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Old 09-16-2011, 02:38 PM   #41
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You are very fortunate to have a fully supported retirement via your pension.

But I am always surprised at how easy it is to set up a "payment" system for those of us with portfolio-based retirements. You pick your system (4% with inflation adjustment, or percent of total assets, or interest and dividends only, or annuitize -- whatever). You just do about 15 minutes setting up autotransfers among your accounts, tweak them once a year, and get on with your life. The money comes in monthly just like a paycheck.

I can see where many might need some help in the accumulation decades, but once your are at the finish line, it's often a piece of cake. If not, perhaps that finish line is a bit farther than you thought.
I see what your saying Rich, but I still worry about the people who maybe had a million, and was planning to get 5-6% interest CD's and live off that. Now that isn't possible, so you reach out for more yield or return, then get whacked with a market downturn. Then you got the stress of that to work through. I guess the simple answer is you didn't have enough to retire on to begin with, but it was only a few years ago you could get a decent CD rate. I have one that is almost 6% that is expiring next month. It was only a 3 year CD, but the rate seems like a lifetime ago!
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Old 09-16-2011, 02:54 PM   #42
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I can see where many might need some help in the accumulation decades, but once your are at the finish line, it's often a piece of cake. If not, perhaps that finish line is a bit farther than you thought.
I haven't had to make my first transfer yet, and won't for some time. It's not as clear to me, and distribution looks more daunting than accum ever did, so I hope my experience is similar to yours. We're completely on our own, with SS/Medicare about 9 years off..."exciting times."
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Old 09-16-2011, 03:32 PM   #43
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You pick your system (4% with inflation adjustment, or percent of total assets, or interest and dividends only, or annuitize -- whatever).
Or all of the above (as we did) ...

You will have those decisions in the beginning of your retirement (just as you had early in your accumulation years of what to save and what to spend).

Seriously, once you layout and execute your plan, it isn't that hard to maintain. And the longer you are doing it (just like in your accumulation years), you won't give it a second thought, over time.
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Old 09-16-2011, 06:46 PM   #44
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Hello Rich - you are correct. My concerns include questions about whether I am ready personally, financially and emotionally. First, I will be 47 when FIRE, and planning for 45-50 years of retirement can be tricky. Second, I am good at what I do (sorry if this sounds presumptuous) and quite successful.
Perhaps it has something to do with the fact that you are approaching the big
"5 0" in a couple of years, more than it has to do with retirement.
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Old 09-19-2011, 02:51 AM   #45
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Hello Midpack - the good news is that I will not be bored in retirement, will all the volunteering and mission work I do. Would like to travel also purely for leisure....
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Reinforcing what others have said about the mental aspect, 'it's not enough to retire to escape something, you have to have something to retire to,' not sure who I am stealing the quote from. What is it you want to do instead? Some people can figure it out on the fly, but the odds are against it. With no plans, at least loose options, you risk being bored in retirement. It does happen, even if many here find it hard to believe.
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Old 09-19-2011, 09:31 PM   #46
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This is a good discussion and I appreciate that we are having it. Though I am about a year away (Class of 2012, I hope!) I have thought about this myself. I have worked for over 40 years, scrimping and saving to get to this point. I suspect it will be like my unwanted divorce - I just let being single happen to me and did not try to fight it or figure it out. Everything went well.

For me, I will probably have to withdraw at 4% for the first five years. I have that in cash equivalents now. My pension is modest, but it does have a partial COLA of up to 3% a year. Then SS kicks in at 66 which should reduce the withdrawal rate down to 2% (assuming we don't get into economic disaster.) So, it should work out.
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Old 09-19-2011, 09:47 PM   #47
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My brother at age 45 found himself unemployed a couple years ago. His house was paid off, and he was making an excellent income as a VP. He told me the hardest part was taking money out rather than putting it in...he got a new j*b after 17 months. Financially he's fine...he got 13 months severance, had no house payment, wife works a minimum wage j*b so they had some income, and he got to spend time with my dad in his older years.
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Old 09-19-2011, 10:13 PM   #48
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Not to beat a dead horse but I too agree you need to know why you want to retire. If you are enjoying what you do and want to continue to do so you won't have to worry about withdrawing money since you will still be making it. If you go part time you will still be making some money and your investments can fund the rest to meet your lifestyle needs.

