Like many who may be getting closer to hitting the "go" button for early retirement, I try and do some prudent research (such as "expert" advice from many of you on this site and the recommended tools like Firecalc and other 3rd party experts). As I continue to research other blogs, sites, experts and their approaches to AA and SWR, my head begins to spin. Eg. I started reading https://earlyretirementnow.com/2016/...-part-1-intro/ and Big ERN's series on SWR and AA concepts, and while I find his approach and depth of research very interesting, I start to get a little bury eyed. I realize that perhaps the beauty of all of this is there are many ways to navigate one's RE once you are "in it", but I find all the many recommended dos/don'ts as it relates to AA and SWR to sometimes being paralyzing for someone like myself, who "thinks" they have run all (or enough) traps, to have the confidence to launch. Since I am still a working stiff (end of 2019 is target launch), I can only read/scan the web so much and have frankly leaned into this site for much of my "RE education". I am somewhat of a believer in the KISS method for many things in life, despite my often compulsion to perform analysis/paralysis when new information is introduced. How did you remove the unnecessary noise and what primary tools/philosophies did you lean into to dive into the pool (i.e. 25 x projected RE income, Firecalc, "seat of your pants")?
Making sense of all the ER noise and strategies
- Thread starter DawgMan
- Start date
I am just a few months into retirement (age 53), but studied things as you describe for several years prior to pulling the trigger. In the end, I got comfortable with a 3.5% SWR not including SS. The most important thing for me was convincing myself that our retirement spending budget was accurate and allowed for the type of lifestyle we would be happy with. I can say that three months in we are THRILLED with our decision! It is the most freeing experience I have ever had, by a long shot. The financial stuff has been fine and kind of a fun activity for me and my DW to jointly manage. We too are keeping it simple on the investments/AA front operating in the 50/50 - 60/40 realm using a mix of ETFs and low cost funds.
I would say once you have done all your research, run all the calcs, tested your budget, then go for it. In terms of boredom, I think everyone is in different situations. We have not had a trace of boredom to this point and have a good list of things we want to and need to do for years to come. Best of luck and congrats on getting to this point!
I would say once you have done all your research, run all the calcs, tested your budget, then go for it. In terms of boredom, I think everyone is in different situations. We have not had a trace of boredom to this point and have a good list of things we want to and need to do for years to come. Best of luck and congrats on getting to this point!
flintnational
Thinks s/he gets paid by the post
I am reminded of the saying, "There are some things you just can't explain to a virgin". To me FIRE is like this. It is a leap of faith based on some fundamental insights. Here are some of the things that I had to "experience" before I understood and felt good about FIRE. IMO, all the calculators and advice in the world will not overcome these feelings.
1) The world did not stop when the paychecks ended. (Prior to FIRE I wasn't sure.)
2) I have saved all my life. The strange feeling of withdrawing from savings quickly goes away.
3) You soon realize you love your new life and have a lot of flexibility to keep it. You can cut expenses, downsize get a part time j*b.
4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation.
So, you are correct. Keep your plans simple and ignore a lot of the data. It will not alleviate the above feelings. You have to make adequate plans and then take a leap.
1) The world did not stop when the paychecks ended. (Prior to FIRE I wasn't sure.)
2) I have saved all my life. The strange feeling of withdrawing from savings quickly goes away.
3) You soon realize you love your new life and have a lot of flexibility to keep it. You can cut expenses, downsize get a part time j*b.
4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation.
So, you are correct. Keep your plans simple and ignore a lot of the data. It will not alleviate the above feelings. You have to make adequate plans and then take a leap.
Hillbilly
Recycles dryer sheets
- Joined
- Mar 20, 2007
- Messages
- 161
Like you, my head was spinning. I settled on whatever I did had to be manageable by DW with few instructions. That narrowed down the approach since she has no interest in investing. So, to keep it simple and reading some of Bogle's advice on balanced mutual funds in the 90's, I settled on: two balanced funds, reserve fund (cash), and daily checking account. I gave her a diagram that shows simple flows of funds and all the account log in info. One of the balanced funds is to be drawn down over time and make the overall AA change. Time to go fishing for me......
