When to coast?

[dallas27]

I'm 37, planning to stop saving heavily at 40 and let compounding do the work while I either dial back work or dial up spending or both.

For others planning similar, how are you analyzing the numbers to decide when and how much you need?

Assumption, retirement funds go untouched, or slightly added to until some full retirement day in the 10-25 year future.


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[RunningBum]

I'm 37, planning to stop saving heavily at 40 and let compounding do the work while I either dial back work or dial up spending or both.

For others planning similar, how are you analyzing the numbers to decide when and how much you need?

Assumption, retirement funds go untouched, or slightly added to until some full retirement day in the 10-25 year future.

I guess I kind of did this by going part-time my last few years. I was probably already FI by then, but I wanted some padding, especially since I didn't have a full handle on non-annual possible expenses like major home repairs, nor was I very certain about health care insurance. I continued to max out my retirement and dipped into my taxable account a bit if I had to, since that was plentiful.

Those years turned out to be pretty flat in the market, so compounding didn't work very hard for me. Hopefully you'll do better. Don't forget that inflation is compounding your future expenses at the same time. Hard to forecast 10-25 years in the future plus another 20-30+ years in retirement beyond that. My take is that it's best to save whatever you can while not depriving yourself if possible, track expenses, predict retirement expenses, and as you get close you start making an exit plan. I just don't think there's any way you can calculate with confidence that in 18 years you're going to have $X and need $Y annually so saving $Z annually now is exactly what I need to do.

As far as dialing up spending, if you've been very stingy I'd say go for it, but otherwise it can be harder to dial it back down again if you have to for retirement. Might be best to stay with a LBYM lifestyle, but like I say I don't know your situation.

 

[sailor]

It happened to us unintentionally.
We used to save quite a big chunk (probably about 40% take home at the peak), but then our priorities involving kids changed.
We gave up DW's salary and bought a house in a much better school district.
NW still goes slightly up (I'm maxing out 401k and mortgage principal payments also increase NW), but I'm anticipating augmenting our cash flow from my after-tax savings for next few years (until youngest one is out of Montessori school).

We certainly do not have enough to ER (little less than half way there).
We used financial calculators (Firecalc, I-ORP, Fidelity RIP, Quicken Lifetime planner and probably few other) to find out how much of savings we needed to support annual spending we wanted, but what happened to us is that our wants/needs increased with 3 of our kids (for planning purposes it came roughly to 25% increase if you discount inflation).

Why do you want to slow down? Are you in a stressful job?
Compounding might not be as good as it was in the past.

 

[nash031]

I just turned 38. We're anywhere from 35-50% towards our number saving more than 40% of our gross income for retirement. I have no intention of "coasting" in your terms for a few reasons:

(1) I have no control over my returns other than to set my asset allocation, but I do have control over how much principal I put in. Thus, buying more shares of XXX and YYY virtually assures that whatever return I get will be magnified and increases the likelihood that I'll reach FI and RE as early as possible.

(2) I intend to increase my savings rate proportionally with my salary as well as allow a little bit more spending. Stopping the savings to increase spending somewhat means that I'll become accustomed to spending at a higher level going into retirement. That seems counterproductive to me. I'd rather settle into a spending level that allows me to live comfortably, travel well and frequently, and sleep well at night. YMMV: if you want to spend more while you're working and "live now", have at it. You're certainly not alone.

In short, increasing spending, decreasing savings, and relying on compounding may not be a road to financial ruin, but it increases the degree of difficulty and cracks the door ever so slightly to a few failure modes unnecessarily IMO. I'd rather err on the side that potentially leaves me with a lot MORE money than the side that potentially leaves me with less. So no, I don't intend to financially "coast" until I'm retired or no longer working full time, at least.

 

[Whisper66]

My DW and I continued to save throughout my career. Never actually "coasted" but clearly got less frugal as money was more plentiful. Saving for the future was always a key objective. The issue that kept us saving was an uncertain future. One obvious concern was if I lost my job (single family income) and couldn't get a similar well paying role to replace it. Another was we had several children growing up. Never know if they will need significant financial life time assistance until they actually grow up and get out on their own two feet. Also didn't want to be left exposed to financial disaster if my DW or I had serious health issues. So we continued to save a pretty significant amount until retirement. Turned out well for us because I decided to retire a few years earlier than planned and the savings were there to support that decision.

