Is 4% really safe?

[Jarhead*]

Nords: *Medicare premium is deducted from Soc. Sec. check automatically. *(Gross amount is subject to taxes).
Check you receive is after deductions.

Re: *pocketing discounts. *Not much.

Second part of question had me smiling a bit though, re: skins games. *The target rich environment are stock brokers, attorneys, etc. that have large cash flows, and spend no time working on their game at the driving range, etc. etc. *They usually spend more money on up-dated equipment every year than I do in 10 years.

What they are trying to do is "buy" a golf game. *Not possible. *

Running into a "covey" of these guys in a "skins" game is
equivilent to "Cut-Throat" fishing in a hatchery. 8)

Life, you gotta love it.

[Cool Dood]

So are you planning a retirement around the concept of offing yourself?

[Jarhead*]

Quote:

Originally Posted by REWahoo! C'mon Nords, if Jarhead had to leave his experience income ("I'll give you young punks an experience that will improve my income") out of his retirement spending he couldn't even afford oatmeal!*

;

[haha]

Quote:

Originally Posted by Jarhead* Second part of question had me smiling a bit though, re: skins games. *The target rich environment are stock brokers, attorneys, etc. that have large cash flows, and spend no time working on their game at the driving range, etc. etc. *They usually spend more money on up-dated equipment every year than I do in 10 years. What they are trying to do is "buy" a golf game. *Not possible. * Running into a "covey" of these guys in a "skins" game is equivilent to "Cut-Throat" fishing in a hatchery. 8) Life, you gotta love it.

Especially when lived this way.*

Ha

[youbet]

Quote:

Originally Posted by rodmail It is no less a failure to find oneself on one's deathbed with $10 million in portfolio after spending a lifetime denying oneself luxuries and pleasures than to find oneself out of money a year before death. In fact, I'll venture forth with the suggestion that it is a GREATER failure to have underspent than overspent.*

I can't argue that your view on conservative vs. aggressive SWR is not the right view....... for you.* I respect how you feel about it, but that outlook wouldn't work for me.

As long as I'm living comfortably, can afford to join friends for social occasions, do a little travel, etc., leaving some assets behind to deserving heirs, causes or charities doesn't bother me at all.

It seems that the rules for this game called life are unique for each of us!* Makes it interesting, huh?* *

[haha]

Quote:

Originally Posted by youbet I can't argue that your view on conservative vs. liberal SWR is the right view....... for you.* I respect how you feel about it, but that outlook wouldn't work for me. As long as I'm living comfortably, can afford to join friends for social occasions, do a little travel, etc., leaving some assets behind to deserving heirs, causes or charities doesn't bother me at all. It seems that the rules for this game called life are unique for each of us!* Makes it interesting, huh?* *

I see it like you. Although I could spend more money very happily, that course would increase my risk of what would be for me strongly negative outcomes. Mainly, I don't want to wind up depending on my kids for support.

The consumption model of a happy life is not very meaningful to me.

Ha

[cute fuzzy bunny]

If I find it piling up to quickly, I'm pretty sure I can figure out a way to resolve that problem.

However, I can think of few things more essentially horrifying than being 80 or 90 years old and running out of money.

[2B]

Quote:

Originally Posted by youbet As long as I'm living comfortably, can afford to join friends for social occasions, do a little travel, etc., leaving some assets behind to deserving heirs, causes or charities doesn't bother me at all.

That's the challenge on SWR. *You can decide you'll live forever and can only take a 3% SWR. *That puts you delaying retirement forever to accumulate assets or living your first ten (heathiest) years in ER at a dramatically reduced lifestyle. *It comes down to a question of how much is enough to "live comfortably, join friends for social occasion and travel." *

Follow Cut-Throat's formula and many of us would be living an ER barebones lifestyle that would depress the Unibomber. *My goal is not to live comfortably by rumaging through dumpsters although it could be quite a social event in the right places.

