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View Poll Results: What was your savings w/o SS divided by your budgeted spending?
Less than 10 7 5.26%
10-15 1 0.75%
15-20 15 11.28%
20-25 20 15.04%
Over 25 90 67.67%
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Poll:Care to share a bit?
Old 04-10-2016, 03:11 PM   #1
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Poll:Care to share a bit?

I've been reading here quite a while. I will be retiring in about 2-3 years at 58. I have a very detailed spending budget and have run Fido RIP (107) and Firecalc (100%) using our planned savings, small pension, and 75% of what SSI says we will receive.

However, I get the impression that my savings total is quite a bit less than the majority here - or maybe it is just those who typically speak up.

If I divide my budgeted spending into our planned savings total, I get about 18.6. I think this is the number that the adage 25x is needed to retire. It seems to work in RIP and Firecalc tools. Spending includes plan for SS, but SS not included in the division.

What's up with that? Am I that far behind? Does EVERYONE discount SSI entirely and assume more savings? Is this too complex to consider with the SS variable?

Would you retirees care to share what your multiplier number was when you retired? Did you factor in SS in your decision?
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Old 04-10-2016, 03:17 PM   #2
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There are several factors.

25 x spending translates to 4% withdraw rate.

If you look at my total spend / investable assets you get 6% .... but that's NOT my withdraw rate. That's because I have other income sources (DH on SS and rental income.) My actual withdrawal rate is closer to 3.5% (28 times).

Some folks have very little savings - but have very nice pensions... We're all individuals when it comes to our income streams/savings/etc.
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Old 04-10-2016, 03:25 PM   #3
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Quote:
Originally Posted by FIREmenow View Post
If I divide my budgeted spending into our planned savings total, I get about 18.6. I think this is the number that the adage 25x is needed to retire. It seems to work in RIP and Firecalc tools. Spending includes plan for SS, but SS not included in the division.

What's up with that?
Without knowing all the specifics, here's what I'm guessing is "up with that."

25x is a rough rule of thumb whereas retirement planning is far more complicated. Calculators like FIRECalc and FIDO account for much more of that complexity than a simple 25x guideline ever could.

If your FIRECalc & FIDO calculations include assumptions about SS and pension income, that's enough to throw the 25x rule of thumb completely out the window.

You could try to make some adjustments to how you're making the "savings / spending" calculation, but why bother? The information you're getting out of the retirement calculators is far more insightful than any rule of thumb could ever be.
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Old 04-10-2016, 04:01 PM   #4
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I retired in 2009. At that time, health care was skyrocketing in expense with no end in sight. My trigger to retire was not the amount that I had saved, but eligibility for subsidized retiree medical insurance. I had to work several years beyond when I would otherwise have been financially independent to qualify for retiree medical. Those years were very difficult for me.

After pushing through that obstacle, ironically I received a moderate and entirely unexpected inheritance shortly before retiring. Then in 2010 Obamacare was passed.

This is a perfect illustration of an ancient proverb, "Man plans, God laughs". All my work and planning made no difference at all. I could have just quit years earlier, and would have had I known that things would happen as they did. But how can I be sad about good fortune? I'm not.

Due to the unavoidable totality of these circumstances, at the time of my retirement my investment portfolio was about 36 times my spending, larger than I ever felt was needed for me. This was calculated as though I wouldn't have a pension or SS. Since then I have begun spending more.
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Old 04-10-2016, 04:17 PM   #5
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Even your poll and question are not a true sampling, so the answer you get will be skewed by who reads and responds.

I gather from your questions, you are concerned since your savings are not high, this should be a concern if your budget is fairly barren, it's not such a problem if your spending is opulent since you can switch from caviar to foie gras as needed.

Things I would ask in your shoes are:
Is that flexibility in your spending plan to cut out thousands per year if needed?
Is your pension indexed to inflation, or a flat rate amount which will be really bad when inflation comes back.
How do your numbers look if the stock market is down 30%
I would play with firecalc a lot instead of the 4% rule, as some places I've read say the 4% should really be 3.5% instead.
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Old 04-10-2016, 04:20 PM   #6
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If I divide my NW by my total spending now, it's something like 66+. Most of that I cannot even buy a cup of coffee with, as it is real estate equity. I also plan on ramping up my spending by quite a bit.