SumDay
Thinks s/he gets paid by the post
- Joined
- Aug 9, 2012
- Messages
- 1,862
I'm retiring in 37 days. I've been focusing on this goal, in earnest, for 3+ years. We downsized three years ago, and I felt like that was phase 1.
We've met with our fee-only financial advisor several times during that period, and we're good to go. I just simplified our portfolio with her help. FYI, I pay her only when I visit with her, and it's WAY less than I pay in annual fees on any one fund in our portfolio. I just couldn't pull the trigger though - the main reason was I wanted DH on Medicare, which happened June 1.
I probably run Firecalc once a week and am still amazed when it comes back at 100%. When I started at megacorp in the 80's, I had ~$3,500 in my 401(k) after a couple of years. Now we'll be living off more that we did during our w*rking years. Someone pinch me! I'm not bragging, I'm just amazed that after all this time the plan is coming together. I guess I'd say our advisor and Firecalc were the things that gave me the most confidence. We've settled on a 2.5% SWR and have quite a bit of wiggle room, if needed.
I have learned LOTS here. I just finished reading How To Retire Wild, Happy & Free because one of the biggest lessons I've learned here is that there's lots more to retirement than just the balance of your hard-earned savings. I follow a blogger The Retirement Manifesto Blog who isn't shy about sharing lots of details about his retirement AND financial planing, and while I don't mimic everything he does, I've gotten lots of great ideas and made them our own. He's not selling anything, just sharing his journey. I really like his bucket strategy post.
I'm a planner, and sometimes I enjoy the planning more than I enjoy the event. I don't want our retirement to be like that.
Good luck to you! It will all fall into place. Isn't the internet great? What did people do before there were boards like this? Seriously!
We've met with our fee-only financial advisor several times during that period, and we're good to go. I just simplified our portfolio with her help. FYI, I pay her only when I visit with her, and it's WAY less than I pay in annual fees on any one fund in our portfolio. I just couldn't pull the trigger though - the main reason was I wanted DH on Medicare, which happened June 1.
I probably run Firecalc once a week and am still amazed when it comes back at 100%. When I started at megacorp in the 80's, I had ~$3,500 in my 401(k) after a couple of years. Now we'll be living off more that we did during our w*rking years. Someone pinch me! I'm not bragging, I'm just amazed that after all this time the plan is coming together. I guess I'd say our advisor and Firecalc were the things that gave me the most confidence. We've settled on a 2.5% SWR and have quite a bit of wiggle room, if needed.
I have learned LOTS here. I just finished reading How To Retire Wild, Happy & Free because one of the biggest lessons I've learned here is that there's lots more to retirement than just the balance of your hard-earned savings. I follow a blogger The Retirement Manifesto Blog who isn't shy about sharing lots of details about his retirement AND financial planing, and while I don't mimic everything he does, I've gotten lots of great ideas and made them our own. He's not selling anything, just sharing his journey. I really like his bucket strategy post.
I'm a planner, and sometimes I enjoy the planning more than I enjoy the event. I don't want our retirement to be like that.
Good luck to you! It will all fall into place. Isn't the internet great? What did people do before there were boards like this? Seriously!
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
Very true.
Here is my own less-than-conservative spending history after 13 years of retirement at age 58.
Annual withdrawal rates (as a percentage of our initial nest egg):
Lowest 3.5%
Highest 9.8% (pre Social Security)
Average 5.2%
After this somewhat aggressive withdrawal history our nest egg (40/45/15) is currently 11% larger than when we retired (14% smaller after adjusting for CPI). We are now in RMD land and I don't expect our future withdrawals will exceed what the IRS requires.
