This is a tricky one.
Instead the questions about % of net worth for home, car, or other categories... which often depends on current age, how about a look ahead to where you expect to be when you are older... 60's, 70's or 80's.
In short, when you look ahead, do you expect to ever spend down your capital assets or your nest egg?
There is such emphasis on Safe Withdrawal Rates, that it makes me wonder if the worry about security in old age, is causing many to continue in unsatisfying jobs.
Those who have made the decision to retire early... and who post here... are obviously satisfied with their decision. Using a calculator takes much of the work out of planning, but that doesn't always represent individual situations or expectations.
Not to put too fine a point on the subject, but... planning could mean more than just estimating a percent of current expenses to plan for the future.
If the plan calls for 75% of needs for a current salary of $100K, then the plan usually estimates future needs (and subsequent to end of life years) at $75K.
So here's the thought. Instead of only planning this way, set up a spread sheet, with 1, 5 or 10 year brackets, to make educated guesses as to what and when conditions may change.
We did this early on, before retirement, and while there were individual variations, our current net worth (inflation adjusted) is almost 100% dead on, and that's 25 years later..
........................................................
Down to the nitty gritty... expenses may go up and down, and adjustments to be made on a by-year or by bracket year basis.
College loans
Mortgage
Change in home value... downsizing
Change in cost of living by location ie. Boise = 70% of San Francisco
Commute expense
Auto Expense ... 1, 2, 3 vehicles?
Increased Travel
Entertainment
Social Security/Pension kick in year.
Healthcare cost reduction w/Medicare kick in
Investable assets from sale of house, land, other personal property.
Reduction in insurance costs... extra vehicles, lower house insurance and presumably the life insurance you don't need.
Initial celebration costs of new retirement travel, hobbies, resettling home expenses
The list can be long or short, but setting up a spreadsheet for total net worth worked for us... very simple, but not just a one time calculator result, but a by year estimate, that shows potential pitfalls or opportunities.
In our case, there were a number of changes that caused vast fluctuations over the first 10 years... starting from our our initial planning, and causing changes in plans as we varied from the original.
Selling my business and the house.
Moving to the campground.
One year of home search travel.
Buying in Florida community and 6/6 snowbirding
Initial increase in healthcost
SS @ age 62
Travel costs
Lowered cost of living than Naperville IL area... 25% less
Next 10 years... biggest part of plan change, buying a year round home
for cash.
And now...in the 25 to 30 year period of our planning, looking to divest of FL home and eventually our camp on the lake... so some more changes in cash position.
This wasn't a science, and no way a detailed day by day project. In truth, just a once a year look back to check if we're still on course.. The part that has left us in a comfort zone, is that we have a better feeling of where we've been and where we're going. As we look ahead, we have a "dollar picture" of what it will cost us for long term care and for a total of 35 years of retirement.
Back to the top... Spending down net worth. In my own case, using only a retirement calculator, would have led me to at least five more years of employment. Looking at an annual decline in Net Worth at our age, is not at all traumatic... It's exactly what we planned for.
Instead the questions about % of net worth for home, car, or other categories... which often depends on current age, how about a look ahead to where you expect to be when you are older... 60's, 70's or 80's.
In short, when you look ahead, do you expect to ever spend down your capital assets or your nest egg?
There is such emphasis on Safe Withdrawal Rates, that it makes me wonder if the worry about security in old age, is causing many to continue in unsatisfying jobs.
Those who have made the decision to retire early... and who post here... are obviously satisfied with their decision. Using a calculator takes much of the work out of planning, but that doesn't always represent individual situations or expectations.
Not to put too fine a point on the subject, but... planning could mean more than just estimating a percent of current expenses to plan for the future.
If the plan calls for 75% of needs for a current salary of $100K, then the plan usually estimates future needs (and subsequent to end of life years) at $75K.
So here's the thought. Instead of only planning this way, set up a spread sheet, with 1, 5 or 10 year brackets, to make educated guesses as to what and when conditions may change.
We did this early on, before retirement, and while there were individual variations, our current net worth (inflation adjusted) is almost 100% dead on, and that's 25 years later..
........................................................
Down to the nitty gritty... expenses may go up and down, and adjustments to be made on a by-year or by bracket year basis.
College loans
Mortgage
Change in home value... downsizing
Change in cost of living by location ie. Boise = 70% of San Francisco
Commute expense
Auto Expense ... 1, 2, 3 vehicles?
Increased Travel
Entertainment
Social Security/Pension kick in year.
Healthcare cost reduction w/Medicare kick in
Investable assets from sale of house, land, other personal property.
Reduction in insurance costs... extra vehicles, lower house insurance and presumably the life insurance you don't need.
Initial celebration costs of new retirement travel, hobbies, resettling home expenses
The list can be long or short, but setting up a spreadsheet for total net worth worked for us... very simple, but not just a one time calculator result, but a by year estimate, that shows potential pitfalls or opportunities.
In our case, there were a number of changes that caused vast fluctuations over the first 10 years... starting from our our initial planning, and causing changes in plans as we varied from the original.
Selling my business and the house.
Moving to the campground.
One year of home search travel.
Buying in Florida community and 6/6 snowbirding
Initial increase in healthcost
SS @ age 62
Travel costs
Lowered cost of living than Naperville IL area... 25% less
Next 10 years... biggest part of plan change, buying a year round home
for cash.
And now...in the 25 to 30 year period of our planning, looking to divest of FL home and eventually our camp on the lake... so some more changes in cash position.
This wasn't a science, and no way a detailed day by day project. In truth, just a once a year look back to check if we're still on course.. The part that has left us in a comfort zone, is that we have a better feeling of where we've been and where we're going. As we look ahead, we have a "dollar picture" of what it will cost us for long term care and for a total of 35 years of retirement.
Back to the top... Spending down net worth. In my own case, using only a retirement calculator, would have led me to at least five more years of employment. Looking at an annual decline in Net Worth at our age, is not at all traumatic... It's exactly what we planned for.
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