Are you to chicken to RE?

[chip2]

THANK -YOU REWahoo, I really need some of that input. (REALLY!)

 

[REWahoo]

THANK -YOU REWahoo, I really need some of that input. (REALLY!)

I was a bit rude, but after a co-worker died in the middle of a megacorp meeting last year at age 42, it made me very grateful that I made it to retirement alive and in good health. I didn't get to FIRE (~4% SWR) until age 58, but if I were in your situation and could have done it at age 54 with a lower SWR, I would have left skid marks peeling out of the parking lot!

 

[firewhen]

About 30 voters said they are FI and not RE, but most did not say why, so here goes for me:

no pension or health insurance
talk about college, our youngest will not be out of college until 20 years from now
either or both of us could easily live another 50 years (and need to fund that)

I have 2 goals: RE in 4 years while still in my late 40's and at 2% SWR.

While I am still working, it takes the edge off knowing deep down I probably don't need to. I don't worry about future promotions or making bonus or what my next raise will be. In an average year the growth in our portfolio is about twice my salary anyway. So why am I working? Is the job that great? No. If I had a crazy amount of money, like tens of millions, would I still be there? No. So I guess I am chicken.

But I can say one thing: this board, more than anything else, will help get me there...

 

[mb]

Well after posting the survey last night I was worried that I would log on today and find that there wasn't anyone that was FI and not REed.

I'm 49 and have still have two kids in school.

My number is currently about 3%. It increases to a little above 4% when both kids are in college (assuming they go to a state school) but eventually drops down to a little less than 3% without SS and pensions and a little less than 2% if SS and pensions are included.

So I figure I can go anytime. (Another factor is that DW also works and we can easily live off of either salary.)

But like firewhen and chip2 something just hasn't clicked yet that I can and should RE. Maybe I need a kick in the butt from RE-Wahoo?

Work is OK. I easily (in my opinion) have the best job of anyone in the company in my area of expertise and also have a lot of flexibility with regard to hours but to tell you the truth I don't find it particularly rewarding. I'm a "technical expert" in a non-core technology and that limits the opportunities to do the "fun and exciting stuff" which in my opinion is what counter balances the negative aspects of working for a mega-corp. Management has become increasingly resistance to doing anything that does not obviously and immediately impact the bottom line even if there are clear future benefits for the company and in my area what is left is pretty mundane.

But I do want to stay active in my field. (Maybe to much ego?) I have thought about part-time consulting and think I could generate some time from my current mega-corp and perhaps a couple of other organizations. That's basically what I do now anyway. Part of my time is spent running small R/D programs and part is spent in a consulting role helping engineers with various problems.

On the financial side although the rational side of my brain says we're fine I have some of the same nagging feellings that other have expressed. Such as: What if the kids get in to Harvard and I have to pay for it? What about rising heath care costs? We only have 150 years of market history and what if we have a 1000-year bear market? What if H**** is right?

DW hasn't quite grasped the ER concept either although she took a long leave of absence from her company a couple of years ago and really enjoyed it.

ME: You know we can retire right now!
DW: Laughs
ME: No, really, all the number look good!
DW: What would you do all day?

(She then points out that she does a lot more volunteer work than I do and therefore will be doing something socially valuable even if she isn't working while I just want to spend my time training for triathlons and wandering around the mountains and beaches in a semi-perpetual traveler mode )

MB

 

[mb]

Wow, four people at less than 2.5%! What are you waiting for?

 

[UncleHoney]

Wow, four people at less than 2.5%! What are you waiting for?

The first of October.

 

[youbet]

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

Do you just lack the creativity to add fun things to your budget until it becomes large enough to consume something closer to 4%? Or, are you saying your "basic" budget is below 4% and you'll figure out what to do with the extra money later? Or?

 

[UncleHoney]

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

Do you just lack the creativity to add fun things to your budget until it becomes large enough to consume something closer to 4%? Or, are you saying your "basic" budget is below 4% and you'll figure out what to do with the extra money later? Or?

No lack of creative things to spend the money on here. I guess it's excess money (I don't like to use that term) but that's what it amounts to.

Here's the plan in a nut shell, or better, an egg shell. We're using the four egg approach.

Egg #1 is DW's SS
Egg #2 is my SS
Egg #3 is my pension
Egg #4 is the nest egg

DW is currently taking her SS which allows us to max out the 401K and IRA's.