My point is that for our limited span of experience, the 4% withdrawal rate is a very conservative number.
This is where I am spending most of my time right now. Planning for FatFire (lots of discretionary), but setting up 2 fall back budgets if/when we have a short or longer term recession.
I am reminded of the saying, "There are some things you just can't explain to a virgin". I might steel this!To me FIRE is like this. It is a leap of faith based on some fundamental insights. Here are some of the things that I had to "experience" before I understood and felt good about FIRE. IMO, all the calculators and advice in the world will not overcome these feelings.
1) The world did not stop when the paychecks ended. (Prior to FIRE I wasn't sure.)
2) I have saved all my life. The strange feeling of withdrawing from savings quickly goes away.
3) You soon realize you love your new life and have a lot of flexibility to keep it. You can cut expenses, downsize get a part time j*b.
4) Like many of us, you will probably get a few years in and start realizing you over planned and could have FIRED sooner. A 4% WR is based on worst case scenarios. There is a lot of safety built into this calculation.
So, you are correct. Keep your plans simple and ignore a lot of the data. It will not alleviate the above feelings. You have to make adequate plans and then take a leap.
Flipping the switch from being a big saver to tapping the bank feels a little spooky, but that's what it's there for, right
Dtail
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Always nice to see real life examples, especially being over 4% and going through a large downsize market relatively early in your retirement.
I do place a lot of faith in the various (6) calculators that I still use in my current retirement of 1 year so far. (yes with the known caveats).
Indirect question - do you have anything coded as cash (15%) besides high yield savings such as CD's, etc?
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
No, that 15% is all CD's at 3% and money market funds at 2% (and growing).
Dtail
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Flipping the switch from being a big saver to tapping the bank feels a little spooky, but that's what it's there for, right
Indeed Dawgman, indeed. Somehow this aspect hasn't bothered me so far. Perhaps coz I was never a full blast LBYM guy, or perhaps coz I know that my expenses will never be fully covered by the incoming non portfolio income.
Weekly Firecalc... you do want to be sure!
I just finished re-reading Wild, Happy... Good reminder there is more to retirement than having a bunch of cash.
Like you, I am a planner always looking for a better mouse trap and underwriting the "what ifs".
Have to say, this is very impressive, especially considering you road thru the 2008 + until the market started performing again. Do share, if willing...
What was your WR in 2008 - 2012 each year?
Where you 100% dependent on your investments or did you have other income sources (i.e. working spouse, pension)?
Were you the same AA for the last 13 yrs?
What type of equity/bond funds did you hold during this period?
Based on your 13 yr experience and the numbers above, it seems clear your confidence level must be high... bravo!
I suppose where the real comfortableness would be is when you see your starting principle drop (as opposed to taking your annual withdrawal and seeing a higher balance) while still in your 50's.
I suppose where the real comfortableness would be is when you see your starting principle drop (as opposed to taking your annual withdrawal and seeing a higher balance) while still in your 50's.
Like Trump, spellcheck spit out the wrong word "uncomfortableness".
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
See this post. 2008 = year 3.
No other income until I started SS in 2009 (year 4).
No, I started retirement at 50/45/5 and migrated to 40/45/15 coming out of 08/09.
Going into 08/09 most of my equity and bond holdings were in two funds, Vanguard Wellesley and Dodge and Cox Balanced. I replaced Dodge and Cox with Wellington in early 2010 and have made no significant changes since that time.
RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jun 18, 2007
- Messages
- 13,244
A lot of us overthink it. I know I do, but I'm getting better. Part of it is that I like to play with numbers, but on things I don't, I've learned when enough is enough for me.
For example, I thought I had a pretty good withdrawal system with my own customize VPW strategy. Then I read a thread about people using CAPE to set %s, and thought I had to learn that. Then I decided, what I have is good enough. Same with budgets. I had thoughts of tracking every category closely, and decided total outflow each month was good enough. If I'm over budget I can always look closer. But I can get my investment net worth to the dollar, with and without PV of SS and pension, with and without estimated future tax liabilities, because I like to track that, and it's not too hard.
