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Please share your mistakes
Old 01-20-2013, 12:17 PM   #1
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Please share your mistakes

As a potential member of the class of 2014, I have a question for those of you well into your FIRE. What mistakes (if any) did you make in your planning the last couple years before FIRE? Any regrets on pulling the trigger too late or too early? This info would be hugely helpful for us trying to decide in the next couple years. Thanks!
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Old 01-20-2013, 12:40 PM   #2
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I am in my 4th year of retirement. I can't really think of any mistakes, except that we planned to move to Missouri and then he decided not to ( so I didn't either). Along these same lines, it seems like there is so much to do, and so much fun to be had in retirement that I have not got around to any of my planned activities and projects. I am very happy with retired life, though.

Oh wait, I know one mistake! Before I retired I honestly did not believe the low income taxes being reported by retirees on this board. So, I allowed 25% of my retirement income for state and federal income tax, when it has been more like 10% for me in retirement.

No regrets about the timing of pulling the trigger. I retired just a couple of days after I qualified for retiree health care.
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Old 01-20-2013, 12:50 PM   #3
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As an up-coming 2014 FIre, I want to piggyback onto this topic. How did you make the "mental switch" from being primarily a saver to a spender? Did this cause mistakes? At first did you have trouble spending money or was it like a floodgate had opened?
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Old 01-20-2013, 12:50 PM   #4
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My mistake was in not understanidng what could realistically be withdrawn from a portfolio, given my constraints which are that I do not like big drawdowns. I do not feel that what goes down must necessarily go back up.

But today, this SWR type information is everywhere, and anyone who visits this forum knows all there really is to know.

Today, I only count cash income as suitable for spending. When I retired, I also counted my realized capital gains. Because markets were very conservatively priced at that time, I made it. But if I were to cut it so close under today's circumstances I would likely get taken out and shot. Some posters seem to think that a dividend focused strategy means that you pay no attention to price changes. I am sure some might do it this way, but iMO it would not be a very good idea.

Some years later i got divorced, which did not help, but as there had been time for good earnings after retirement our portfolio pretty well stood the blow.

Ha
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Old 01-20-2013, 12:54 PM   #5
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Quote:
Originally Posted by heeyy_joe View Post
As an up-coming 2014 FIre, I want to piggyback onto this topic. How did you make the "mental switch" from being primarily a saver to a spender? Did this cause mistakes? At first did you have trouble spending money or was it like a floodgate had opened?
It's a good question and prob better to deal with in its own thread.

To answer quickly, I find in retirement I am much more conscious of my spending. I really think about importance of an item before purchasing. This is a good thing though as the less I spend the more I save and invest.
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Old 01-20-2013, 12:57 PM   #6
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I wish I would have done more reading and learning about retirement finance and investing before retiring. I would have handled my asset allocation and withdrawal approach I little differently had I read Stocks for the Long Run, Bogleheads Guide, and the Swedroe books prior to pulling the trigger. It is a pain to switch to a new approach after monies are already committed.
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Old 01-20-2013, 01:20 PM   #7
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Quote:
Originally Posted by cinman2000 View Post
As a potential member of the class of 2014, I have a question for those of you well into your FIRE. What mistakes (if any) did you make in your planning the last couple years before FIRE? Any regrets on pulling the trigger too late or too early? This info would be hugely helpful for us trying to decide in the next couple years. Thanks!
I went part time (27 hours, three 9 hour days a week) at 55. Did that for 2 years to "practice" retirement (less money, more free time). The only mistake I made (in hindsight) was not retiring at 55 !

Seriously, the best advice I can give is, keep detailed records of all your expenses for at least 2 years before a planned retirement date. It will tell you more about your financial readiness than anything else.
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Old 01-20-2013, 01:25 PM   #8
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I find that I am also very conscious of what I spend now. A good example would be clothes. When working, I would browse through the catalogs and pick up a new piece of clothing that looked good from time to time (whether I really needed it or not). In retirement, I rarely do that. I almost never buy anything on impulse anymore (I never did a lot of that, but I did a little bit when I was working). I don't really consider this making a sacrifice, because I really didn't need the extra stuff in the first place.

We've also learned to set aside money for things that are really high priority for us (like our winter stay on the Texas coast each year). So we make sure the money is sufficient for that every year, before even considering buying stuff that we may not really need.

Overall, switching from saving to spending mentality has not been a problem for us.
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Old 01-20-2013, 01:41 PM   #9
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Lessons from someone who ER'd May 1st, 2008
- Move to your planned ER AA sooner than later.
- If you plan to move after ER, see if you can do that while still working.

