Pre-ER: When to stop adding money to portfolio?

[figner]

As I watch the effects of compounding on my portfolio, I wonder when, if ever, I might stop contributing while still letting the portfolio grow on its own. Do you have a milestone where you would stop contributing to your portfolio? I tend to think in terms of what percentage of my total portfolio I'm contributing annually, so maybe I could stop once my contribution is less than 5% without impacting my FIRE date too much. More likely though, I'll be so eager to get to the finish line I'll just keep socking away every spare cent.

 

[REWahoo]

I was still socking $ into my portfolio the day I skipped happily out of the door of megacorp for the very last time.

 

[VaCollector]

Began semi-retirement (other than tax season) mid-May and just made another contribution to my SEP today

I guess that puts me in the category of "hate to pay any taxes that I don't have to" ....and I plan to max out any POSSIBLE future contributions too

 

[Alan]

I voted never and am still saving as much as possible 33 months from RE even though FIRECalc and other calculators say I am FI.

But, 3 years ago once we looked pretty certain we were in good shape; DW RE'd and I took a sideways job move to a new state and job to freshen up our lives, so in reality we did cut back contributing the max we could.

 

[d]

though only 7 votes have been cast, at this point the answer seems clear!

 

[firewhen]

We have always saved without any goal or concern about what are annual savings was as a percent of the total. I will say that as the years go by and the portfolio grows, the annual savings becomes insignificant compared to the portfolio growth. We probably can only save about 1% now, and when I plan where I would like to be in the future, I am counting on capital appreciation since additional contributions will mean very little.

But I do think we will hit 0 once we ER since we will be unable to save then (although hopefully portfolio growth will outpace our annual expenses).

 

[dgalbraith100]

I haven't stopped, but I have slowed way down. If I were to save all my discretionary income, I would be saving 4%, instead I'm saving about 1.5%.

The portfolio was mostly built when my wife and I were working, now only my wife is working, and the portfolio is big enough that any extra we put in doesn't impact the FIRE date in any "real" way.

So would I stop? Probably not completely, but I have slowed down enough that you might as well call it stopped.

Laters,
-d.

ps. The portfolio's returns last year were ~130% of my wifes total income, so saving a large % of the portfolio is hard to do

 

[chinaco]

voted never. As long as I am working of course.

 

[slepyhed]

I'm the guy at 10% or less - but let me explain!

My wife and I plan on moving before retiring, so it looks like our savings will be about 6% of the portfolio value before picking up stakes and moving across the continent.

When we get there, I plan to get some kind of easy minimum wage type of job for a few years and live off of that and my wife's pension. After a few years to get settled in and let the portfolio grow, then I'll stop working for good. So there won't be any contributions or withdrawls for 2-4 years.

So mine's more of a downshift, then FIRE plan.

 

[ladelfina]

I put never, but it depends so much on
-where you are on the path timewise
-what the value of your holdings are versus where they need to be

If I were just starting out, I certainly wouldn't stop saving just because what I could put in was "only" 1%, or 5% of my current total.

I think if you are near enough to FIRE, a.) the extra can't hurt and b.) it will keep you in training for when you have to rely 100% on your portfolio. May be different for those with a good pension. It depends also on what your income is and how much belt-tightening is required to make the contributions.

Anyway, in ER, my "contributions" are no longer what I put IN, but what I don't take out..

It's not a process that ends at a particular point.

 

[audreyh1]

As long as I could put away pre-tax dollars and get 401K matches I did so.

I also kept saving into taxable accounts. That was just my nature.

Even now ER'd I don't spend all I can every year.

Audrey

 

[Helen]

This is an interesting way to view savings, I hadn't thought of savings a a percentage of the portfolio.

Unfortunately I won't be in a position to stop saving while working. We started saving late in life and want to retire early so we are putting away 42% of our gross income per year.

I'll be age 56 2.5 months before I have 20 years in. It just so happens I can retire with 20 years at age 56 (but I'll defer the pension until I'm 60). That's also when I project to hit $1 million in savings.

While many people here were smart enough to start saving early and can coast the last few years, my partner and I will be racing to the finish line.

Best of luck to us all,

-helen

 

[kcowan]

Thanks to above standard portfolio performance since ER in 2002, our "savings" have grown by 21% without any gainful employment contributions. Our spending plan is based on nominal CPI plus 5% CAGR.

 

[CyclingInvestor]

I reached FI in 2004, and paid off the last $52k of my mortgage to celebrate. Since
work at the time was pleasant, I continued to work and save at the same rate as before,
which was max out 401k, deposit $$ to stock account when checking account got too
large, even though the deposits were dwarfed by the internal returns of the portfolio.
When I retired last year, it was easy to shift to a paycheck of 72(t) transfers from my
big IRA plus dividends from my regular stock portfolio.