Having a buffer goes a long ways towards not having to micromanage, or manage at all, if the buffer is big enough.
I think as long as you do enough monitoring to be able to sleep at night, without ignorance, you're fine. I include the caveat because I think it's easy to take a glance after the first year and see you're fine, but how do you know? It's like running your first marathon, everyone feels fine in the first mile, but if you went out too fast, you'll pay for it in the end, so you better have some idea just how fast you can start.
For example, I thought I had a pretty good withdrawal system with my own customize VPW strategy. Then I read a thread about people using CAPE to set %s, and thought I had to learn that. Then I decided, what I have is good enough. Same with budgets. I had thoughts of tracking every category closely, and decided total outflow each month was good enough. If I'm over budget I can always look closer. But I can get my investment net worth to the dollar, with and without PV of SS and pension, with and without estimated future tax liabilities, because I like to track that, and it's not too hard.
Having a buffer goes a long ways towards not having to micromanage, or manage at all, if the buffer is big enough.
I think as long as you do enough monitoring to be able to sleep at night, without ignorance, you're fine. I include the caveat because I think it's easy to take a glance after the first year and see you're fine, but how do you know? It's like running your first marathon, everyone feels fine in the first mile, but if you went out too fast, you'll pay for it in the end, so you better have some idea just how fast you can start.
W2R
Moderator Emeritus
Being a single woman with most of my family dead, and an introvert with few friends other than Frank to lean on, I felt absolutely compelled to work towards a financially bulletproof retirement. After a financially disastrous 1998 divorce that left me with a negative net worth, no house, less than $1000, no retirement savings or investments, and creditors hounding me, at age 50, I was scared to death about retirement. So my first step was ramping up the LBYM severely, and then working hard on retirement planning. I strongly felt, and feel, that my financial future is my own responsibility and I'd better not mess it up.
So anyway, I used ALL of the approaches you mention, and made sure my retirement would work no matter which I used. I feel like FIRECalc is the best calculator around, and everyone should at least be given the go-ahead by FIRECalc. That said, I'm not trusting any one calculator. I used every calculator I could find, used the 25x factor, modeled my income and outgo with inflation, studied the seminal papers on relevant topics at JFP and elsewhere, and blah blah blah.
Using all of these I was OK to retire and completely set by my late 50's, but then had to work for 2-3 more years beyond that to age 61.5 in order to qualify for retiree health insurance and mini-pension. I continued to save at the same rate during those 2-3 years, and meanwhile came into some good fortune, and also got some divorced spousal SS at age 66 that I wasn't expecting. So, to make a long story short, my ultra-conservative financial plan plus unexpected good fortune that was not part of my planning, resulted in a retirement that is WAY over-funded.
That's OK with me. Being a worry wart, I'd rather be over-funded than worried about money all the time.
My spending record is overly conservative too and I know that I need to ramp up my "Blow that Dough" efforts. How was I to know that the market would boom like this?
I was planning for the opposite plus massive inflation. I haven't had much good luck in my life, so although I never expected it, I'll take it.I sold my (paid off) home and bought my (paid off) Dream Home that I have always wanted, three years ago. So my spending in retirement has been:
2010: 2.61%
2011: 1.98%
2012: 2.12%
2013: 2.40%
2014: 1.70% (started getting divorced spousal SS)
2015: 1.72% + 6.92% for Dream Home purchase and move
2016: 1.75%
2017: 1.58%
2018: 0.28% (projected - - went on my own SS which is higher than divorced spousal)
My very conservative (45:55 AA) investment portfolio today is 134% of what it was on 11/9/2009, the day I retired. Part of the reason the percentages above are so low, is that even though I spend more every year I am not catching up with market increases. Guess I hit the "sweet spot". That's OK by me.