FIRECalc is one view of the past. *I assumes equivalent purchasing power adjusting for inflation. *It pretty much guarantees a sizeable estate to the heirs of the FIRECalc follower. *

There are other forces involved that can impact what makes a SWR. *Everyone is different but research shows that spending drops off as one ages. *That drop off includes medical spending. *People can and will adjust their spending if their resources fall why can't they raise them if they rise? *I"ll be glad to leave an estate to my children and grandchildren. *I just don't want to force myself into an overly frugal lifestyle out of fear of dying in total poverty.

[tryan]

When I got out at 43 I figured on a 3% withdrawl for the first several (~10) years. Since the non-smokers in my genes lived well into the 80's.

Plan is to ramp UP withdrawls as we age. The 80th B-day party should be some place fun!

[2B]

Plan is to ramp UP withdrawls as we age. The 80th B-day party should be some place fun!

The data says you won't.

[tryan]

yeah ... this might consist of gifting large wads of $$ to kids/grandkids and watching how they enjoy the loot.

Quote:

Originally Posted by tryan When I got out at 43 I figured on a 3% withdrawl for the first several (~10) years. Since the non-smokers in my genes lived well into the 80's. Plan is to ramp UP withdrawls as we age. The 80th B-day party should be some place fun!

Trust me 80 is not pretty, and money spent at that age is not near as enjoyable as money spent the previous 20 years.

As Warren Buffet said 'Don't put off Sex until your old age' 8)

[2B]

Tryan clearly has the goal of giving money away and not enjoying it. If that is the goal, work until you die. The more people contributing to SS improves the odds I may actually get some.

Quote:

Originally Posted by 2B Follow Cut-Throat's formula and many of us would be living an ER barebones lifestyle that would depress the Unibomber. My goal is not to live comfortably by rumaging through dumpsters although it could be quite a social event in the right places.

I'm confused! - How does following my formula equal living an ER barebones lifestyle?

I did multiply the necessities by 2! You must not understand what I posted!

[2B]

CT,

It probably has to do with your definition of "barebones" and my wife's definition.* I figure I can ER tomorrow but my ability to stay in my oversized money pit would be compromised if I still wanted to torture helpless fish as much as I would like.* My wife values the money pit and enjoys all the rooms we store unneeded furniture in.* She considers its care and feeding part of "barebones."

I need to have her get a good job with health benefits.* She pulled a fast one on me by deferring her job search after we moved to be closer to my new job.* That would raise the income closer to her idea of "barebones."

Also, multiplying by 25 keeps the big inheritance aspect alive.* The SWR on twice "barebones" says you'd survive on 2%.* I'm considering the 6% possibility but not including SS since it won't start for over a decade.* I must confess I am a big chicken.* I probably won't be comfortable taking that much right away.* That extends my sentence by a few years but I'm going to start taking better vacations when DW addresses the issue of her parents.* That's probably my biggest variable for ER.

:

[unclemick]

Duh !

I am following Cut-Thoat's formula of sorts - albeit as a late starter - after a decade plus as a humble BUT frugal cheap bastard.

heh heh heh heh heh

[haha]

Boys and girls, here was our 4% SWR on a platter. On Jan 15th, 2000, the treasury issued 10 year TIPs with a real coupon of 4 1/4%.

Buy those and go to sleep.

Oh wait, I was asleep; that's why I didn't buy them.* :P

Ha

[cute fuzzy bunny]

Providing CPI = your personal rate of inflation.

I'd lose 20-30% of buying power every ten years...

[Nords]

Quote:

Originally Posted by Cute Fuzzy Bunny If I find it piling up to quickly, I'm pretty sure I can figure out a way to resolve that problem.

Yeah, but how many Lexuses (Lexii?) can your spouse drive?

Quote:

Originally Posted by 2B FIRECalc is one view of the past. *I assumes equivalent purchasing power adjusting for inflation. *It pretty much guarantees a sizeable estate to the heirs of the FIRECalc follower. *

If you have a better calculator in mind, give us a link. *Monte Carlo is even more conservative than FIRECalc.

Quote:

Originally Posted by 2B There are other forces involved that can impact what makes a SWR. *Everyone is different but research shows that spending drops off as one ages. *That drop off includes medical spending.

