me to develop some serious LBYM habits before I ever thought retirement was even possible for me. It's pretty scary to realize that it is quite possible to become homeless and broke, if unable to keep one's job or find a new one.

There, but for the grace of G*d, go I.
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Old 10-02-2012, 05:26 PM   #4
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You are referring to people still working. Even though we saved everything we could and were super thrifty, when I reached 35 we had no money in the bank - it had all spent spent on health care. Losing my job at that point would have been devastating. Many people have no savings, some because of poor money management skills, but there are other reasons.

We were extremely fortunate. We made it through tough times, then work started to pay off, we brought along our thrifty ways and saved much more than we spent.

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Old 10-02-2012, 05:37 PM   #5
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Originally Posted by Enuff2Eat View Post
Forget about income. Let's talk fact!! :-)

Suppose you got injury, lay off, or have to care for sick member of the family, How long can you survive without your paycheck??

It's very scare that many people are a few paycheck from homeless. Based on my 401k alone, I will last 1.5 year if I can cash it out assume 0% tax & penalty.

Enuff
This very question is what motivated me (and a lot of others at this forum I'm sure) to really start LBYM and saving and investing as much as I could so that sometime, as it is now I could say that I can live without a paycheck. i.e. being financially independent. Many have done it and much earlier than me. I wasn't FI until age 49-52. From from what I've read at this forum, many have succeded much earlier in their 30's and 40's.
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Old 10-02-2012, 05:41 PM   #6
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Given that we have now hit our number and that we have considerable fat in the retirement budget, I'd like to think that the answer is "indefinitely". Of course, life does not come with guarantees and there will always be circumstances which could wreck the best of plans.
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Old 10-02-2012, 05:45 PM   #7
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When I was working I also paid for LTD insurance which covered me for 6 months full pay followed by 12 months at 50% pay if sickness or injury stopped me working. LTD insurance was very cheap for the piece of mind it brought.

Sadly however, I realize that many folks don't have this.
I also have LTD. If I get permanently disabled so I can't work my LTD will provide 60% of my salary until my retirement age.

If I lost my job today I could just about manage to live of my taxable savings and rental income until SS etc started.
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Old 10-02-2012, 06:34 PM   #8
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We have about 3.5 years of current expenses in relatively liquid accounts, including Ibonds that we could sell without penalty. That number is deliberately higher than average because our situation is less stable than is typical. We could reduce our spending by fairly substantial percentages by cutting out some of the non-necessities that we currently indulge in. So we probably have anywhere from 5-7 years of basic life sustaining funds in the bank that we could access without taking any kind of financial hit.

Our big safety net is our apartment, though. At current values, we would probably be FI if we were to sell it and move to a less expensive location and either homeschool (if staying in China) or put the kids in public schools (if returning to the US). Even if property values were to totally tank, which the government will probably never allow to happen in Beijing, we would still get out of it what we put in, which was a substantial down payment that would allow us to live comfortably for several years.

DH will turn 55 next year, so if need be we could also tap into his retirement accounts without penalty.

We also both have LTD policies through work that would pay 60% of salary, which is more than what we live on.

I don't know how people can manage living on the edge. Would make me very nervous.

lhamo
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Old 10-02-2012, 06:51 PM   #9
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I truly appreciate this question, because I thought I was the only one that thought of this question. As many others on the board I maintain detailed records in excel, one of my worksheets includes a summary of my current budget, reduced spend budget and laid off budget. I have a formula that calculates how long we can survive for each budget with my wife's income, expected unemployment (the short term version), 6 months of guarantee severance, savings account, taxable investments accounts. Currently it appears we can go 30 to 60 months without me working or dipping into 401ks, IRAs and cash pension. I honestly don't know how people with tons of personal debt sleep at night without at least 12 months in an emergency account.
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Old 10-02-2012, 08:07 PM   #10
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Assuming reasonable (fairly meager/conservative) and current expenses, indefinitely. My concerns revolve around reality encroaching on my best laid plans:
  • Black swan event decimating my portfolio
  • Unexpected expensive health care issues (mine or 80+ year old mother)
  • Any number of other things that keep a worry wart risk averse person up at night
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Old 10-02-2012, 08:11 PM   #11
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I pay for LTD at w*rk, which would provide 60% of my salary. That, and my wife's job would be plenty for us to not only survive, but continue to save for "retirement". Even if we didn't have LTD, we have probably a years worth of expenses cash/equities that are fairly easy to reach.
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Old 10-02-2012, 08:37 PM   #12
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I could retire now, if need be, but at a lower standard of living than I'd prefer. I have LTD and LTC, both included in my basic cheapskate budget of around $24k/yr.
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Old 10-02-2012, 09:01 PM   #13
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How long can I live without working? Since my work was not physical, I have always had to maintain some physical activities in my leisure time, in order to keep in shape. And now that I have stopped working, and since I never hated my work, only the work environment, I do worry about having my brain atrophied and shrinking. However, people here kept saying that it would not hurt, so I am giving it a try. I can still get some work if I want to.