When I retire in October the plan is to add the pension egg and fill in the gaps with the nest egg. I'll be 61 1/2.

When I turn 62 I'll have the option of adding my SS egg or staying the course with nest egg wd's. Currently the pension egg check is growing at a dollar a day. The nest egg is growing at $2100 a month.

Using egg #1 and egg #3 in combination with egg #2 or egg #4 will take us over our yearly budget by about 40%. Add all four eggs together and we could almost double our yearly burn rate for a while.

If we keep expenses below about $55K a year the nest egg should last a long time.

UH

 

[Delawaredave]

For me, I think there's 3 "employment periods" in life:

1. Working because there is no other choice
2. Able to say "take this job and shove it"
3. Not working

I'm trying to get to stage #2 above and see what that feels like - and will decide from there.

 

[donheff]

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

Do you just lack the creativity to add fun things to your budget until it becomes large enough to consume something closer to 4%? Or, are you saying your "basic" budget is below 4% and you'll figure out what to do with the extra money later? Or?

No, it is simply wanting to not have to make a large adjustment later. We worked hard for 30 years and live a nice life. The last thing we want to do now is cut back below our LBYM earlier life due to some extended bear market or something. I guess it is some kind of weird reverse risk tolerance. We have always been heavy on equities (age and posters here have tempered that attitude a bit) and don't lose any sleep when the market takes a dive ala 2000-2002. But the idea that we could have to cut back significantly in our mid-70s or, god forbid, go back to work is scary. So we have a low SWR. We would also be happy to leave a pile to the kids and grand kids. In terms of creativity, our travel and dining out budget is huge. But no super luxury cars. To each their own.

 

[chip2]

Interesting topic.

I'm worried about retiring, my wife is also not making any leanings towards me retiring, which is worrisome.

I think society does not like ER people. You should "feel guilty" if you are not working.

However a friend I lunch with regularly has recently had a heart attack and is now in rehab and working half days. He is the same age as me, 54. A couple we dine with on occaision, the husband died last Tuesday of a heart attack at 52. He lived for health and fitness, had a personal trainer.

I guess that the statistics kick in once you are in your 50s. A hundred years ago, not many people made it past their 50s so we should take our window of opportunity.

Now Im thinking, maybe on my 55 birthday?.............

 

[tryan]

Yup, and then Brad Delp dies at 55. A vegitarian for 4 decades.

Sad day here in Boston.

 

[REWahoo]

Now Im thinking, maybe on my 55 birthday?.............

Chip2, did you see this thread from "Best of the Boards"?

http://early-retirement.org/forums/index.php?topic=6482.0

 

[chinaco]

I could FIRE and support my (non-health insurance pre-retirement expenses). I have not worked the numbers, but my work related expenses might cover the health care premium I would nee to pay for insurance.

We are waiting till 55 for 2 reasons:

1) Company Covered health care at ER (age 55)
2) We anticipate spending more in the early years of retirement... (we intend to travel). Leting market gains accrue a few more years and stashing away a little more will help.


Working a few more years will better outfit us with the financial resources to FIRE with out 1st choice lifestyle.

That said: I feel confident that we could make it work with a LBYM lifestyle and less travel... or travel on a more spartan budget.

 

[Nords]

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

Some years we exceed 4%-- like updating our rental property or replacing a car or completing a major home-improvement project. The capital expense is part of the overall plan and it's just a variable SWR that most of the retirement calculators don't consider.

But overall we can't find creative & fun ways to spend our money. We don't feel the need to care for more material possessions or to inflict affluenza on our offspring. As for the experiences that we consider "fun", many of them don't require enough money to put a dent in the SWR...

 

[Goonie]

So if you are FI but not RE what's the excuse?

My excuse?? I have to wait to RE until I turn 50, in order to qualify for my full DB pension!!

That would be in 4 weeks....19 w*rking days that I'm supposed to show up. I pretty much quit w*rking the 2nd week of January...but still have to show up to punch the time-clock, 'til April 6th.

 

[DRiP Guy]

Yup, and then Brad Delp dies at 55. A vegitarian for 4 decades.

Sad day here in Boston.

Nicest guy in rock... more than a feeling, indeed. Sorry to hear about that, grew up to the music.

 

[Surfdaddy]

For the folks whose budget represents significantly less than 4% of their financial assets, please help me understand.......