I also get free healthcare from the VA which is about 5 miles from my home. And a DGF that will retire with me that I will help support for a few years. She will also get nearly free healthcare from the State of MN.

I always figured that I cannot be 100% sure of my spending, therefore assume it will double. And my return on investments may be less than I think, so assume the return is half of what is 'normal'.

I'd rather work the extra year, and realize I could leave sooner, than have to stay at home and eat red beans and rice every day. (with hot dogs mixed in on special holidays).
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Old 04-10-2016, 06:10 PM   #7
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This may or may not help but our savings is exactly 25 times budgeted/estimated yearly spending. However, we do have a large safety net in a pension. It is not figured in the the above calculation. This allows us to splurge a little with travel and so forth but, if it ever went away, we could cover our basic living expenses. Eventually I will get a small amount from social security but again, not figured in.
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Old 04-10-2016, 06:10 PM   #8
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To me, the most relevant number to use in the denominator (that's the bottom number!) is estimated annual withdrawals from savings. Right now we're running at 28; when I start collecting SS at age 70 (I'm 63 now) that will go down.
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Old 04-10-2016, 06:55 PM   #9
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My own calculations are outlined in my first post here on ER, and were developed using assumptions made at the time,at age 53, in 1989, and based on 32 years of retirement with an end date of 2021. It was calculated on a spend down basis...

Sharing 23 years of Frugal Retirement

Using the formula proposed in the OP... the number would have worked out to less than 15, based on net worth at the time.

As it turned out, the the end result, at this time... 27 years later, the current (solvency) total time horizon works out to be more like 40 years of retirement.

As I look back, three major factors entered in, that were not in my initial planning scenario...
1. higher interest rates in the early years
2. lower than expected inflation
3. lower than planned spending in the early years.
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Old 04-10-2016, 07:13 PM   #10
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1.5% or in your terms about 66.6. Now this assume paying full medical expenses including max out of pocket for both of us. Include a couple trips (vacations ... based on a 7 day Caribbean cruise and 2 weeks hiking europe) plus other discretionary spending [modeled after 2013 actual spending]). As the market acted weird last year and early this... we easily adapt to much much less.

Not the % is not based on net worth, but just investable assets. SS not included.

Note that we will likely spend quite a bit more if the market behaves as there is quite a bit of margin in our plan. While we have live frugally, we realize this is a time to splurge on some trips, charitable contributions, etc... but not shift our overall lifestyle. We are not following an X% indexed to inflation withdraw rate. It will be flexible to markets, getting some life experiences while we can, etc.

I think there is a thread on turning retirement planning upside down that is talking about spending more $ early. We are hoping to do some of this while spending less in bad markets... more in good ones. But able to be comfortable on 1.5% or less.

Just looking for good hiking!
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Old 04-10-2016, 07:42 PM   #11
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Quote:
Originally Posted by FIREmenow View Post
I've been reading here quite a while. I will be retiring in about 2-3 years at 58. I have a very detailed spending budget and have run Fido RIP (107) and Firecalc (100%) using our planned savings, small pension, and 75% of what SSI says we will receive.

However, I get the impression that my savings total is quite a bit less than the majority here - or maybe it is just those who typically speak up.

If I divide my budgeted spending into our planned savings total, I get about 18.6. I think this is the number that the adage 25x is needed to retire. It seems to work in RIP and Firecalc tools. Spending includes plan for SS, but SS not included in the division.

What's up with that? Am I that far behind? Does EVERYONE discount SSI entirely and assume more savings? Is this too complex to consider with the SS variable?

Would you retirees care to share what your multiplier number was when you retired? Did you factor in SS in your decision?
So, all good questions. I'm going to assume that you have already done the bit about monitoring your spending and the result happens to require you to pull money out of your portfolio at a ratio of 18.6 years to deplete the total balance assuming no growth, etc. This appears to be bad at first blush, however once social security is accounted for things get better.

We're doing something like this as well, but we look at it in a slightly different way. We split our portfolio into two pieces, one the Fidelity piece, and the other a 401k+other piece. We'll consume the dividends from the fidelity piece at 2.7% a 37 ratio, but rapidly depleting the 401k piece over a period of 8-10 years until it is gone when we will start my social security. If we include the initial consumption of this 401k money, our withdrawals will be similar to yours of over 5%.