Oh, or are you talking about financial survival? Well, it is still too early for me to tell, since I only stopped work completely a few months ago. FIRECalc says that if I stick with 3.5% WR and stay diversified in my investments, I should do OK.

I guess if people here or FIRECalc is wrong on either count, well, I can always go back to work.
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Old 10-02-2012, 09:04 PM   #14
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Forever, I guess, now that I'm retired.
Me too, although, like Khan I'll qualify it with "until I run out of kidneys".
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Old 10-03-2012, 12:02 AM   #15
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I can go a few years before touching my 401K and after that, it's hard to say how long I will last. I guess it's all depending upon when in your working years this misfortune hits you. I am a few years away from FIRE, so I would be in a better shape than someone who is in their 30's. I do pay for the LTD insurance through work, although if I got laid off and couldn't find a job, the LTD insurance would do nothing for me.
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Old 10-03-2012, 12:04 AM   #16
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Suppose you got injury, lay off, or have to care for sick member of the family, How long can you survive without your paycheck??
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Old 10-03-2012, 08:01 AM   #17
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Indefinitely for us. We have a COLA'd pension and medical/prescription coverage from my old job. When I get the Big Ache DW gets 70% of the retirement income and we have more than enough in savings/investments to maintain things until she's eligible for SS on top of the pension. This is one reason we like having Zero Debt.

So while she'll never have a 200 meter yacht she'll never be dining on Alpo either. Which is fine, we never wanted a yacht anyway.
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Old 10-03-2012, 11:40 AM   #18
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If there was no penalty for touching the retirement investments? About 6 very tight and uncomfortable years. A few more if I sold the paid for house.

This type of scenario is very scary to me, as I had a health issue a few years ago that DID cause me to reduce work hours. Thankfully DW and I have been LBYM all along.
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Old 10-03-2012, 12:03 PM   #19
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This very question is what motivated me (and a lot of others at this forum I'm sure) to really start LBYM and saving and investing as much as I could so that sometime, as it is now I could say that I can live without a paycheck. i.e. being financially independent. Many have done it and much earlier than me. I wasn't FI until age 49-52. From from what I've read at this forum, many have succeded much earlier in their 30's and 40's.

Scary scenarios involving disability and long term unemployment were real motivators in our quest for financial independence. While the risk of disability can be covered with LTD insurance, which we always carried, the risk of unemployment or underemployment is harder to cover. Having seen first hand the damage that a period of long term unemployment can do, we decided early on to concentrate on financial independence.
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Old 10-03-2012, 12:20 PM   #20
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I'm not sure how I'd calculate how many years my I could go without doing the w*rking. But, I did run some numbers through Firecalc and found the following results. If I got laid off and didn't go back to work, I'd have about a 65% chance of making it to death, where I use the age of 100, presuming I get my SS calculation of around $11,400 per year starting at age 62.

I ran a few other calculations, and I'd have a 95% chance of not running out of money by age 60.
81.4% chance of not running out of money by age 65
77.0% chance of not running out by 70
68.5% chance of not running out by 75
67.0% chance of not running out by 80
65.6% chance of not running out by 90

If I trim expenses by 1/4, which I think would be reasonable, Firecalc gives me a 100% chance of making it to 100.

If I became disabled, I'd get about $23,700 per year right now, and would have a 100% chance of making it. However, if I became disabled, I'd presume there might be a bunch of medical bills that I wouldn't know what to account for.
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