how to know when working OMY is not financially worthwhile?

[daylatedollarshort]

We had a lot of fat in our budget and realized that optimizing our expenses had a higher ROI in our fifties than OMY. Every $1K cut meant needing $50K less in total retirement funding over 50 years, and we had a lot of relatively painless $1K cuts we could make, or small cuts that added up to $1K, especially with more free time to review the budget and price shop goods and services.

We've made most of our 80/20 on cuts so this year I am going to go back to upping my hours at our hobby businesses. I have to do something to keep my brain active and keep busy so why not have a hobby that also makes extra money. I would not do something where I had to have a long commute, be on call 24/7, manage teams in the US and countries in opposite time zones, and be inside an office all weekdays during daylight hours. I'd live in a yurt before I'd go back to that.

Well, actually I probably would go back to that kind of job for $2M a year, like a recent poster. So I can see his dilemma. But I never made that kind of money, so it is not such a hard decision for me.

[Andre1969]

Quote:

Originally Posted by harley That's an argument for working the rest of your life. If you are going to retire, especially ER, you have to accept that you will be drawing down your net worth. Often the draw down will be negated by investment growth, but if you need to get to the point where you are never drawing against your portfolio you'll never stop working. Which is fine, but wasn't for me.

When I get closer, I think that's going to be the part that might take awhile to get used to. While I know, rationally, that it's okay for the portfolio to draw down over time, it's going to be hard to switch from decades of investing, sacrificing, and watching the balance go up, to drawing it down. I'm sure it's something you get used to in time, but the initial adjustment might be a bit difficult.

[jazz4cash]

Quote:

Originally Posted by harley That's an argument for working the rest of your life. If you are going to retire, especially ER, you have to accept that you will be drawing down your net worth. Often the draw down will be negated by investment growth, but if you need to get to the point where you are never drawing against your portfolio you'll never stop working. Which is fine, but wasn't for me.

I guess you could look at it that way if you wish, but taken in the limited context of "what is the impact of OMY on my savings?", it makes sense to for me to include the both additional and retained savings in the analysis. I certainly did not mean to imply that one needed to get to a point of never drawing against a portfolio. As I stated, it only shifts things a bit towards OMY.

[Andre1969]

Quote:

Originally Posted by jazz4cash I guess you could look at it that way if you wish, but taken in the limited context of "what is the impact of OMY on my savings?", it makes sense to for me to include the both additional and retained savings in the analysis. I certainly did not mean to imply that one needed to get to a point of never drawing against a portfolio. As I stated, it only shifts things a bit towards OMY.

Your way of looking it is it definitely something to take into consideration. And, it's why I'm OMY'ing for a bit longer. If I had retired at the beginning of 2014, it definitely would have reduced the gain of my portfolio. I still would have gotten my pension buyout, but wouldn't have added anything to my 401k. I also wouldn't have been able to contribute to my Roth either, but this year, to do that, I just moved money from an after tax account to the Roth, rather than adding money, so it was a lateral move, rather than additional investing.

I just ran my numbers, and if I had retired on, say, 1/1/14, my portfolio would have only gone up about 3.9%, instead of the 10.6 that it has so far. So, I guess that's good, that it would still have gone up. But I want a little more padding.

[FUEGO]

20:1 seems pretty arbitrary. For us, it would suggest working for quite a while longer to go from about $1.4 million to $2.8 million portfolio given our final salaries were a combined $140,000.

I think it really comes down to reaching a sufficiently small SWR. At $1.4 million in the portfolio, we set aside about $200k for a couple of big one time expenses and we still have $1.2 million. We have budgeted around $32,000/yr so our withdrawal rate is 2.66%. We could go lower if times got tough (trim out the vacation budget) and we'll probably spend more when times are good.

Should we really keep working until we get to 20:1 ratio of NW to final income? At that point we'll have a WR of 1.2%.

Interestingly enough, DW did work "one more year" this last year but mostly because she gets many months paid time off and will do the same in 2015 when she will exhaust all the leave time and probably quit. OMY was a pretty easy choice when one can get paid for a full year and only work 8-9 months. But if you have "enough"? Working a full year is for chumps!

[RobLJ]

I now have 6 more months before semi-retirement, which seems surreal. That means working 1/2 time remotely for at least a few more years for 40% of salary, while DW will down-shift her career and work a few more years as we move out West.
It is a bit funny that the NW/new capital is right about 20-1, which is in line with the poster, although if semi-retirement weren't possible, I probably would work OMY, or two. If DW happened to lose her job, we could get by fine with my working part-time and drawing from my retirement savings.

