Making sense of all the ER noise and strategies

[DawgMan]

Like many who may be getting closer to hitting the "go" button for early retirement, I try and do some prudent research (such as "expert" advice from many of you on this site and the recommended tools like Firecalc and other 3rd party experts). As I continue to research other blogs, sites, experts and their approaches to AA and SWR, my head begins to spin. Eg. I started reading https://earlyretirementnow.com/2016/...-part-1-intro/ and Big ERN's series on SWR and AA concepts, and while I find his approach and depth of research very interesting, I start to get a little bury eyed. I realize that perhaps the beauty of all of this is there are many ways to navigate one's RE once you are "in it", but I find all the many recommended dos/don'ts as it relates to AA and SWR to sometimes being paralyzing for someone like myself, who "thinks" they have run all (or enough) traps, to have the confidence to launch. Since I am still a working stiff (end of 2019 is target launch), I can only read/scan the web so much and have frankly leaned into this site for much of my "RE education". I am somewhat of a believer in the KISS method for many things in life, despite my often compulsion to perform analysis/paralysis when new information is introduced. How did you remove the unnecessary noise and what primary tools/philosophies did you lean into to dive into the pool (i.e. 25 x projected RE income, Firecalc, "seat of your pants")?

[beachfire]

I am just a few months into retirement (age 53), but studied things as you describe for several years prior to pulling the trigger. In the end, I got comfortable with a 3.5% SWR not including SS. The most important thing for me was convincing myself that our retirement spending budget was accurate and allowed for the type of lifestyle we would be happy with. I can say that three months in we are THRILLED with our decision! It is the most freeing experience I have ever had, by a long shot. The financial stuff has been fine and kind of a fun activity for me and my DW to jointly manage. We too are keeping it simple on the investments/AA front operating in the 50/50 - 60/40 realm using a mix of ETFs and low cost funds.

I would say once you have done all your research, run all the calcs, tested your budget, then go for it. In terms of boredom, I think everyone is in different situations. We have not had a trace of boredom to this point and have a good list of things we want to and need to do for years to come. Best of luck and congrats on getting to this point!

[flintnational]

I am reminded of the saying, "There are some things you just can't explain to a virgin". To me FIRE is like this. It is a leap of faith based on some fundamental insights. Here are some of the things that I had to "experience" before I understood and felt good about FIRE. IMO, all the calculators and advice in the world will not overcome these feelings.

1) The world did not stop when the paychecks ended. (Prior to FIRE I wasn't sure.)
2) I have saved all my life. The strange feeling of withdrawing from savings quickly goes away.
3) You soon realize you love your new life and have a lot of flexibility to keep it. You can cut expenses, downsize get a part time j*b.
4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation.

So, you are correct. Keep your plans simple and ignore a lot of the data. It will not alleviate the above feelings. You have to make adequate plans and then take a leap.

[Hillbilly]

Like you, my head was spinning. I settled on whatever I did had to be manageable by DW with few instructions. That narrowed down the approach since she has no interest in investing. So, to keep it simple and reading some of Bogle's advice on balanced mutual funds in the 90's, I settled on: two balanced funds, reserve fund (cash), and daily checking account. I gave her a diagram that shows simple flows of funds and all the account log in info. One of the balanced funds is to be drawn down over time and make the overall AA change. Time to go fishing for me......

[SumDay]

I'm retiring in 37 days. I've been focusing on this goal, in earnest, for 3+ years. We downsized three years ago, and I felt like that was phase 1.

We've met with our fee-only financial advisor several times during that period, and we're good to go. I just simplified our portfolio with her help. FYI, I pay her only when I visit with her, and it's WAY less than I pay in annual fees on any one fund in our portfolio. I just couldn't pull the trigger though - the main reason was I wanted DH on Medicare, which happened June 1.

I probably run Firecalc once a week and am still amazed when it comes back at 100%. When I started at megacorp in the 80's, I had ~$3,500 in my 401(k) after a couple of years. Now we'll be living off more that we did during our w*rking years. Someone pinch me! I'm not bragging, I'm just amazed that after all this time the plan is coming together. I guess I'd say our advisor and Firecalc were the things that gave me the most confidence. We've settled on a 2.5% SWR and have quite a bit of wiggle room, if needed.

I have learned LOTS here. I just finished reading How To Retire Wild, Happy & Free because one of the biggest lessons I've learned here is that there's lots more to retirement than just the balance of your hard-earned savings. I follow a blogger The Retirement Manifesto Blog who isn't shy about sharing lots of details about his retirement AND financial planing, and while I don't mimic everything he does, I've gotten lots of great ideas and made them our own. He's not selling anything, just sharing his journey. I really like his bucket strategy post.

