The futility of planning

[.Brewer12345]

I have done all the planning exercises and I am well along my way toward FIRE at the ripe old age of 30, but lately I have given up on planning retirement budgets, figuring out portfolio bogeys I'd have to hit, etc. Why? There are so many variables and assumptions one must make when doing these calculations that you basically cannot get more than a rough sense of things if you are more than 5 years away from FIRE. I don't even know how many kids I will end up with, let alone some of the other smaller items that go into this calculus.

Instead, I have pretty much decided that I will keep plugging along, managing my finances carefully and I will FIRE when either:

- I know for sure that I have enough money to maintain whatever lifestyle I want at the time, or

- I get freakin sick of work, bosses, etc. and decide to cash in my chips. If this happens, it will be time to make the lifestyle fit the portfolio. Obviously the portfolio would have to be at least a certain level, but I live in a high cost area and have a decent nest egg to start.

Anyone looking at things this way?

 

[wabmester]

You're right. The only value of LT planning is strategic -- it just sets the course, not how to get there.

I had sufficient assets to retire when I was 38, but I decided to keep working for two more years in the hope that I could create an extra safety margin. The stock options I was betting on fizzled during those two years, and I really found the daily grind oppressive knowing that I didn't have to be there. So, in retrospect, I should have pulled the trigger as soon as I could.

I didn't like the option of bringing lifestyle in-line with a smaller portfolio. Personally, I'm already a cheap bastard, but I didn't want to impose that choice on my wife, who doesn't see things my way

 

[brewer12345]

Oh, I am registered, I just couldn't remember my password when I did the original post.

I know that I could squeeze the budget pretty painlessly simply by moving, since I am in a high tax, high cost area (NJ). I could most likely have a higher standard of living on less money if I hopped a state (to say, PA, depending on the specific location). I like being where I am at the moment and it gives me access to a very good labor market, but unless I really build a whopping portfolio, I will likely have to move to achieve FIRE at a reasonably early age. In addition, the appreciated value of my home would be a nice boost to my portfolio (and it will definately appreciate at the rate NJ is restricting development).

My best guess is that I may be able to FIRE at age 45 or so, depending on how many kids I have to put through college. We have one on the way now, so there really is no way to be sure (likely 2 or 3 kids).

 

[unclemick]

I think my 1.2 mil at age 63 graph is still in my files somewhere. Started around age 33(I'd need to check the date). We basically maxed 401/Ira's in 'balanced index' funds and 'lived paycheck to paycheck'.

Lay off at age 49 at 300k on the graph after doing some job hunting it dawned on us to ER. Long story but put together a new plan and made it 49-60 without touching the the original 300k - now roughly 600k.

Moral planning is good and adjust only when needed.

 

[Ted]

My best guess is that I may be able to FIRE at age 45 or so, depending on how many kids I have to put through college.  We have one on the way now, so there really is no way to be sure (likely 2 or 3 kids).

If you really don't know how to predict this, I'd suggest contacting Planned Parenthood for advice. And if you decide to have more than 2 kids, blame yourself for the increased population pressures that several people on this board complain about. (I complain about them too, but have helped to relieve them by having limited my offspring to one.)

 

[wzd]

If you really don't know how to predict this, ...

Planned parenthood couldn't help me, when I told them my future brides children were already ages 6 and 8...

Wayne

 

[wzd]

Brewer -

I set 25% as my target savings when I was in my 20's. One divorce, a second marriage, two step-daughters, and one son later, I still retired before age 50. I always wanted to retire early, but hadn't set a target. Then a downsizing early retirement offer came along and I checked the numbers, figured we wouldn't starve, convinced my wife of that, and retired. I think living as if you make less, because 20 to 25% is saved, is a key factor. Didn't know about LBYM or whatever it is, but knew it was important.

Just set a significant savings target, and then check every so often to see if you feel comfortable retiring on it yet. Maybe not the best way, but it creates the right habits!