I retired for several reasons including I was burned out and my DW needed a lot of personal care due to health reasons. My j*b did not lend itself to part time work so mine was all or nothing.

Switching from contributions to withdraws was a brain cramping experience for me...still is even after over 3 years in ER. We moved; started a "business" and did a lot of RV travel for a while. Most of our retirement comes from investments so the down market has been painful for us as has self-funding a new business that is still in the early stages of success (still not breaking even yet). This was not a planned expense so it has required a lot of juggling of budgets.

Our withdraw plan is quite complex and is composed of a number of stages for different accounts and sources. Luckily we managed to move a good bit of equities to less volatile funds to help dampen the waves on Wall Street. We plan on spending our kids inheritance if need be so the plan is to take care of us first...if anything is left then it will be a gift to them when we go. That makes planning a bit easier with limited funds.

Seeing the balances go down on some of the accounts due to withdraws is painful but necessary. We know that it is part of the plan....after-tax first...then per-tax last. A lot of our plan also takes into account taxation rates and income rates over time. Our needs today are very different from our needs in 10 years 20 years and 30 years. The plan takes all this into account and unless the Market collapses for and extended period we will survive. If it does, we will survive but in a different way.

To repeat some previous posts...retirement is not and end...it is a beginning. It is not a destination...it is a journey. You go from w*rk to retirement for a reason...not just because you are sick of our j*b (unless you are uber-FI) I am in my second ER and if you count the business I am no longer retired now but I see it more as a hobby since it is not providing any income...if it ever does it will be great but we are only looking to break even so the business stays fun rather than a j*b. When we get tired of it we sell it and walk away. Then move on to the next adventure and the next dream. ....we do have a lot of them yet to live before we logoff the final time.
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Old 09-20-2011, 07:17 AM   #49
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In order to help with the transition, I would make any big purchases before you retire (cars, boats, etc).
TJ
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Old 09-20-2011, 09:55 AM   #50
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In order to help with the transition, I would make any big purchases before you retire (cars, boats, etc).
TJ
Assuming you pay cash for them so you don't carry the debt into retirement unless you can well afford it. Same goes for RVs, second homes, aircraft, ATV, snowmobiles, etc. Toys are nice to have especially now that you don't have to waste your time w*rking.

Keep in mind that during retirement things will break, cars will need to be replaced, roofs leak, AC units stop, etc. Have a realistic Repair/Replace fund unless you can fund from from your investments or savings.
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Old 09-20-2011, 02:14 PM   #51
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... I volunteer often in the US and abroad and spend tens of thousands of dollars on mission projects, which is another variable I need to account for. Knowing all this, does it make sense to FIRE when one turns 47 ? ...
First, thanks for your service to those less fortunate.

One reason I decided to do some consulting after 6 months of ER is to earn income for charitable contributions. My goal is to keep our contributions at the same level they were when I ER'd. We included significant contributions in our ER spending plan (way more than a tithe of our much lower income) but not up to that level. I hope to consult a few days a month and use that income to make up the difference.

A dentist friend who just retired found a consulting gig reviewing Medicaid claims 1-2 days a week - just right for him. You might look into something like that to fund your mission work. And you'll have plenty of time to do the work! Good luck!
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Old 09-20-2011, 02:26 PM   #52
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Assuming you pay cash for them so you don't carry the debt into retirement unless you can well afford it. Same goes for RVs, second homes, aircraft, ATV, snowmobiles, etc. Toys are nice to have especially now that you don't have to waste your time w*rking.

Keep in mind that during retirement things will break, cars will need to be replaced, roofs leak, AC units stop, etc. Have a realistic Repair/Replace fund unless you can fund from from your investments or savings.
All true, but getting back to the subject line, there is something psychologically painful about having to pull out a big chunk of money just after retiring.
TJ
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Old 09-20-2011, 02:33 PM   #53
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All true, but getting back to the subject line, there is somethingpsychologically painful about having to pull out a big chunk of money just after retiring.
TJ
Not necessarily, at least if you plan for it ahead and set that money aside. That is how I bought my Venza in cash right after retiring. I had been saving for it for 10 years, and looking forward to the time when I could spend that money. Despite my LBYM habits, washing out sandwich bags and not even buying dryer sheets, buying my retirement car was part of my plan so I completely enjoyed the experience and there was nothing painful about it at all.