I'm a planner, and sometimes I enjoy the planning more than I enjoy the event. I don't want our retirement to be like that.

Good luck to you! It will all fall into place. Isn't the internet great? What did people do before there were boards like this? Seriously!

[REWahoo]

Quote:

Originally Posted by flintnational 4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation.

Very true.

Here is my own less-than-conservative spending history after 13 years of retirement at age 58.

Annual withdrawal rates (as a percentage of our initial nest egg):

Lowest 3.5%
Highest 9.8% (pre Social Security)
Average 5.2%

After this somewhat aggressive withdrawal history our nest egg (40/45/15) is currently 11% larger than when we retired (14% smaller after adjusting for CPI). We are now in RMD land and I don't expect our future withdrawals will exceed what the IRS requires.

My point is that for our limited span of experience, the 4% withdrawal rate is a very conservative number.

[DawgMan]

Quote:

Originally Posted by beachfire I am just a few months into retirement (age 53), but studied things as you describe for several years prior to pulling the trigger. In the end, I got comfortable with a 3.5% SWR not including SS. The most important thing for me was convincing myself that our retirement spending budget was accurate and allowed for the type of lifestyle we would be happy with. I can say that three months in we are THRILLED with our decision! It is the most freeing experience I have ever had, by a long shot. The financial stuff has been fine and kind of a fun activity for me and my DW to jointly manage. We too are keeping it simple on the investments/AA front operating in the 50/50 - 60/40 realm using a mix of ETFs and low cost funds. I would say once you have done all your research, run all the calcs, tested your budget, then go for it. In terms of boredom, I think everyone is in different situations. We have not had a trace of boredom to this point and have a good list of things we want to and need to do for years to come. Best of luck and congrats on getting to this point!

This is where I am spending most of my time right now. Planning for FatFire (lots of discretionary), but setting up 2 fall back budgets if/when we have a short or longer term recession.

[DawgMan]

Quote:

Originally Posted by flintnational I am reminded of the saying, "There are some things you just can't explain to a virgin". I might steel this!To me FIRE is like this. It is a leap of faith based on some fundamental insights. Here are some of the things that I had to "experience" before I understood and felt good about FIRE. IMO, all the calculators and advice in the world will not overcome these feelings. 1) The world did not stop when the paychecks ended. (Prior to FIRE I wasn't sure.) 2) I have saved all my life. The strange feeling of withdrawing from savings quickly goes away. 3) You soon realize you love your new life and have a lot of flexibility to keep it. You can cut expenses, downsize get a part time j*b. 4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation. So, you are correct. Keep your plans simple and ignore a lot of the data. It will not alleviate the above feelings. You have to make adequate plans and then take a leap.

Flipping the switch from being a big saver to tapping the bank feels a little spooky, but that's what it's there for, right

[Dtail]

Quote:

Originally Posted by REWahoo Very true. Here is my own less-than-conservative spending history after 13 years of retirement at age 58. Annual withdrawal rates (as a percentage of our initial nest egg): Lowest 3.5% Highest 9.8% (pre Social Security) Average 5.2% After this somewhat aggressive withdrawal history our nest egg (40/45/15) is currently 11% larger than when we retired (14% smaller after adjusting for CPI). We are now in RMD land and I don't expect our future withdrawals will exceed what the IRS requires. My point is that for our limited span of experience, the 4% withdrawal rate is a very conservative number.

Always nice to see real life examples, especially being over 4% and going through a large downsize market relatively early in your retirement.

I do place a lot of faith in the various (6) calculators that I still use in my current retirement of 1 year so far. (yes with the known caveats).

Indirect question - do you have anything coded as cash (15%) besides high yield savings such as CD's, etc?

[REWahoo]

Quote:

Originally Posted by Dtail . Indirect question - do you have anything coded as cash (15%) besides high yield savings such as CD's, etc?

No, that 15% is all CD's at 3% and money market funds at 2% (and growing).

[Dtail]

Quote:

Originally Posted by DawgMan Flipping the switch from being a big saver to tapping the bank feels a little spooky, but that's what it's there for, right

Indeed Dawgman, indeed. Somehow this aspect hasn't bothered me so far. Perhaps coz I was never a full blast LBYM guy, or perhaps coz I know that my expenses will never be fully covered by the incoming non portfolio income.