This wasn't a mistake we made, but I am glad we had this leeway
- Make sure you have some head-room in your SWR in case you need to cut back on it due to market conditions. Our was a scant 12% over our long term expenses IIRC, but it still helped when the portfolio lost 27% (again IIRC) in the first year.

All the best.
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Old 01-20-2013, 01:47 PM   #10
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Have made plenty of mistakes, but if there were to be one suggestion that I would make to avoid a big mistake, it would be to do Detailed Planning... and not stop at a calculator to determine if a plan would work.

Of course, using Firecalc or any other measure of future dollars is important, since they include variables that would be almost impossible to figure from scratch.

That said, output is only as good as input, and garbage in = garbage out, is the key.

Short cutting actual plans by using expense numbers @ 70% of ending salary or some other general formula is a bit of Russion roulette, IMHO.

For starters... because we're all in different circumstances here, real numbers are important. If your worth includes a $1Million House, and a $150K Sailboat and you're used to international travel, then your priorities are different from one who is using Social Security as a major and necessary supplement to retirement spending.

I would iterate my original plan, which was the creation of many spread sheets/calculations... with a projected net worth final amount for each year of retirement. For practical purposes, did not include inflation, but DID calculate a nominal investment return rate. In my case, 24 years ago, 2%. In our case, we were at the lower end of the net worth scale, so things like housing value, Social Security, and some degree of detailed cost of living expenses were important. That was the basic plan.

Next was a hypothetical year by year calculation... including:
Cost of healthcare before medicare... then after.
Selling original home, the buying "down". for 5 years.
Plan for major purchases... Cars, Travel to look for southern home.
Later years, buying "final home"
Real estimates for house taxes, fees, furniture.
Budgets for food, eating out, sin expenses etc.
Entertainment, travel, .. higher in early years.
Long term care insurance
... and some substantial planning for those "occasional" expenses, like major repairs, high dental bills, help for family.

Large green spreadsheets... dozens... planning out a hypothetical life for 30+ years... Not really a plan, but a "What IF" outline. Something we never really used.... but a guide that prepared us for the long haul. We changed, dozens and dozens of times, but in every case, it was something that we knew about, and knew how to adjust when necessary. From the very beginning, we slept well and never looked back in worry (except one time when we thought we might be on the hook for a few hundred thousand in medical expenses... that didn't happen).

The Firecalc numbers work out for me, but the detailed planning is what we used to make it work.
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Old 01-20-2013, 01:49 PM   #11
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Originally Posted by cinman2000 View Post
As a potential member of the class of 2014, I have a question for those of you well into your FIRE. What mistakes (if any) did you make in your planning the last couple years before FIRE? Any regrets on pulling the trigger too late or too early? This info would be hugely helpful for us trying to decide in the next couple years. Thanks!
I did not realize prior to ER at 52 how difficult it would be to get a high deductible health plan. I had assumed that being in reasonably good health both of us would have no difficulty. Not so. My wife had minor carpal tunnel and I had high blood pressure, controlled with medication. I could not find an insurer at any price try as I might. Finally, we got (expensive) group health insurance as a business thru COSTCO of all places but I was sweating it.

Hopefully this sort of problem will not be a concern going forward if Obamacare works as promissed.
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Old 01-20-2013, 02:23 PM   #12
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Cinman I see lots of great advice/lessons learned on the financial side but I would strongly encourage you to spend equal, if not more time focusing on the non-financial aspects of early retirement. Put emphasis - a great deal of emphasis - on insuring both you and your spouse are on the same page when it comes to how you envision life once both of you are retired. Miscommunication here can lead to serious troubles and having a great financial plan won't smooth over differing priorities.

I cannot express how important this is, only say I have scars to show what can happen if you don't take the time to truly understand each others expectations of life after FIRE.
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Old 01-20-2013, 02:35 PM   #13
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Lots of good answers right here Let me google that for you
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Old 01-20-2013, 02:41 PM   #14
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Quote:
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Seriously, the best advice I can give is, keep detailed records of all your expenses for at least 2 years before a planned retirement date. It will tell you more about your financial readiness than anything else.
Quote:
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- Make sure you have some head-room in your SWR in case you need to cut back on it due to market conditions.
I second both these suggestions, plus that of REW to be sure that you and your SO are on the same page when it comes to what you will do after ER.