I can do the same now for my next car, putting money aside each year. I don't think that I will buy another car since I am already 63, but some people here that are pretty smart say that I will think differently about driving in my 70's after I turn 70.
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Old 09-20-2011, 03:59 PM   #54
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All true, but getting back to the subject line, there is something psychologically painful about having to pull out a big chunk of money just after retiring.
TJ
It's better than having to get a loan ...

Seriously, I also paid cash for a car (volunteer for Meals on Wheels) and had no problem doing it. I put away $500/mo. in my car fund for future purchases - regardless if I buy one or not, due to the little mileage I actually accrue these days.

If you anticipate and budget your expenses for big ticket items (such as a new roof for your house, HVAC replacement, etc.) there should be no problem. Anyway, it's something you should have been doing all along, retired or not...
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Old 09-24-2011, 10:58 AM   #55
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Here is my plan. I'm going to do it early next year.
1. I have 10 yrs living expenses in cash equivalent accounts. I am 62 yrs old. The rest in equities & MFs which will give me some time to move in the cycles.
2. I will draw SS at 62 to help pay for insurance etc.
3. I will downsize in housing.
4. I will downsize in the numbers of vehicles, although the 3 are fully paid.
5. I will buy certain hobby stuff while still working as I will have difficulty buying it during retirement. (Camera lenses and target pistols)>
6. Will concentrate on doing things than buying stuff.
7.Will buy only on sale or discount.
Psychologically it may still be difficult, but the alternatives are, well, even worse. So I'm willing to jump.
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Old 09-24-2011, 11:31 AM   #56
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.
5. I will buy certain hobby stuff while still working as I will have difficulty buying it during retirement. (Camera lenses and target pistols)>
.
Actually, it won't be harder to buy hobby things pre or post retirement, all other things being equal, so buy these things when it is the best time to buy them.

Remember, if you don't buy the camera lenses or target pistols pre-retirement, that money goes into your retirement savings and those exact same dollars will be there for your post retirement hobby purchases......

I only mention this because I watched a friend load up on hobby and personal entertainment items during his last couple of years working in prepartion for RE. A couple of years into RE, he found that some of the stuff wasn't as important to his retirement lifestyle as he'd anticipated. He should have just set the money aside in savings and then purchased the items at the time of need and when he could be confident that they would be an important part of retirement.
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Old 09-24-2011, 01:38 PM   #57
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All true, but getting back to the subject line, there is something psychologically painful about having to pull out a big chunk of money just after retiring.
TJ

I dunno, but that sounds like twisted psychology to me. How is taking a planned $X out right before retirement or right after retirement any different? It leaves you in the exact same place. Is it really that hard, psychologically? I'll agree with W2R's response...

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Not necessarily, at least if you plan for it ahead and set that money aside. That is how I bought my Venza in cash right after retiring. .... buying my retirement car was part of my plan so I completely enjoyed the experience and there was nothing painful about it at all.
It's like when I hear people say they can't retire until the kids are out of college. Really? Maybe they mean ' I can't retire for X more years because I need to save up some more $', but the college costs are the same retired or not (ignoring tax and aid issues).


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It's better than having to get a loan ...
Why? If the loan is on good terms, why not? People act like 'debt' and 'loan' are four letter words... oh . More seriously, a loan is just a financial decision with pros/cons, it's not voodoo demon magic. Although I've always paid cash for cars, when I look at the rates now, I might consider a loan. It's money - do the math.


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Here is my plan. I'm going to do it early next year.
1. I have 10 yrs living expenses in cash equivalent accounts. I am 62 yrs old. The rest in equities & MFs which will give me some time to move in the cycles.
Using the round 4% WR number, that is ~ 40% cash equivalent accounts. Your choice, but take a look at what FIRECALC reports about having that much cash sitting around. And can you keep it all FDIC insured? There are times I've been more concerned about my cash holdings than my stock holdings.


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5. I will buy certain hobby stuff while still working as I will have difficulty buying it during retirement. (Camera lenses and target pistols)>

...

7.Will buy only on sale or discount.