Wayne

 

[Ted]

Planned parenthood couldn't help me, when I told them my future brides children were already ages 6 and 8...

Wayne

It sounds to me as if you picked a way of planning your family size with certainty.

Planning isn't futile at all -- its just that it has to include some flexibility to respond to changed circumstances. And money in the bank (or invested) certainly helps to provide that flexibility. So does a small family size.

 

[brewer12345]

If you really don't know how to predict this, I'd suggest contacting Planned Parenthood for advice. And if you decide to have more than 2 kids, blame yourself for the increased population pressures that several people on this board complain about. (I complain about them too, but have helped to relieve them by having limited my offspring to one.)

************************

Yadda, yadda, yadda...

Puh-lease! Spare me your self-righteous claptrap. What I was indicating is that we have not decided whether we will have 2 or 3 kids. Look at it this way: at least we are not like my wife's grandmother, who had 15 (!) kids.

I also take it as read that I will be working longer in order to have kids. Otherwise I could probably RE in under 10 years.

 

[sgeeeee]

Brewer,

Planning isn't the problem. The option is clueless reaction to every event. But I agree that you can spend time planning too many long term details for it to be effective.

At this point, maybe all you need to be planning is how much money you can afford to invest and how you can increase that amount.

I avoided your problem by being blissfully ignorant of what I should be planning for until I actually decided that retirement would be a good thing. I always saved most of my salary, so I was not it too bad a shape when I finally got my act together. I did some research and plannning and decided I was within 5 years of having enough. It got me in a little bit of trouble waiting that long and I had to make adjustments. That and the ugly bear market of 2000 - 2002 caused me to delay my plans by a few years. From other's posts, I don't think my story is that unique. So you sound like you're ahead of where many of us were at your point.

 

[unclemick]

I survived a modest flat period in the DOW (1968-1982) - kept dollar cost averaging and reinvesting dividends. With hindsight those early dollars were the key to ER because of time and compounding (also they were 'untouchable' no matter what). Had I wasted a lot of time - timing or watching charts, We wouldn't be in our eleventh year of ER.

The greatest financial advice of all time came from a non finance guy - AND it wasn't a complement:

'God looks after Drunkards, Fools, and The United States of America'
Charles DeGaul

 

[Jack]

The original post on this topic (why plan when there are so many variables and assumptions involved?) reminded me of a fellow P&G engineer long ago when I once had to work.

While receiving training on the importance of project scheduling, this guy questioned the need to schedule at all due to uncertainties and variables involved with any project. What he never fully understood was that the fact that there ARE so many uncertainties is exactly why scheduling IS so imperative.

To me, this same principle applies to early retirement.

 

[Ted]

The greatest financial advice of all time came from a non finance guy - AND it wasn't a complement:

'God looks after Drunkards, Fools, and The United States of America'
         Charles DeGaul

It's a clever quote, but it doesn't apply to drunkards who drive, fools who put all of their money into their company's stock, or the U.S. on 9/11/01.

Another quote that too many people tend to believe because it is "clever" is the one by economist John Maynard Keynes in the 1930's that "In the long run, we are all dead." This was an argument supporting government policies to stimulate a depressed economy -- and I agree that some such measures are desirable -- but this quote was taken to the extreme of justifying practically any desperate economic measures without regard to their long term consequences. When 1930s-style liberals still come up with this quote, I point out that Keynes is now dead, and we are living in the "long run."

 

[John Galt]

Hello Ted! Sorry you don't care for "In the long run we are all dead!" as it's one of my favorites. I am about as
far from a "30s style liberal" as you could possibly get,
so I don't use it to persuade anyone about government
fiscal policy. Re. free enterprise (an endangered species in my view), I would prefer if the government
would just get the hell out of the way. In fact, government intrusion in my business was a major factor
in my ER decision. You could argue that they did me a favor.

John Galt

 

[unclemick]

Ted

I still like the DeGaul version rather than Buffett or Bogle's.