 

[figner]

Wow, I didn't expect the results to be so overwhelmingly in the "never" camp. Neat to know.

 

[old woman]

I haven't decided yet. I have about 400K invested in equities and contribute about 20K per year so I am putting in 5% but it is growing at about 10% so far this year. My contribution still helps it go up but I did cut back from putting in 25K last year. I greatly increased my mortgage amount so needed more take home pay. I might buy my retirement property before selling his house which I might finance using my 20K retirement savings expense money. The risk being if I got unemployed with two mortgages I would have to take from my nest egg to pay payments until I sold my old house and having two houses to maintain before retirement. So I will keep putting my money in until I am ready to make the big move. I am 59 already so early withdrawal penalty isn't an issue and most is taxable or ROTH and over 55 the 401K is available if you leave your job.

 

[kcowan]

I would hesitate to hold 2 houses on the verge of retirement. There was a documentary on a couple who did just that. It took them well over a year to sell the first property. They were very stressed because they were carrying a mortgage for the first time in years.

Keep up your contributions. When your are retired, selling your current home will be easier. Then take your time to buy the new one. A buyer with cash has leverage.

The other risk is that both houses go down in value. And then you could get offered an ER package.

 

[yakers]

Anyone who is retired and drawing out less than the portfolio is gaining value and 'saving' by the terms of the question. So you could just ask 'who is drawing down less than portfolio growth?' or 'who is drawing down from principal?'
I would be happy to 'save' every year as long as the portfolio goes up more than say 5%, the problem would be how much or what % would I withdraw in a down year.

 

[rw86347]

As I watch the effects of compounding on my portfolio, I wonder when, if ever, I might stop contributing while still letting the portfolio grow on its own. Do you have a milestone where you would stop contributing to your portfolio? I tend to think in terms of what percentage of my total portfolio I'm contributing annually, so maybe I could stop once my contribution is less than 5% without impacting my FIRE date too much. More likely though, I'll be so eager to get to the finish line I'll just keep socking away every spare cent.

exactly! I had the same thought for years, then I figured out how I could calculate it.

1) How much in today money do you want to live on? [me $50k/yr]

2) adjust this number to when I reach 60 yrs old.

3) multiply this number times 25 (the 4% rule)

4) now you know how much you need to save.

5) remember fv = pv * e^(% * T)

6) fv = answer to line 3

7) e = 2.7

8) % = growth rate (average through history is 11.8%)

9) t = years till 60

10) solve for pv.

Today if my stocks grow at historic rates, and inflation grows at historic rates then at 34 (my current age) I need a minimum of $250,000 in the bank. Today I have $193K.

I am still behind the curve, but i hope to catch this growing curve in the next couple years than add some feel safe buffer to my savings.

rw

 

[Spanky]

Will stop putting in more money when income stops coming in 4 to 5 years.

 

[chinaco]

Thinking of it as a % of our portfolio is a bit interesting...

We actually are putting about 3% a year in tax deferred 401k style accounts + DW PST. We are putting another 1% after Tax. (Equates) to approx 1.5% pretax.

Essentially we are saving in 1 work year, 1 ER year of pretax income. It seems fairly obvious to me that if we are 4.x years from ER, that money will be used within 5-7 years and it should go into MM and Short-term and Int Term Bond Funds. That will help to fund ER income from age 55-59.5. Plus, those funds help us to adjust our portfolio allocation to the target 60/30/10 by 55.

 

[kaudrey]

I hadn't really thought about it until you asked the question, except that I also planned to save until I retired.

I save 30% of my gross income, but I live how I want to live - not extravagant, but I go out to dinner or drinks with friends, I go on vacation a few times a year etc. What would I spend the extra money on? Maybe once I get closer I'll go on a few more expensive vacations, but I have a budget for that in my retirement money, so I can wait until then.

My calculations are based on living at the same level I do now at retirement (adjusted for inflation etc etc). If I all of a sudden starting spending that extra 30%, I'd have to be cutting back again to my current spending levels once I got to RE.

My plan, instead, is to FIRE at 52 with a certain level of savings. If I exceed that level early, I'll just retire earlier!

 

[mikex]

I was doing 16%, but recently dropped to 8%, because I want to save more into a liquid account so I can quit my job early, and draw from that until 55. Also, my company matches 50% up to the first 8% of what I put into my 401k, so it seems dumb to just not get all that free money.

 

[megacorp-firee]

My last contribution goes in with my last paycheck from megacorp. That will max out my 401K contribution for the year. Then I start 'distributing'
whoo hoo ... Almost there!