Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Should I...?
Old 05-02-2014, 01:37 PM   #1
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
Should I...?

Hello Everyone,

I’ve been working towards an ER date in the 2017-2019 range. I’m now rethinking the plan and contemplating becoming part of the class of ‘14. My wife is already retired.

This is not really a “can I ER” post, as I’m pretty confident that I can. This is more of a “should I ER in 2014” post? For which there are no right answers, but I’m interested in people’s perspective.

Basic information:
- I know our current/past expenses, and have done my best estimate of the changes we would see in retirement.
- We both will have moderate pensions. If we take SS at 70, it will combine to cover all of our normal expenses from that point on.
- We have partial health insurance coverage from my wife’s former employer (a school district). It is not full coverage, but the partial premium and group coverage are a key part of our ER plans.
- Our savings are in a mix of after-tax and tax-deferred accounts, and we will have access to enough funds pre-59½.

In order for me to retire in 2014 v. 2017+, we need to:
- Mostly abandon international travel and limit ourselves to the continental US and Canada. Disappointing, but not a show-stopper.
- Accept that I may have to go back to w*rk at a much lower salary if my wife’s partial medical coverage were to end. It is “guaranteed”, but clearly there are risks given that it is a relatively poor urban district and retiree medical is funded year-to-year.
- Shift to a 3% variable WR – we would now cut back when our assets decline (since this will be 3% of assets, not a constant inflation adjusted 3% of the original amount).
- Take SS early. We'd still be okay if our assets support an inflation-adjusted 3% of our starting amount, but we trade predictable SS for much less predictable stocks/bonds.
- Accept that our “LTC/savings” pool (which we’d be doing 3% withdrawals from) could shrink significantly depending on our sequence of returns. It won’t go to zero, but it could drop 50%+ if we repeat the 30’s, 70’s or 2000’s.

So basically I gain 3-5 years of retirement in return for accepting more risks and reducing my lifestyle a bit.

I’m leaning towards joining the class of ’14, but I’m interested in hearing other perspectives.

Thanks,
-Travel4Fun
__________________

__________________
Travel4Fun is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-02-2014, 02:10 PM   #2
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
- Mostly abandon international travel and limit ourselves to the continental US and Canada. Disappointing, but not a show-stopper.
If it were me, I wouldn't quit this year unless my life was absolutely miserable. This is obviously important or you wouldn't have mentioned it.

Quote:
- Shift to a 3% variable WR – we would now cut back when our assets decline (since this will be 3% of assets, not a constant inflation adjusted 3% of the original amount).
Bob Clyatt showed that a 4%/95% plan would historically maintain your inflation adjusted principal over 40 years about 95% of the time. Why the 3%?

It needn't be 2014 or 2017... there's 2015, 2016
__________________

__________________
walkinwood is online now   Reply With Quote
Old 05-02-2014, 02:20 PM   #3
Full time employment: Posting here.
dtbach's Avatar
 
Join Date: Apr 2011
Location: Madison
Posts: 752
You've thought through things pretty well and it certainly looks doable from what you have told us. I think you could spend a life time just seeing the US and Canada so that isn't much of a show-stopper as you have said. Why don't you make it 2015 and split the difference.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
dtbach is offline   Reply With Quote
Old 05-02-2014, 05:23 PM   #4
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
walkinwood & dtbach,

Thanks for your thoughts. Losing the international travel is disappointing, but in addition to what dtbach mentioned about the beauty in the US/Canada (which I agree with), my wife, despite our no pets agreement when the last dog died, has adopted a stray cat and our son's dog. Which will make longer international trips in retirement rather challenging. I'd still love to have the option, but as a practical matter it may be difficult even with the money. And while I'd love to spend two months in New Zealand, a month in Ireland, six weeks in Italy, etc., we have had the opportunity to spend time on six continents and visit number of countries over the last fifteen years.

2015 is certainly an option that I'm considering. But that really means about a year and a half, since I'll suffer from One More Month syndrome from roughly Oct-June due to several financial incentives that occur between Jan-June. So it's retire in 4-5 months, or retire in 16-17 months, etc.
__________________
Travel4Fun is offline   Reply With Quote
Old 05-02-2014, 06:00 PM   #5
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
walkinwood,

Interesting that you bring up Bob Clyatt. I'm actually looking at a variation of what he proposes. My reasoning on the 3% is two-fold.