[DawgMan]

Quote:

Originally Posted by SumDay I'm retiring in 37 days. I've been focusing on this goal, in earnest, for 3+ years. We downsized three years ago, and I felt like that was phase 1. We've met with our fee-only financial advisor several times during that period, and we're good to go. I just simplified our portfolio with her help. FYI, I pay her only when I visit with her, and it's WAY less than I pay in annual fees on any one fund in our portfolio. I just couldn't pull the trigger though - the main reason was I wanted DH on Medicare, which happened June 1. I probably run Firecalc once a week and am still amazed when it comes back at 100%. When I started at megacorp in the 80's, I had ~$3,500 in my 401(k) after a couple of years. Now we'll be living off more that we did during our w*rking years. Someone pinch me! I'm not bragging, I'm just amazed that after all this time the plan is coming together. I guess I'd say our advisor and Firecalc were the things that gave me the most confidence. We've settled on a 2.5% SWR and have quite a bit of wiggle room, if needed. I have learned LOTS here. I just finished reading How To Retire Wild, Happy & Free because one of the biggest lessons I've learned here is that there's lots more to retirement than just the balance of your hard-earned savings. I follow a blogger The Retirement Manifesto Blog who isn't shy about sharing lots of details about his retirement AND financial planing, and while I don't mimic everything he does, I've gotten lots of great ideas and made them our own. He's not selling anything, just sharing his journey. I really like his bucket strategy post. I'm a planner, and sometimes I enjoy the planning more than I enjoy the event. I don't want our retirement to be like that. Good luck to you! It will all fall into place. Isn't the internet great? What did people do before there were boards like this? Seriously!

Weekly Firecalc... you do want to be sure!

I just finished re-reading Wild, Happy... Good reminder there is more to retirement than having a bunch of cash.

Like you, I am a planner always looking for a better mouse trap and underwriting the "what ifs".

[DawgMan]

Quote:

Originally Posted by REWahoo Very true. Here is my own less-than-conservative spending history after 13 years of retirement at age 58. Annual withdrawal rates (as a percentage of our initial nest egg): Lowest 3.5% Highest 9.8% (pre Social Security) Average 5.2% After this somewhat aggressive withdrawal history our nest egg (40/45/15) is currently 11% larger than when we retired (14% smaller after adjusting for CPI). We are now in RMD land and I don't expect our future withdrawals will exceed what the IRS requires. My point is that for our limited span of experience, the 4% withdrawal rate is a very conservative number.

Have to say, this is very impressive, especially considering you road thru the 2008 + until the market started performing again. Do share, if willing...

What was your WR in 2008 - 2012 each year?
Where you 100% dependent on your investments or did you have other income sources (i.e. working spouse, pension)?
Were you the same AA for the last 13 yrs?
What type of equity/bond funds did you hold during this period?

Based on your 13 yr experience and the numbers above, it seems clear your confidence level must be high... bravo!

[DawgMan]

Quote:

Originally Posted by Dtail Indeed Dawgman, indeed. Somehow this aspect hasn't bothered me so far. Perhaps coz I was never a full blast LBYM guy, or perhaps coz I know that my expenses will never be fully covered by the incoming non portfolio income.

I suppose where the real comfortableness would be is when you see your starting principle drop (as opposed to taking your annual withdrawal and seeing a higher balance) while still in your 50's.

[DawgMan]

Quote:

Originally Posted by DawgMan I suppose where the real comfortableness would be is when you see your starting principle drop (as opposed to taking your annual withdrawal and seeing a higher balance) while still in your 50's.

Like Trump, spellcheck spit out the wrong word "uncomfortableness".

[RobbieB]

I never had any noise. I retired before I even found this site. Never worried about anything. Planned to retire at 59.5 and left early at 59.

Birthday present to myself -

[REWahoo]

Quote:

Originally Posted by DawgMan What was your WR in 2008 - 2012 each year?

See this post. 2008 = year 3.

Quote:

Originally Posted by DawgMan Where you 100% dependent on your investments or did you have other income

No other income until I started SS in 2009 (year 4).

Quote:

Originally Posted by DawgMan Were you the same AA for the last 13 yrs?

No, I started retirement at 50/45/5 and migrated to 40/45/15 coming out of 08/09.

Quote:

Originally Posted by DawgMan What type of equity/bond funds did you hold during this period?

Going into 08/09 most of my equity and bond holdings were in two funds, Vanguard Wellesley and Dodge and Cox Balanced. I replaced Dodge and Cox with Wellington in early 2010 and have made no significant changes since that time.