I plan to self fund LTC, so some of it may be used for that some day.
I use Firecalc and VG Nestegg and use extreme losses and see what happens. Or start with less and see what happens. Then rearrange portfolio and see what happens.
Maybe start with all cash - 1M/30yrs gives you 33K per year
Monte Carlo Simulation with VG
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% cash gives 98%
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% bonds gives 96%
Then manipulate worse case in a bunch of areas in Firecalc. With/without SS, add a huge outflow in one year, say $50k spending 4 years down the road, unexpected. Or market crash, now NW, $800K instead of 1M. Or sell house at market low, move to rented place at $1200/month. No maintenance fee, just rent.
I play around with the numbers, change the portfolio mix, change inflation from 3% to 2%, little changes make a big difference over 30 years.
It's certainly worth the time to think up every scenario and see the outcome. Just a thought.
Maybe start with all cash - 1M/30yrs gives you 33K per year
Monte Carlo Simulation with VG
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% cash gives 98%
VG Nestegg - 1M/30yrs, 35K spending - 49% stocks, 51% bonds gives 96%
Then manipulate worse case in a bunch of areas in Firecalc. With/without SS, add a huge outflow in one year, say $50k spending 4 years down the road, unexpected. Or market crash, now NW, $800K instead of 1M. Or sell house at market low, move to rented place at $1200/month. No maintenance fee, just rent.
I play around with the numbers, change the portfolio mix, change inflation from 3% to 2%, little changes make a big difference over 30 years.
It's certainly worth the time to think up every scenario and see the outcome. Just a thought.
walkinwood
Thinks s/he gets paid by the post
I don't know how long you've been reading the ER literature, but one day, you'll find that most of it is just variations on a theme. You'll learn to skim articles and spot the pieces of useful information quickly. It just happens at some point just like it probably did in your professional field.
We use a "percentage of portfolio value" method. That is, take say 4% of your portfolio value at the beginning of the year as your annual budget. It can be a wild ride, so you need to have enough headroom in your budget to ride out the bad years. We were looking at 40+ years of ER, so didn't want to go the traditional SWR route (percentage of initial portfolio adjusted for inflation each year).
Sticking to your AA, being flexible in your spending and having sufficient discretionary funds in your annual budget is key to being successful. We also took a portion of our portfolio and put it aside as an emergency pool. We don't include it when we calculate our annual budget. That pool can help with unexpected expenses or if there are a series of years with dropping portfolio values.
We ER'd in May '08 and are still here in ER land. If you are interested search for my old posts to read out our journey.
Good luck.
We use a "percentage of portfolio value" method. That is, take say 4% of your portfolio value at the beginning of the year as your annual budget. It can be a wild ride, so you need to have enough headroom in your budget to ride out the bad years. We were looking at 40+ years of ER, so didn't want to go the traditional SWR route (percentage of initial portfolio adjusted for inflation each year).
Sticking to your AA, being flexible in your spending and having sufficient discretionary funds in your annual budget is key to being successful. We also took a portion of our portfolio and put it aside as an emergency pool. We don't include it when we calculate our annual budget. That pool can help with unexpected expenses or if there are a series of years with dropping portfolio values.
We ER'd in May '08 and are still here in ER land. If you are interested search for my old posts to read out our journey.
Good luck.
Just went back and read your posts highlighting your journey/milestones. Very informative and helpful to folks like me looking for the extra boost of confidence. Despite retiring right at the GR, it appears you navigated the storm pretty well and most importantly with a great attitude (glass half full). I don't know if you want to share in specifics, but your journey prompted some questions, particularly during the years your portfolio balance was below your starting balance...
- When you launched in 2008, did you have a budget which represented both your ideal spend as well as a"cutback" budget?
- It sounds like you always underwrote going back to work/"getting a job" as one of your levers to pull if income was needed? Did you generate the income you had thought you would relative to your time commitment (i.e. part time/full time/consulting gig)?