1. Although I don't expect that yet another crash is imminent (although who knows), I have relatively conservative expectations for returns given the current low interest rates and fully valued stock market. I have no idea what will happen, but my long-term expectations are that a repeat of the 90s is unlikely any time soon. So a 3% withdrawal seems more in line with lower expected returns.

2. If you run simulations using Bob's approach, the results are interesting. Picking a start year of 1969 (near worst case, perhaps, but enlightening about what happens if things don't go well) and a $1M portfolio and 50/50 asset allocation (in real dollars):
  • With a 4% / 95% approach your payout drops by more than 50% in the worst case and spends 28 years below your first year payout. That's a $20k (real) haircut on spending in the worst year and twelve years with more than a $10k (real) cut.
  • With a 3% / 95% approach your payout (only) drops by 45% and (only) spends 20 years below the first year payout. Still not good, but better. More significantly, the worst case is only a $13k (real)haircut, and there are only five years with a $10k+ (real) haircut.
  • I'm actually thinking about a 3% / 100% approach, which means that my payout never gets cut in nominal dollars. In real dollars, it performs fairly similarly to the 3% / 95% approach for the 1969 start time, although it would get ugly in a deflationary environment.

Hopefully we're looking at sunshine and flowers for the years ahead and none of this matters. And we may choose to cut back further if things go 70s or 2008 on us again. But at least as a starting point, I'm more comfortable with 3% than 4%.

I don't know how much all this really matters in the end, but I do enjoy analyzing this kind of stuff. If I was retired, I could spend hours every day analyzing this. Such a shame that my wife probably won't let me do that. Whatever date I end up choosing.
__________________
Travel4Fun is offline   Reply With Quote
Old 05-02-2014, 07:08 PM   #6
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,826
You haven't shared much about your work life, which makes it difficult for me to have an opinion. Do you enjoy what you do? Are there alternatives? Can you work part time?
__________________
Ready is offline   Reply With Quote
Old 05-02-2014, 07:32 PM   #7
Thinks s/he gets paid by the post
heeyy_joe's Avatar
 
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
2014 is not your year, maybe 2015.
__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote
Old 05-02-2014, 09:57 PM   #8
Full time employment: Posting here.
CaliforniaMan's Avatar
 
Join Date: Dec 2013
Location: San Diego
Posts: 846
Quote:
Originally Posted by Travel4Fun View Post
...
I don't know how much all this really matters in the end, but I do enjoy analyzing this kind of stuff. If I was retired, I could spend hours every day analyzing this. Such a shame that my wife probably won't let me do that. Whatever date I end up choosing.
I was thinking myself that I had ideas about SWR that I wanted to code up and test during retirement, try some optimization stuff. But then I thought, after all of this, after 10,000 permutations and strategies, how much difference would it really make to my withdrawal method. Maybe a few tenths of a percent if any, because all we have to test against is the past, and we know the future will be different. So I decided to go outside watch the birds, and plan my patio renovation instead.

BTW, Originally for me it was going to be 4%, but now I am planning a 3% or less withdrawal rate just because... I don't know, just because.
__________________
Merrily, merrily, merrily, merrily,
Life is but a dream.
CaliforniaMan is offline   Reply With Quote
Old 05-02-2014, 10:57 PM   #9
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by Travel4Fun View Post
walkinwood,

Interesting that you bring up Bob Clyatt. I'm actually looking at a variation of what he proposes. My reasoning on the 3% is two-fold.
I took a chunk of money from my portfolio and designated it as an emergency fund & calculated my %age withdrawal from what was left. I never modeled it to any great degree, but I felt that it would help in case of an unexpected expense or in the case where the withdrawals keep decreasing year after year. This separation is for SWR calculations only - the whole portfolio follows my 60/40 asset allocation.

I you do model it, I'd love to see the outcome. I'm too lazy (laid back?) to do it myself.