[RunningBum]

A lot of us overthink it. I know I do, but I'm getting better. Part of it is that I like to play with numbers, but on things I don't, I've learned when enough is enough for me.

For example, I thought I had a pretty good withdrawal system with my own customize VPW strategy. Then I read a thread about people using CAPE to set %s, and thought I had to learn that. Then I decided, what I have is good enough. Same with budgets. I had thoughts of tracking every category closely, and decided total outflow each month was good enough. If I'm over budget I can always look closer. But I can get my investment net worth to the dollar, with and without PV of SS and pension, with and without estimated future tax liabilities, because I like to track that, and it's not too hard.

Having a buffer goes a long ways towards not having to micromanage, or manage at all, if the buffer is big enough.

I think as long as you do enough monitoring to be able to sleep at night, without ignorance, you're fine. I include the caveat because I think it's easy to take a glance after the first year and see you're fine, but how do you know? It's like running your first marathon, everyone feels fine in the first mile, but if you went out too fast, you'll pay for it in the end, so you better have some idea just how fast you can start.

[W2R]

Quote:

Originally Posted by DawgMan How did you remove the unnecessary noise and what primary tools/philosophies did you lean into to dive into the pool (i.e. 25 x projected RE income, Firecalc, "seat of your pants")?

Being a single woman with most of my family dead, and an introvert with few friends other than Frank to lean on, I felt absolutely compelled to work towards a financially bulletproof retirement. After a financially disastrous 1998 divorce that left me with a negative net worth, no house, less than $1000, no retirement savings or investments, and creditors hounding me, at age 50, I was scared to death about retirement. So my first step was ramping up the LBYM severely, and then working hard on retirement planning. I strongly felt, and feel, that my financial future is my own responsibility and I'd better not mess it up.

So anyway, I used ALL of the approaches you mention, and made sure my retirement would work no matter which I used. I feel like FIRECalc is the best calculator around, and everyone should at least be given the go-ahead by FIRECalc. That said, I'm not trusting any one calculator. I used every calculator I could find, used the 25x factor, modeled my income and outgo with inflation, studied the seminal papers on relevant topics at JFP and elsewhere, and blah blah blah.

Using all of these I was OK to retire and completely set by my late 50's, but then had to work for 2-3 more years beyond that to age 61.5 in order to qualify for retiree health insurance and mini-pension. I continued to save at the same rate during those 2-3 years, and meanwhile came into some good fortune, and also got some divorced spousal SS at age 66 that I wasn't expecting. So, to make a long story short, my ultra-conservative financial plan plus unexpected good fortune that was not part of my planning, resulted in a retirement that is WAY over-funded.

That's OK with me. Being a worry wart, I'd rather be over-funded than worried about money all the time.

My spending record is overly conservative too and I know that I need to ramp up my "Blow that Dough" efforts. How was I to know that the market would boom like this? I was planning for the opposite plus massive inflation. I haven't had much good luck in my life, so although I never expected it, I'll take it.

I sold my (paid off) home and bought my (paid off) Dream Home that I have always wanted, three years ago. So my spending in retirement has been:

2010: 2.61%
2011: 1.98%
2012: 2.12%
2013: 2.40%
2014: 1.70% (started getting divorced spousal SS)
2015: 1.72% + 6.92% for Dream Home purchase and move
2016: 1.75%
2017: 1.58%
2018: 0.28% (projected - - went on my own SS which is higher than divorced spousal)

My very conservative (45:55 AA) investment portfolio today is 134% of what it was on 11/9/2009, the day I retired. Part of the reason the percentages above are so low, is that even though I spend more every year I am not catching up with market increases. Guess I hit the "sweet spot". That's OK by me. I plan to self fund LTC, so some of it may be used for that some day.

[Rianne]

I use Firecalc and VG Nestegg and use extreme losses and see what happens. Or start with less and see what happens. Then rearrange portfolio and see what happens.

Maybe start with all cash - 1M/30yrs gives you 33K per year
Monte Carlo Simulation with VG
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% cash gives 98%
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% bonds gives 96%

Then manipulate worse case in a bunch of areas in Firecalc. With/without SS, add a huge outflow in one year, say $50k spending 4 years down the road, unexpected. Or market crash, now NW, $800K instead of 1M. Or sell house at market low, move to rented place at $1200/month. No maintenance fee, just rent.

I play around with the numbers, change the portfolio mix, change inflation from 3% to 2%, little changes make a big difference over 30 years.

It's certainly worth the time to think up every scenario and see the outcome. Just a thought.