The issue is to plug the gap before social security kicks in, which is in 6-10 years for me. If things go well, DW will either quit or further downscale hours earlier than 4-5 years. She's OK with drawing half or less her current salary after the move.
As many have posted, everyone's circumstances differ.

[bumtrader]

According to Fidelity's it's 8x of final salary with a bunch of caveats -

"...To simplify matters, we’ve created a rule of thumb: Save at least 8 times (X) your ending salary to help increase the odds that you won’t outlive your savings during 25 years in retirement. If that multiple seems daunting, don’t fret. You don’t need to save 8X from the start. Rather, you can step up to it over your working life..."

Here is the link to the article:

https://www.fidelity.com/viewpoints/...rement-savings

[robnplunder]

This is more of an emotional/mental exercise than a math problem for many, I think. I'd motivated quit OMY for sure if my investment income > job income. This year, my investment income was about 40% of my gross job income.

[Cobra9777]

I never had any OMY tendencies. As soon as I hit FI (as defined by Meadbh in post #8), I was gone. At the time, we were adding about 5% to NW every year, which is right at the 20:1 ratio. But it was more complicated than that... DB pension bump at 55, RSUs, unvested options. We gave up a lot more than suggested by that ratio. But in the end, none of that mattered. We had enough to maintain our lifestyle, travel extensively, do hobbies, never worry about money, and most-likely leave a nice inheritance for the kids (as long as no LTC is required). The job had become stressful and uninteresting; and my desire to start a new chapter was strong. Done and done.

[Sunset]

For a few years I watched as my savings generated more additional savings than my contributions added even while I maxed my 401K + outside Roth contribution + plain leftover $$.

So when DW said she wanted to retire, I checked and saw:
(Assets without house) annual withdrawal rate of 3% > our spending
So we both retired !
(also looked at various retirement calculators to confirm).

[38Chevy454]

I think there is an emotional aspect, in that we are conditioned to be in savings and investment mode when working. So there is a big change in going to a withdrawal mode that many people might fear. Easier to just keep working and making the nestegg bigger, so when they do make that transition, it is lower (perceived to them) risk.

I am reminded of a saying "you never hear someone on their death bed wish they had spent more time at the office".

[robnplunder]

Quote:

Originally Posted by 38Chevy454 I am reminded of a saying "you never hear someone on their death bed wish they had spent more time at the office".

... although, I am trying to make the best of it. Today, I started working out using megacorp's gym during work hour. It was quite enjoyable.

[Katsmeow]

When DH retired a few years ago (and I semi-retired) we didn't consider how much more we could make if he or I continued to work full-time. Under your scenario I guess we would have kept working full-time as the added amount from a year looked to be substantial.

Really we looked on it more simply -- Did we have "enough"? It seems self-evidence to me that we would have "more" if we kept working full-time. And, at the income level at the time it would have been quite a bit more (not millions more, but significant). In the end, though, we figured we had "enough" and whether it was financially worthwhile to work full-time another year (yes it would be) was beside the point.

[truenorth418]

Quote:

Originally Posted by Looking4Ward My job paid five times what I actually needed to live on. But it consumed 100% of my life. For me, it wasn't a financial calculation. It was a quality of life decision.

Well put.


Sent from my iPhone using Early Retirement Forum

[harley]

Quote:

Originally Posted by robnplunder ... although, I am trying to make the best of it. Today, I started working out using megacorp's gym during work hour. It was quite enjoyable.

I remember when my mega built a large fancy office building. The one thing I was looking forward to was the gym. Of course when we got there they shut it down. Worried about liability, they said. I went into the basement room many years later and all the equipment was still there, locked away and covered in dust and rust. I'm sure all of that came out of our bonuses.

[gauss]

Quote:

Originally Posted by bumtrader According to Fidelity's it's 8x of final salary with a bunch of caveats - "...To simplify matters, we’ve created a rule of thumb: Save at least 8 times (X) your ending salary to help increase the odds that you won’t outlive your savings during 25 years in retirement. If that multiple seems daunting, don’t fret. You don’t need to save 8X from the start. Rather, you can step up to it over your working life..." Here is the link to the article: https://www.fidelity.com/viewpoints/...rement-savings

Be careful if you play around with the chart. It only supports changing one assumption at a time -- all previous changes are discarded.

[Ed_The_Gypsy]

OP, it comes down to, what is your life worth to you? Do you want to die in your office? Wait until you are disabled or dementia sets in? We know not when the hour will come.