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Actually, it won't be harder to buy hobby things pre or post retirement, all other things being equal, so buy these things when it is the best time to buy them.

Remember, if you don't buy the camera lenses or target pistols pre-retirement, that money goes into your retirement savings and those exact same dollars will be there for your post retirement hobby purchases......

I only mention this because I watched a friend load up on hobby and personal entertainment items during his last couple of years working in prepartion for RE. A couple of years into RE, he found that some of the stuff wasn't as important to his retirement lifestyle as he'd anticipated. He should have just set the money aside in savings and then purchased the items at the time of need and when he could be confident that they would be an important part of retirement.
A big +1 to youbet. If you look again, you'll see that Birchwood is actually contradicting himself in #5 and #7. You will very ikely spend this more wisely after retiring. In addition to matching it to your post-retirment needs, you'll have more time to shop out the bargains.

If this is really that hard for you psychologically - take the amount you would spend pre-retirement, put it in a separate account. You are then 'free' to spend that to zero after retirement with no guilt issues. Personally, I can do this on a spreadsheet (or just in my mind) easier and cheaper than with separate accounts, but to each their own.


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Old 09-24-2011, 06:43 PM   #58
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ObGyn: My experience is what you fear. I FIREd 2.5 years ago at 56.
I am very comfortable that all the withdrawal calculations I did before
then, and since, are the best I can do. My calculated SWR is 3% for
the first 3 years, then 3.5% for 3 years, then 2% until both the wife
and I kick the bucket.

But mentally I cannot make the shift to withdrawals cleanly. Every
month, instead of just moving the 3% to checking I have to go
through some mental anguish and drama. "How little can I take?"
We are living well, spending on vacations and whims regularly. It
must be a mental defect I have that in 2.5 years I cannot switch
thinking yet. I'm not complaining, just reinforcing your concern.

Dan
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Old 09-24-2011, 11:49 PM   #59
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All true, but getting back to the subject line, there is something psychologically painful about having to pull out a big chunk of money just after retiring.
TJ
No doubt that for some there is pain in the process. I have felt the pain and still do when I have to convert some asset into cash for living expenses. It is indeed hard for some to go from a savings mentality to a selling one. For some the savings becomes an end to itself and the act becomes much more than the mere collection of money in an account. When that activity stops mental and emotional trauma can be created for that individual which results in pain in some manifestation or another. I think all of us have some elements of this to some degree. I know it hurts me to do it but not so much that it makes me lose sleep over it.

We plan so we can.

Withdraws are a fact of life for many of us not living on dividends or pensions. Selling off is part of the whole process and should have been in the plan before one retired. It is is a surprise now one might think the plan was incomplete at the time of retirement.
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Old 09-25-2011, 05:45 AM   #60
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I think it comes down to how solid you believe your plan is and if you have adequate financial resources.


I recently FIREd. We (americans... and much of the globe) are in an extreme time right now. But I have tried to position our assets for tough times and to benefit when markets (and economy) turn around. This gave (and continues to give) me the confidence to not change our plans.

Since I FIRED... I have noticed that I am much more focused on our spending than I was when I was working. Partly because I have more time on my hands. But, we have not tightened our belt and cut spending... specifically discretionary spending.... maybe a better description would be "we have not cut consumption"... except w*rk related consumption.

Here some changes I have noticed in myself. There is nothing happening that I was not aware of before I FIREd... but I think I am much more focused on it... probably because of the economy and uncertainty of the times.

  1. I am kind of handy with doing certain types of work around the house. When I was working, I would pay to have many things done. I am doing many more projects myself now (which save us money). I had always planned on doing that... but I think the current economy (and uncertainty) has me seeing the benefit even more. In this way, we have cut non-discretionary spending.... but not consumption. The other benefit... it keeps me occupied. Since I am in early FIRE days... it is good to have some built in structure (e.g., spend time doing projects at home).
  2. We have a fairly large discretionary budget... in FIRE, it is an increased budget for travel. We are not cutting our traveling. But because we do not work... We do have the flexibility to seek out travel deals to try to save a few bucks here or there.
  3. We are eating out less. Mainly because we have more time on our hands to prepare meals at home. This has been going on since DW ERd. But has increased now that we are totally FIREd.
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