As for moving from saving to spending, we were a little cautious the first couple of years but are much more confident now. We did build up a good cash cushion in the last couple of years before ER to carry us over the first few years until we have access to our IRA's at age 59.5
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Old 01-20-2013, 03:31 PM   #15
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Wow, thanks for all this excellent advice. What a great resource this forum is. Invaluable information!
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Old 01-20-2013, 03:35 PM   #16
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Many logical people here strongly suggest getting a heloc in place while you can still show regular income from a job, even if you never plan to use it. Same for refinancing an existing mortgage to a lower rate, giving you more flexibility in paying it off.

Not being logical we did neither, but both would be important considerations while they are still relatively easy to do.
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Old 01-20-2013, 03:40 PM   #17
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I quit working about 2 years ago at 52 (DH was 61 and had quit working about 5 years prior) because it looked like we had enough money to make it without counting our social security. DH will not collect his SS until at least FRA which is 66 and I most likely will not collect mine until 70.

Switching from saving mode to spending mode was nerve wracking for the first year. We have been sticking to about a 3.5% withdrawal rate which is more aggressive than some here but I think is conservative enough given DH's SS will kick in in about 6 years. Our net worth has increased by about as much as we have spent in the last two years so that lets us breath a little easier.

Because outflow with no inflow made me nervous, I did after school babysitting to bring in some extra cash. I was surprised how well people paid for good childcare and I had a very flexible situation because the grandparents were always available (and dying to take the kids). I helped the kids with their homework every day and really enjoyed it which leads into what I am doing now.

I still felt I needed a skill where I could temporarily go make a few bucks if the market started to tank or we had a large unexpected expense. Since one of my degrees is a math degree and I found I enjoyed working with the kids, I decided to go back to school to get my teaching certificate as a middle grades (5-9) math teacher. The local college has a one-year program for those who already have a four-year degree but who need the classes and experience to meet the requirements for a Florida teaching certificate. I'm in the third of three semesters and will start eight weeks of student teaching week after next. I won't teach full-time once I get my teaching certificate but there are other options to make a few extra dollars.

I didn't do nearly as much detailed planning (spreadsheets and budgets for years ahead of pulling the trigger) as others did. We have always had a moderate lifestyle so when I decided I couldn't stand working any longer, I put together a budget that was based on a 3.5% withdrawal rate and we decided we could make that work. Our long term planning was more focused around medical insurance. For the five years prior to quitting work, we did our best to remain healthy and stay out of the doctor's office so we had no pre-existing conditions. I knew our insurability was going to be almost more important than the size of our nest egg.

I would be more relaxed if our nest egg was 20-25% larger. If we have another couple of years like this last year, I'll feel much better. The long length of our retirement is wonderful but carries a fair amount of uncertaintly. The only thing we are certain of now is we won't be working full time for any extended period of time ever again.
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Old 01-20-2013, 05:32 PM   #18
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Have a big stash, away from tax deferred saving plans, if retiring before 59 1/2.
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Old 01-20-2013, 08:00 PM   #19
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I only stopped my part-time work 6 months ago, which had been making enough for our expenses. So, I have not had much experience living solely on investments for any grave mistake to manifest itself yet. And I assume that we are talking about financial matters here, as other mistakes not having anything to do with ER would not be relevant.

So, a few years from now, if I own up to any mistake, what would I prefer between the following two?

1) I spent too much, and now have to cut back.
2) I regret not spending enough while I could, and my time has run out before my money.

Of course, it would be nice if neither of the above happens. Still, I am going to spend enough so that the risk of 1) will be higher than 2).
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Old 01-20-2013, 11:48 PM   #20
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DW and I are both 60. I have been retired since 2009. She is retiring this year. We both have pensions. I HATE paying taxes and will do most anything to defer them till later. The biggest mistake we have made is that we put too much into tax deferred IRAs, 401s and 403bs and not enough into taxable accounts. The assumption early on in our journey to FI was that after retirement we would be in a lower tax bracket. Reality is that after we start collecting SS at 66 and RMDs at 70.5 we will likely be in the dreaded 28% tax bracket or possibly worse depending on whether rates go up over the next decade.. For the next few years before we start drawing SS if we had more cash available outside the deferred accounts we could invest more of it to earn tax free dividends and spend down some of it to keep us in the 15% bracket. As it is we will instead be drawing some from the tax deferred accounts and paying higher taxes. Did I mention that I HATE paying taxes. We could see this situation coming on several years ago and should have rolled more from the tax deferred accounts into our Roth IRA accounts. We will probably this year while still in the 25% bracket move as much as we can without going into the 28% bracket. Overall we are in fine shape with far more money available than we have been spending but better choices over the last few years would have put us into a better position in regards to taxes.
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