Again, do you have a study that spends some time tackling the question of medical spending with increasing old age and concludes that spending gets lower? *Especially with the recent Medicare prescription legislation?

Because the studies I've read either ignore it or, at best, say that it's going to go up heroically in the final year or two of life.

Quote:

Originally Posted by 2B People can and will adjust their spending if their resources fall why can't they raise them if they rise? *I"ll be glad to leave an estate to my children and grandchildren. *I just don't want to force myself into an overly frugal lifestyle out of fear of dying in total poverty.

It's easy to lower spending in the face of homelessness or starvation. *When resources rise, you discover that some things no longer deliver the value that you expected and that many other things, which do bring value, don't require large handfuls of cash.

Worry constructively. *I think anyone contemplating complete FIRE should brainstorm the things they plan on doing with their lives... kid's weddings, fantasy vacations, regular entertainment, a new roof, replacement vehicles & appliances, and historical spending. *Health insurance & prescription costs should be part of that, too. *Then they should develop a detailed budget to handle all those expenses. *Then they should divide by 4% to achieve a reasonable starting point for their ER portfolio.

At that point they have to decide what they want to do the most to make the math work: *Work longer, raise their income, or lower their expenses. *I'm betting that those options are listed in their order of difficulty...

No one is advocating a life of dumpster diving, not that there's anything wrong with that. *What Cut-Throat and others are trying to point out is that calculators don't handle a variable SWR. *If your expenses are fixed then you can't handle a variable SWR either. *If, however, you can cut out a vacation or even drive an older car for a few more years, then your SWR can drop when the markets drop (if necessary). *

If you take Bob Clyatt's approach to early semi-retirement, then you don't mind working part of a really bad year to tide things over. *No one is implying that you have to take shifts as both a Wal-Mart greeter and a Home Depot stocker.

While I'd be delighted to have our portfolio significantly exceed our lifespans, I watched my grandfather (and his portfolio) wither through 14 years in a full-care facility. *He died at age 97, about 18 months short of Medicaid, and I think he'd have a hard time believing that medical expenses drop off with age... because he was spending about $50K a year on them at that point!

[2B]

CT quote:
Myself, I have the ultimate backup plan - which is the 'Trout Bum in the trailer park down by the River' Lifestyle. - This is if we enter the WAB style depression of 1929 and Stock Market Prices do not recover for my generation. - In which case I will even give up catch and release in favor of catch and Fillet!

I agree.* If DW should change her mind, I'd be there except I'd move between the Stripers/Blues and the Tarpon/Bones.* I wouldn't eat as well in the winter but I'm sure I could find some reds or specs.


Quote from Nords:
If you have a better calculator in mind, give us a link.* Monte Carlo is even more conservative than FIRECalc.

I'm referring to the article by Guyton in the March 2006 issue of FPA Journal.* It goes up to 6.2% with spending rules.* Yes, the spending will rise and fall but the spending power overall stands up well.

Another Nords quote:
Again, do you have a study that spends some time tackling the question of medical spending with increasing old age and concludes that spending gets lower?* Especially with the recent Medicare prescription legislation?

I don't have a reference handy.* I had assumed up to about 6 months ago to plan for a horrible medical increase the final few years of life.* The study I saw (probably in the FPA Journal) studied life spending and found a nominal 15% decrease in total spending every five years after 65.* There are numerous anectodal stories where my ol' grandma spent 48 years in a nursing home at $100K per year but the data they referenced was composite.* My parents both died without benefit of nursing home and the bills associated with their expenses were minimal.* My MIL has been in a very good quality nursing home at $4K/mo since August.* We'll see how long she lives.* I know if she wasn't there she would be dead by now.* One key fact to remember, my MIL doesn't spend $200 per month beyond this cost.

It all comes down to the amount of risk someone is willing to take and how many scenarios of disaster you want to cover.* I'm personally willing to risk the longer nursing home stay since I have a family history of not being in one long (a great grandfather in an assisted living home for about 5 years and a grandfather that lasted 2 months).* In DW's family only the good die young which means DW is already on borrowed time and MIL/FIL may live forever.




*