'Paradoxically,when dumb money ackowledges its limitations, it ceases to be dumb.'

'buy the whole market at minimum expense.'

Lord Keynes was one of those rare birds - a successful investor.

Rant Time - I come from a long line of 1930's liberal's. Remember the old saw - '47 states and the Soviet of Washington'. In SW Washington, liberals were socialist, conservatives were democrats, and rebublican votes were sometimes counted as a courtesy if I remember my Washinton state history course from high school.

Luckily none of which prevented me from dollar cost averaging, LBYM, diversification, and later balanced index funds.

My opinion of most financial advice in the media and the guru stuff in my mailbox(buy my newsletter) would get me kicked off this forum.

I'll stick with DeGaul - but will listen to Buffett and Bogle - who sometimes refers to Keynes.

End Rant

 

[brewer12345]

The original post on this topic (why plan when there are so many variables and assumptions involved?)

*****************

Hmmm, I was really trying to express that planning will only get you so far, not that it is completely without merit. Oh well, nobody ever accused me of being a "Great Communicator".

 

[newellcr]

"There are so many variables and assumptions one must make when doing these calculations that you basically cannot get more than a rough sense of things if you are more than 5 years away from FIRE. "

Hello Brewer,

Yes, the planning takes on more substance as you near FIRE, but there are some really important decisions that need to be made very early beyond living within your means and investing for FIRE. These are not necessarily complicated but they do require some forethought. You want to address as many of these variables as you can. For example, some of these variables are tax rate and tax treatment of various investments. If tax rates (or your personal tax rate) goes up, a Roth may be more attractive than a standard IRA. If tax rates go down, the opposite may be true. When the capital gains tax was reduced on long term gains, it makes more sense to have substantial FIRE investments outside of an IRA or 401k. Address all of the variables as best as you can, which IMO is no small task.

Cheers,

Chris

 

[John Galt]

Hello Chris. Re. your advice to "Brewer", yes it is a big
job (the planning). Maybe that's why I didn't do any of it, at least until after I had already retired. Of course,
I got blindsided many times. That's when the
planning kicked in

John Galt

 

[Ted]

One of Keynes's most controversial concepts was that "savings is bad for the economy," at least when it is in recession.

Back in the 1930s, there was truth to this, because a lot of people "saved" by physically stashing away money (which at the time included gold coins). In the absence of any offsetting monetary stimulus by the Federal Reserve (which was not very well understood at the time) this caused consumption to decrease and employment to decrease in a downward spiral.

But today, when people "save" they do so by putting money into some sort of account where it is quickly lent out to others. The problem with "1930's style liberals" is that they haven't yet figured out that the "modern" economic thought of the 1930s is in many respects no longer applicable. On the other hand, even fiscal conservatives like me recognize the value of certain programs that started in the 1930s, including Social Security and federal regulation of the securities industry.

 

[John Galt]

Hello Ted! I agree with almost everything you said in your last post on this topic. I am also a fiscal
conservative, but would be in deep doo-doo without
social security. Anyway, the only exception I would take
is with the implication that our citizens (and especially politicians)
are getting smarter. Maybe about some things, but
in general I don't see it.

John Galt

 

[Ted]

 Anyway, the only exception I would take
is with the implication that our citizens (and especially politicians)
are getting smarter.  

Economics is a science, and there is no question but that a lot more is understood about it today than in the 1930s, just as with physics, biology, etc. Of course, there are always some people who believe in outmoded concepts such as a flat earth, a gold standard, and the idea that free international trade makes "working people" in the U.S. and other countries worse off.

 

[John Galt]

Yes, Ted but then there is John Galt's First Law of human activity.............The best predictor of future
behavior is past behavior. Those who do not learn from past mistakes are truly condemned to repeat them.
One does not have to be a student of history, or even a
very careful observor of contemporary society to
recognize these things being played out all around
us.

John Galt