I'm also 58.

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Old 04-10-2016, 09:26 PM   #12
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Originally Posted by FIREmenow View Post
What's up with that? Am I that far behind? Does EVERYONE discount SSI entirely and assume more savings? Is this too complex to consider with the SS variable?

Would you retirees care to share what your multiplier number was when you retired? Did you factor in SS in your decision?
I have to confess what I originally planned on spending, and what I actually seem to be spending is a bit different. I planned on a multiplier of 25, but for the first two years my actual is around 20. That does not include SS, since I do not receive that yet.

I re-ran Firecalc with the actual values and still have a very good success rate predicted. Also, I will get some significant help when I get into the 60's in a few years with Medicare and social security. Also my daughter graduates college this year, and Our house will be paid off soon. It helps that I subscribe to the theory a person will spend less as they get older.

So I am watching and monitoring, and will make changes as required.
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Old 04-11-2016, 12:41 AM   #13
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50-60 not counting SS, pensions, rental income, more if counting SS, pensions, rental income. Health care is almost free through my husband's retiree insurance. I typically don't count everything in Firecalc. I still have a small inheritance coming up from my mom's estate.



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Old 04-11-2016, 04:44 AM   #14
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WOW! Thank you all for the super replies and discussion!

Especially your previous thread, imoldernu, which is like drinking from a fire hose for me!

I knew things were more complex and personal than one could make them into a single number - things just seemed out of whack.

My 18.6 number should only be for 4 years until we start SS (at 62). After that, my number will be more like 48 for what we will need to be taking from savings/investments.

That is also at the "premium" level of spending. We could easily go to a "nominal" level of spending, as in imoldernu's plan, and reduce spending by 25-30%.

I feel quite a bit better now.

Thanks again,
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Old 04-11-2016, 06:18 AM   #15
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Our situation is more complex than putting a number to it because we have multiple increases and decreases in expenses to factor in -

- House will be paid off in 10 years with a substantial $34k/year payment
- DW gets small pension in 3 years
- RMD's will increase tax hit
- At some point I will hire a PM for my rental properties
- SS
- Right now we factor in a travel premium to spend in our "go-go" years
- We are still doing a little work on the side (I will probably sell 5-8 houses as a realtor this year which is very variable in income)

It's in the 20-25x range right now but once you factor out the house payment that changes substantially.
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Old 04-11-2016, 06:22 AM   #16
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My 18.6 number should only be for 4 years until we start SS (at 62). After that, my number will be more like 48 for what we will need to be taking from savings/investments.
Well there's your answer

Probably best that you set aside the cash-out for the coming 4 years with some buffer, and then do [spend - SS] / investments. That number will turn out to be +/- 2.5% probably.

Which is pretty solid, even by forum standards.
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Old 04-11-2016, 06:34 AM   #17
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38 - As (before/after tax) accounts / budget
47 - As net worth (not incl ss/pension) / budget
"budget" would be bare bones expenses + 30%.
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Old 04-11-2016, 06:48 AM   #18
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I'll play I retired at 54 ten years ago my number was 20. Mr. Market was good to me so now 10 years of spending behind me and my number is 26. I did start SS at 62 and that is used as travel/fun money.

I was/am Firecalc calculated to be able to spend 150% more than my actual spending. I spent $40k last year on home repair and travel as not part of my normal spending, and still didn't bump up against my Firecalc suggested spending. Go figure.
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Old 04-11-2016, 07:35 AM   #19
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Quote:
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My 18.6 number should only be for 4 years until we start SS (at 62). After that, my number will be more like 48 for what we will need to be taking from savings/investments.
That answers the question.

Your average withdrawal is far less than 25x. It is a bit front end loaded so you're somewhat more vulnerable to problems if you should retire into a very bad market. It's possible to correct for that if you have sufficient flexibility in your spending so that you can cut back if you retire into a really nasty market in those early years before SS.
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Old 04-11-2016, 07:39 AM   #20
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Quote:
Originally Posted by FIREmenow View Post
My 18.6 number should only be for 4 years until we start SS (at 62). After that, my number will be more like 48 for what we will need to be taking from savings/investments.
That's almost identical to our situation when we retired 11 years ago. We planned on waiting until FRA to start collecting SS but the 08/09 market crash "enticed" me into taking it at age 62.
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