- Were you able to plug the gap with your "jobs" in those years to get you back whole on your planned spending, or did you still make certain cutbacks?
- What is the "look-back" lesson for the rest of us? What, if anything, do you wish you would have done differently during those down portfolio years?
Thanks for the wisdom!
jollystomper
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Apr 16, 2012
- Messages
- 6,188
TO sum up my journey: I looked at both the income and the spending side. After all, it is not just want you have, it is how you intend to spend it.
For the income side, I used multiple calculators (FIRECALC, Fidelity RIP, Quicken, Financial Engines) along with the Megacorp provided financial planner who provided me with retirement modeling reports.
From 2012 all of these pointed to high odds of a retirement on a "normal" level of spending. So I looked at retirement on a "comfortable" level of spending, and in 2014 these all had high odds of success. At that point it was more a question of how much more did I want to try to pad my savings/investments. I started OMY at that point.
For the expense side, I took a closer look at what we were spending and how it would change or could be changed in retirement. Having Quicken data for 20 years definitely helped. Also - for 3 months in 2015 and 2016, and almost all of 2017, we experimented living on our expected retirement income to see what changes we might need to make in our spending. This (along with seeing on this forum how others had fared with their retirement spending) definitely made us feel more comfortable.
Finally, last year in August when from an emotional standpoint I was totally ready, I did "disaster" analysis of what would happen if we lost 20-50% of our investments... and saw that our basic needs would still be comfortably covered. At that point it was OMM time, looking at where my "glide path" would land me based on personal and job situations (which I have a thread on this site about it).
Dtail
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Like Trump, spellcheck spit out the wrong word "uncomfortableness".
Well for you and I and others retiring in their late 50's, that situation is less likely.
Don't worry I understood you and would believe you not wouldn't believe you......
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have to admit DawgMan... going by the threads that you have started over the last few months, you are doing a very comprehensive job of your retirement planning. When doing so, it is easy to get all wrapped up in your underwear if you are not careful.
I retired at the beginning of 2012. My master plan at the time anticipated a ~4% WR until my pension started, then ~3.5%, then 2.7% when DW started SS at 66 then less than 1% once my SS started at age 70.
Our WR were as follows:
2012..... 4.1%
2013..... 5.8%
2014..... 5.8% (included replacing 1-car garage with 2-car garage with bonus loft)
2015..... 4.6%
2016..... 11.7% (included purchasing winter condo for cash, otherwise 4.5%)
2017..... 3.6%
2018 estimated... 3.2%
Now here is the best part.... out portfolio today is 125% of what it was when I retired at the end of 2011 and what my master plan projected it to be as of now (134% if I include the value of the winter condo as part of our retirement assets).
Just before I retired I ran just about every free retirement calculator known to man... trying to use the same assumptions... each gave me different versions of a green light so I decided enough was enough (and I still enjoyed my job and colleagues but was tired of traveling).
I retired at the beginning of 2012. My master plan at the time anticipated a ~4% WR until my pension started, then ~3.5%, then 2.7% when DW started SS at 66 then less than 1% once my SS started at age 70.
Our WR were as follows:
2012..... 4.1%
2013..... 5.8%
2014..... 5.8% (included replacing 1-car garage with 2-car garage with bonus loft)
2015..... 4.6%
2016..... 11.7% (included purchasing winter condo for cash, otherwise 4.5%)
2017..... 3.6%
2018 estimated... 3.2%
Now here is the best part.... out portfolio today is 125% of what it was when I retired at the end of 2011 and what my master plan projected it to be as of now (134% if I include the value of the winter condo as part of our retirement assets).
Just before I retired I ran just about every free retirement calculator known to man... trying to use the same assumptions... each gave me different versions of a green light so I decided enough was enough (and I still enjoyed my job and colleagues but was tired of traveling).
Last edited:
