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Old 03-12-2014, 11:32 AM   #21
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Following a 4%-based withdrawal scheme will seem a little strange if you are taking 4% out when you are hitting 100. 4% is intended for a 30 year future period. By 100 you will have a much higher SWR. Hence the RMD-based schemes, which have you taking much higher percentages as you age. Calculating a new SWR every year would do the same thing. Not sure that will mean much to me if my portfolio is doing well at age 100, but it will be important if my portfolio has been declining. I'll have no problem taking 10% of my portfolio at age 100 if that's what's required to support my normal budget.
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Old 03-12-2014, 11:45 AM   #22
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I'm 33 and retired, and even though my spouse still has a year or two left in her career, we are pretending we are in ER and mostly ignoring her salary (which keeps building up in a cash account along with some smallish income from my side hustles).

We have budgeted $32,000 per year for retirement spending and that includes $5,000 or so for travel. $32,000 is less than a 3% withdrawal rate (which is comfortable for us given we have 5-6 decades of ER to fund).

This year we might spend $6000-7000 on travel since we are planning a trip to Canada for 5 weeks for the whole family and we already booked a week-long cruise to the Caribbean and Mexico (for the four of us, leaving the toddler back in the States).

I figure this is one of those good years of plenty. We are making a killing in the market, so we can afford to live it up some. That may mean blowing our $32k budget by a few thousand dollars.

If we were to lose 30% of the portfolio next year, I doubt we would spend anywhere close to $5k on travel!

Now that I'm ER, I "get it" with regard to withdrawals. No way could I stick to a fixed percentage plus an inflation adjustment. If the market goes bonkers (up), and we have $2-$2.5 million, we'll definitely spend significantly more than $32,000 per year.
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Old 03-12-2014, 12:33 PM   #23
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FUEGO,

A bit off-topic, but my sense is that being a stay-at-home-dad and being retired are two entirely different things.

When I was working and DW was a SAHM we never considered her to be "retired".

Though I must admit, I'm not sure how to describe the difference for people who are retired and still have kids living at home, so if you prefer retired, so be it!

Once your DW retires and neither of you are working then I get it. I wish I could have done it at 33. Good for you!
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Old 03-12-2014, 01:11 PM   #24
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Quote:
Originally Posted by FUEGO View Post
I'm 33 and retired, and even though my spouse still has a year or two left in her career, we are pretending we are in ER and mostly ignoring her salary (which keeps building up in a cash account along with some smallish income from my side hustles).

We have budgeted $32,000 per year for retirement spending and that includes $5,000 or so for travel. $32,000 is less than a 3% withdrawal rate (which is comfortable for us given we have 5-6 decades of ER to fund).

This year we might spend $6000-7000 on travel since we are planning a trip to Canada for 5 weeks for the whole family and we already booked a week-long cruise to the Caribbean and Mexico (for the four of us, leaving the toddler back in the States).

I figure this is one of those good years of plenty. We are making a killing in the market, so we can afford to live it up some. That may mean blowing our $32k budget by a few thousand dollars.

If we were to lose 30% of the portfolio next year, I doubt we would spend anywhere close to $5k on travel!

Now that I'm ER, I "get it" with regard to withdrawals. No way could I stick to a fixed percentage plus an inflation adjustment. If the market goes bonkers (up), and we have $2-$2.5 million, we'll definitely spend significantly more than $32,000 per year.
I may be a bit off the mark here with my comment, but with three young kids $32K seems very low, even for a LBYM type. It is barely above the poverty level and in 10 years you will have the first of three kids starting college. In my experience kids don't get cheaper as they get older.

Also at 33 you could just be entering the rising part of your career, which could bring your earnings up quite substantially. And of course staying out of the workplace too long has ramifications for this. Another 10 years of earnings with your kind of savings rate could get you past all of this, and you could still retire early and comfortably.

If it were just the two of you, then it would be fine, but I would be very worried if I were in your position quitting work now with only $32K and three young kids.
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Old 03-12-2014, 01:19 PM   #25
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Quote:
Originally Posted by pb4uski View Post
FUEGO,

A bit off-topic, but my sense is that being a stay-at-home-dad and being retired are two entirely different things.

When I was working and DW was a SAHM we never considered her to be "retired".

Though I must admit, I'm not sure how to describe the difference for people who are retired and still have kids living at home, so if you prefer retired, so be it!

Once your DW retires and neither of you are working then I get it. I wish I could have done it at 33. Good for you!
Yeah, that's why I poke fun at myself and say I'm a stay at home dad (labels don't really matter to me, so call me what you want!). If we weren't FI, I'd go get a job so we can hit FI sooner. DW has a pretty sweet set up at work (40 hours/wk, frequent telecommute, extra 5 weeks paid vacation this year, 2-3 months extra paid vacation next year). So for a year or two, she'll be "full time" (if that's the right word for working 8-9 months each year) and I'll be retired. After that we'll be retired. Or 2 stay at home parents, if you like.
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Old 03-12-2014, 01:26 PM   #26
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I may be a bit off the mark here with my comment, but with three young kids $32K seems very low, even for a LBYM type. It is barely above the poverty level and in 10 years you will have the first of three kids starting college. In my experience kids don't get cheaper as they get older.

Also at 33 you could just be entering the rising part of your career, which could bring your earnings up quite substantially. And of course staying out of the workplace too long has ramifications for this. Another 10 years of earnings with your kind of savings rate could get you past all of this, and you could still retire early and comfortably.

If it were just the two of you, then it would be fine, but I would be very worried if I were in your position quitting work now with only $32K and three young kids.
It's hard to believe the Federal Poverty Level is so high!

We live in North Carolina, and it just isn't that expensive here. I've spent a lot of time tweaking the budget, and put enough fun money in there that could be cut if we needed to. Or diverted to kid expenses should they grow to the moon.

I didn't add in a bunch of additional expense for their teen years, but I figure you might have a point there. But with the way kids are shunning driver's licenses and cars these days, I don't know how much those expenses will really be. And we use the car so infrequently, it might just be a few thousand $$ for insurance.

College is somewhat of a question mark, but we have about half the necessary tuition saved up in a 529. There's lots of other ways to pay for college or reduce the costs, and we have two great local universities that offer in-state tuition.

As for peak income years, I don't know how much higher my income would go. In my branch of engineering, there seems to be a cliff around the $70-80k mark where I was. You could work more or travel more and make more. No thanks to both!

Funny you mention 10 more years of earnings to set me right. I'll just enjoy 10 more years of retirement and then see if we are multi-millionaires or destitute paupers. Maybe I'll go back to work then. Not a whole lot has changed in my field in 10 years, so I figure in another 10, I can always jump back in. Just have to be a little, what is it one poster used to say, "agile, mobile, and hostile"? Money is pretty easy to make, especially when you only need $32k to live the good life!

My cover story will be "hey I was a stay at home dad for the last X years. My kids were important to me. Look how awesome they turned out, now that they are in college. Now hire me and let's build $hit together!". Or I'll just start my own company, hustle up some business, and make my next million that way. I have capital and standing offers from friends that want to go out on their own but like the security blanket of a paycheck a bit too much.
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