At about 3.75% here.
1 - Kids are 12 and 14, need to go to college, drive, have insurance. Expenses will go up.
2 - Health insurance. I'm 50, DW is 49. We're pretty healthy but just enough nagging/chronic problems that we may have trouble getting insurance. Even if we do and we can afford it, what do the premiums do over the next 15 years before medicare, given the current rate of increases?
3 - Extraordinary expenses - Cars, etc. Would like a bigger cushion
4 - US position in the world, demographics. I think 4% may be too optimistic as returns may be lower in the future
5 - Market has done very well for a number of years. Don't want to retire into a down market.

Yes, I'm a worrier! My target is a 2.5% SWR and if I do really well on the investments it will take two more years.

 

[sgeeeee]

. . . My target is a 2.5% SWR and if I do really well on the investments it will take two more years.

A 2.5% initial withdrawal rate would support 27 years in retirement with a 3.5% inflation adjustment every year if you did nothing but burried the money in your back yard.

Assume a 4% annual return on your investment along with the 3.5% inlfation adjustment and you're good for 46 years.

Four percent is a very conservative number. It is based on the worst case ever faced by US investors in the past 130 years. It is not based on averages. It is also based on pretty modest diversification (S&P 500 fund + 1 bond fund). Today with additional asset classes it is easy to have greater safety.

If you want to be more conservative than 4%, it is useful to understand that longevity risk reduction is not a linear function of initial withdrawal rate. Beyond about 25 year retirement planning, historical SWR assymptotically approaches a number of the order of 3% to 3.5% (depending on the bond fund choice).

 

[kumquat]

If the question really is "Are you to chicken to RE?" since I am FI then the answer is YES. The next question is "why" and "how do I face my fears"?

Please help, I think I want out.

 

[Spanky]

If the question really is "Are you to chicken to RE?" since I am FI then the answer is YES. The next question is "why" and "how do I face my fears"?

Please help, I think I want out.

Most fears, I believe, are irrational:
- what if something happens that may wipe out my nest eggs.
- what am I going to do all day?
- what if I have to return to work, but my skills are obsolete?
- what if I run out of money (because of under-estimating the amount required to retire?
... etc.

 

[youbet]

Using egg #1 and egg #3 in combination with egg #2 or egg #4 will take us over our yearly budget by about 40%. Add all four eggs together and we could almost double our yearly burn rate for a while.

If we keep expenses below about $55K a year the nest egg should last a long time.

Why are you not adding fun activities to your budget (travel, entertainment, toys, whatever floats your boat) so that your expenditures consume what you can easily afford? I'm relatively conservative in my spending habits vs. income as well, so I'm certainly not knocking what you're doing. But if you believe you could safely, conservatively spend much more than you're planning to spend, why?

 

[Gone4Good]

3.6% based on what I currently spend.

4.7% based on what I plan to spend.

For my ~60 year retirement, I don't consider 4% "safe". I'll be working to get my initial WR down to about 3% with the ability to cut spending in half, if needs be.

 

[sgeeeee]

3.6% based on what I currently spend.

4.7% based on what I plan to spend.

For my ~60 year retirement, I don't consider 4% "safe". I'll be working to get my initial WR down to about 3% with the ability to cut spending in half, if needs be.

3% is a conservative but easily justifiable number for 60 years in retirement. With the right allocations and some assumed control over part of your annual spending, you could probably justify 3.5%, but making it 3% gives you some insurance against catastrophic events.

I don't think initial withdrawal rate will change much for a 50 year vs 60 year retirement plan. At 3% over these multi-decade time periods with some reasonable expectation on control of expenses, people could probably fund a lifestyle forever.

 

[youbet]

No, it is simply wanting to not have to make a large adjustment later. We worked hard for 30 years and live a nice life. The last thing we want to do now is cut back below our LBYM earlier life due to some extended bear market or something........ But the idea that we could have to cut back significantly in our mid-70s or, god forbid, go back to work is scary. So we have a low SWR. We would also be happy to leave a pile to the kids and grand kids.

Our thoughts are very similar to yours......

Also, I think the size of your retirement income in absolute terms plays an important role in determining the WR you choose. For example, for folks with no pension or other income besides current or future SS, it would be hard to imagine being satisfied spending less than 4% of a $1,000,000 portfolio. But for some lucky dog who managed to assemble, inherit or otherwise obtain a $5,000,000 portfolio, it's easy to imagine being satisified with a WR as low as maybe 2.5%. Especially if that supports a lifestyle at least equal to what you've lived all your lives and is similar to friends and relatives that you participate in activities with.