Having said all that, life is for living. So if there are really things you want to do, I'm all for doing them. Just make sure you consider the possible consequences of not saving and be happy with the decisions you make.

Good luck with whatever you decide!

 

[Meadbh]

I saved money right up until ER. In fact, when I became FI, I was morivated to save even more, and to evaluate expenses more critically. I wanted to be sure that my LBYM lifestyle was doable long term without feeling deprived.

 

[dallas27]

So you all trust firecalc during accumulation and drawdown phases, but not to "coast?"

The way i calculate it, i want to get to 50% of target, then stop saving. I expect in 10-15 i will still save a little along the way, but only work enough to do the things i wish to do. Wake up one day 10-15 years later with retirement fully funded. Could it be faster or slower, sure.

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[Meadbh]

So you all trust firecalc during accumulation and drawdown phases, but not to "coast?"

I do not recall mentioning Firecalc. Mathematical tools are decision aids, not prescriptions.

 

[MRG]

I had the same idea at about 42 then Y2K happened. I had the same thoughts 8 years later till '08. I'm glad I kept saving till I retired. YMMV.

 

[dallas27]

I had the same idea at about 42 then Y2K happened. I had the same thoughts 8 years later till '08. I'm glad I kept saving till I retired. YMMV.

Starting from the peak of 2000 to now has a real return of about 2% annum. At that rate i would hit my target on time, although at very low end of my acceptable range. Thank you for suggesting that period, makes me a lot more confident.


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[nash031]

I don't know when FIREcalc was brought into this. It has nothing to do with my decision to coast or not. Simply put, I want to achieve FI ASAP with as few uncontrollable variables as possible. Once I'm there, I will evaluate reducing savings, loosening purse strings, etc. but I have no intention of coasting into that point.

 

[hnzw_rui]

As far as dialing up spending, if you've been very stingy I'd say go for it, but otherwise it can be harder to dial it back down again if you have to for retirement. Might be best to stay with a LBYM lifestyle, but like I say I don't know your situation.

Agreed. You can LBYM while still budgeting for some fun money for things you enjoy (be it travel, golf, books, gadgets, etc). Sure, it's nice to be able to retire early but what if you never get to the finish line?

 

[brewer12345]

The last 5 years I was content with simply maxing the 401k and.collecting the match.

 

[RunningBum]

So you all trust firecalc during accumulation and drawdown phases, but not to "coast?"

The way i calculate it, i want to get to 50% of target, then stop saving. I expect in 10-15 i will still save a little along the way, but only work enough to do the things i wish to do. Wake up one day 10-15 years later with retirement fully funded. Could it be faster or slower, sure.

I never mentioned firecalc either, but now that you have, I don't think it's a tool for accumulation, is it? Been awhile since I ran it, but I don't recall any such option. Did you use it in your calcs for coasting?

It's your life, live it how you like. Your plan might work. Too many variables for me to say. I'll butt out since you didn't seem to like or appreciate my answer.

edit: I guess Firecalc does have a Future Retirement option. I may have used it when I was 95% or so there, but I'd have less confidence using it for coasting or accumulation if I was many years away.

 

[growing_older]

I had a similar plan to consider a semi-ER at 40 or put in just a couple more years and firmly retire at 42-43. Then an unexpected divorce scuttled all those plans and a couple market setbacks squashed what was left of the accounts. Now my plan is LBYM and focus on saving until I actually do have enough to ER. Too many ways for a less focused plan to fall apart.

 

[cooch96]

I think you have the right idea, Dallas. Once I'm at Stage 1 ER (I believe you were the guy to call it that), I plan on asking megacorp to put me on at part time (3.5-4.5 days per week).

I figure there's a 1% chance I'll get canned outright, a 9% chance they'll actually agree to the idea, and a 90% chance they'll laugh in my face and tell me to go back to work. If I get put on part time at a reduced salary, then I'd continue saving a bit but spending more on my days off at the range or ski slopes or whatever. If I get canned, I'll look for a better job (closer to home, lower stress, almost certainly lower pay) while collecting unemployment. And for the most likely course of action, I'll definitely let myself enjoy some big purchases: new rig, home remodel, etc, while the nest egg grows with just dividends and maxing out Ira and 401k contributions. I feel those are all versions of coasting.