I do not care to predict the future, but I wonder how many people in the early 80s were thinking that the stock market was too rich and a repeat of the 60s wasn't likely. I worry more (though still very, very little) about a "Syria" event than purely catastrophic market events.
__________________
walkinwood is online now   Reply With Quote
Old 05-03-2014, 10:20 AM   #10
Thinks s/he gets paid by the post
Milton's Avatar
 
Join Date: Apr 2007
Posts: 2,077
Quote:
Originally Posted by Ready View Post
You haven't shared much about your work life, which makes it difficult for me to have an opinion. Do you enjoy what you do?
Agreed.

As you acknowledge, accelerating your retirement date will require you to pull in your travel horns and incur additional risks. If you are reasonably content at work, I'd be inclined to keep at it for another few years.

Quote:
Originally Posted by Travel4Fun View Post
[M]y wife, despite our no pets agreement when the last dog died, has adopted a stray cat and our son's dog. Which will make longer international trips in retirement rather challenging.
If I were in your shoes, I would not allow the somewhat random circumstances described to pose a significant obstacle to my retirement plans. Dog camp is the way to go.
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
Milton is offline   Reply With Quote
Old 05-03-2014, 05:25 PM   #11
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
As far as work goes, Megacorp middle management. Due to global team, first calls start at 4:00 am (from home). Usually get home between 6:00-7:00 pm. I mostly avoid the late evening calls with China, but that could change. I don't hate what I do, but there are too many days that I feel like I'm just working for the paycheck. Colleagues are good, bosses are fine, but it is the usual do more with less every year, plus driving whatever the initiatives of the year are. I'm not finding time or motivation to exercise, which is not good, plus I have some health issues (but nothing likely to kill me quickly).

As far as part-time work or a different job, given our desire to travel about half the year and golden handcuffs (I'm not in the 1%, but I'm pretty good with 30 years of experience so I couldn't make nearly as much elsewhere), I'm probably better off toughing it out if I really need/want more money.

2015 is a good idea, at least financially. I actually have a countdown timer that I got for my wife that I set for fall of 2015 a few weeks ago. But even with ER active retirement tends to be all too short; hopefully my wife and I will stay active for many years and one year won't make much difference, but you never know.

Milton - agree that dog camping will be most if not all of our travel. We love the outdoors, especially mountains and water.

I really appreciate the feedback and questions. I know it's hard based on a few forum posts, but it definitely helps to get some outside perspectives.
__________________
Travel4Fun is offline   Reply With Quote
Old 05-03-2014, 05:31 PM   #12
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
Quote:
Originally Posted by walkinwood View Post
I took a chunk of money from my portfolio and designated it as an emergency fund & calculated my %age withdrawal from what was left. I never modeled it to any great degree, but I felt that it would help in case of an unexpected expense or in the case where the withdrawals keep decreasing year after year. This separation is for SWR calculations only - the whole portfolio follows my 60/40 asset allocation.
That's interesting. Do you have separate accounts/funds (as in only your emergency fund is in short-term bonds or you have a separate IRA or account somewhere) so that it is obviously separate? I'd be interested in how you set it up and what kind of investments you keep the emergency fund portion of your portfolio in.
__________________
Travel4Fun is offline   Reply With Quote
Old 05-03-2014, 06:29 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jun 2010
Location: France
Posts: 1,195
It seems to me that if three years earlier retirement makes such an enormous difference to your income/expenditure as detailed in the OP, you might want to go back and recalculate. You are presumably planning for at least a 30 year retirement, and let's say that your retirement income is half your current income. On that basis those 3 years make only a 5% difference to your total 30-year income. If your plans are such that a 5% drop makes a big difference, then either you have almost no margin for error (in which case, either wait longer to retire or I wish you good luck), or you've calculated something wrong.
__________________
Age 56, retired July 1, 2012; DW is 60 and working for 2 more years. Current portfolio is 2000K split 50 stocks/20 bonds/30 cash. Renting house, no debts.
BigNick is offline   Reply With Quote
Old 05-03-2014, 07:19 PM   #14
Dryer sheet wannabe
 
Join Date: Jun 2009
Posts: 16
Quote:
Originally Posted by BigNick View Post
It seems to me that if three years earlier retirement makes such an enormous difference to your income/expenditure as detailed in the OP, you might want to go back and recalculate. You are presumably planning for at least a 30 year retirement, and let's say that your retirement income is half your current income. On that basis those 3 years make only a 5% difference to your total 30-year income. If your plans are such that a 5% drop makes a big difference, then either you have almost no margin for error (in which case, either wait longer to retire or I wish you good luck), or you've calculated something wrong.
As I mentioned originally, this is more a question of "should I ..." v. "can I ...".

That said, since pensions and SS will eventually cover either most or all of our spending needs, we just need to get to that point. And due to different timing of each of those sources, funding required from our portfolio goes down significantly over time. So depending on the timing of SS, portfolio requirements can go down by 30-40% in just three years. Of course, were I to actually work three more years (unlikely now -- probably more a question of 2014 or 2015 at this point) the extra money would go to a combination of intl travel and buffer (either in the form of an emergency fund like walkinwoods described or a lower withdrawal rate than 3%).
__________________
Travel4Fun is offline   Reply With Quote
Old 05-03-2014, 07:29 PM   #15
Thinks s/he gets paid by the post
Milton's Avatar
 
Join Date: Apr 2007
Posts: 2,077
Quote:
Originally Posted by Travel4Fun View Post
I don't hate what I do, but there are too many days that I feel like I'm just working for the paycheck. Colleagues are good, bosses are fine, but it is the usual do more with less every year, plus driving whatever the initiatives of the year are.
Really, it sounds like it could be a lot worse.

Quote:
Originally Posted by Travel4Fun View Post
As far as part-time work or a different job, given our desire to travel about half the year and golden handcuffs (I'm not in the 1%, but I'm pretty good with 30 years of experience so I couldn't make nearly as much elsewhere), I'm probably better off toughing it out if I really need/want more money
Probably realistic. The prospect of switching to part-time work or alternative employment (more flexibility, more money, more fulfilling, etc.) is always good in theory, but frequently difficult to achieve in practice.

Quote:
Originally Posted by Travel4Fun View Post
I'm not finding time or motivation to exercise, which is not good, plus I have some health issues (but nothing likely to kill me quickly).
Your job may well adversely affect your time, but - to be brutally honest - you are responsible for your own health. I only mention this because taking ER will not affect your lack of motivation to exercise.

If you have health issues, don't wait until retirement to take action. You owe it to yourself and your family.
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
Milton is offline   Reply With Quote
Old 05-04-2014, 11:50 PM   #16
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by Travel4Fun View Post
That's interesting. Do you have separate accounts/funds (as in only your emergency fund is in short-term bonds or you have a separate IRA or account somewhere) so that it is obviously separate? I'd be interested in how you set it up and what kind of investments you keep the emergency fund portion of your portfolio in.
The emergency fund is separate only on the spreadsheet. It is invested in the same AA as the rest of the portfolio. If I don't touch it, it grows and shrinks along with the rest of the portfolio. You can get more creative with it, but the simplicity works for me.

I calculate it once a year & leave it at that. So far, I've had to take some money form it once (the year we had moving expenses), but most years I end up just below my budget. The emergency fund has grown nicely over the last 2-3 years, so at some point, I'll trim it down & add that money to the portion I use to calculate my budget.
__________________

__________________
walkinwood is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Military retention considerations: "Should I Stay or Should I Go?" (very long post) Nords Young Dreamers 25 05-14-2010 06:37 AM
How should one be investing should the U.S. lose its AAA rating? novaman FIRE Related Public Policy 0 03-15-2010 11:29 AM
Should I stay or should I go...there's a song in that... janetvj Hi, I am... 32 01-29-2009 07:43 PM
Should He Stay or Should He Go margaritavillebound Hi, I am... 12 07-16-2007 10:34 AM
Iraq and the Kansas Tornado. You should be angry. We all should. newguy88 Other topics 16 05-08-2007 08:20 AM

 

 
All times are GMT -6. The time now is 07:58 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.