In the meantime, I'll keep my ears open and keep handing out my resume (2 call backs in 10 months).

 

[eta2020]

I saved money right up until ER. In fact, when I became FI, I was morivated to save even more, and to evaluate expenses more critically. I wanted to be sure that my LBYM lifestyle was doable long term without feeling deprived.

+1

I felt FI (could coast) as soon as portfolio dividend yield of 2.2% was higher then our current expenses.

But in retirement we will need to pay for Medical Insurance so our expenses will go up. Hence we continue to LBYM to increase portfolio for few more years.

 

[dallas27]

I felt FI (could coast) as soon as portfolio dividend yield of 2.2% was higher then our current expenses.

In my models, I would consider that a failure to discount money against time properly. 2% would result in years wasted working.

 

[Lakewood90712]

Assumption, retirement funds go untouched, or slightly added to until some full retirement day in the 10-25 year future.

IMO , 10 year and 25 year time horizon is apples to oranges. Large corrections, along with recovery is almost assured during both, but I would have a lot less confidence using the 10 year assumption. Other than those issues, It could indeed work.

 

[NgineER]

This is a really interesting strategy. I am not gutsy enough to try it however. I am the sole bread winner in our household, and I'm not completely clear about what kid expenses will be in the future.

My only concern would be that if I stop saving and eventually make more money I would be spending more money. If I get used to spending more, then my original estimate is way too low...
If you set a spending cap then it might work. Any income above a certain level would go to investments.

 

[Car-Guy]

I don't think I ever coasted "financially". To be honest, the last 10+ years that I worked, I intentionally "dialed" up my spending a lot but I was still able to save more than ever. However, I did start coasting with my level of work by cutting down to 40 hour work weeks the last two+ years to ease into retirement.

 

[Whisper66]

Stuff Happens.....

So you all trust firecalc during accumulation and drawdown phases, but not to "coast?"

The way i calculate it, i want to get to 50% of target, then stop saving.......

I have high level of confidence in firecalc's predictions as long as my input is correct. My biggest concern until very near ER was unexpected events that would blow my savings / yearly expense input assumptions out of the water. Have had too many friends (and family actually) where such events have occurred and dramatically changed their future financial situation. I don't consider those types of events remote issues and therefore chose to continue savings a reasonable amount throughout most of my career to provide a larger buffer to cover such events. Just a couple examples: (1) wife gets long term, terminal illness which requires extensive medical expenses for her remaining life of many years (2) one child diagnosed with mental illness that will mean they will forever be under the parents care (3) horrible truck accident where bread winner becomes wheel chair bound for life (4) wife gets diagnoised with stage 4 cancer and requires extensive (expensive) medical treatments ..... just a couple examples of what has happened to good people I know. None actually happened directly to me but some were situations where I might have felt compelled to help out financially.

Again - life is for living so I'm not suggesting that you shouldn't coast, just that you be aware of possible consequences and happy with your decisions.

 

[foxfirev5]

Around age 55 DW and I felt marginally FI. Her job was very stressful with a long commute. We agreed that she would retire, take care of all the household stuff, and I would work a few more years. With the reduction in income the coasting came naturally. From years of 30-40% savings rate down to a 401k contribution 0f 10% to get a max match. All other available cash went to savings accounts for early retirement years. Currently our savings rate is less than 20% with retirement in less than 250 days .
Slightly coasting in more than just the financial end.

 

[dallas27]

With the OP, i was hoping to get some numeric responses.

The way i'm slicing and dicing is i want to reach 50% of target egg, which is also 75% of the minimum egg i would okay with. Then payoff mortgage or just downsize and eliminate mortgage ( would take About a year). Then i plan for 10 years of work as much I need to do whatever. I figure in these ten years i'll get some decent travel in, really improve overall health and activity, and then re-assess the egg around the ten year mark. Maybe do another ten if things are kosher. Who knows where I might end up.

During this time, i'm 100% stocks, heavy in small, mid, foreign.


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[NW-Bound]

I'm 37, planning to stop saving heavily at 40 and let compounding do the work while I either dial back work or dial up spending or both...

Dial back work can be called "coasting", but dial up spending is "speeding".

And once you are used to spend more, can you retire on schedule according to the original plan, if your lifestyle is now higher?