There is FI and beyond FI-but how far?

[TGL405]

Wiki defines FI as:
"Financial independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income and/or cash flow from dipping into the assets that is at least as great as their expenses".

I had some catching up to do when I realized where I was at financially. Then I conducted my own extensive research, weighed many of the questions & answers on these posts- taking all the great wisdom from this site and scrambled to apply it to my own situation.

I have recently reached the point of FI. I am not wealthy, but I can stop working and not ever have to go back or find another job. It was hard work and has taken years of planning and application on my part, but I did it- and feel pretty darn good to finally reach this threshold. I still test different scenarios using FireCalc and some other similar planners as confirmation, but things look good and I have also solved the healthcare issue for my family.

My wife and I have been discussing retirement and when to finally pull the trigger and initially thought Dec. of this year. We are at the point of struggling to determine just how far beyond FI we need/ want to go. I know this is a very personal decision and the standard answer from many posts is "it depends", but I think there may be some folks out there in a similar situation to mine who don't have alot of money but feel that they may be close to FI and struggle to find that "balance point" or comfort level to call it.

There is something reassuring to hear from people who have been through the same struggles and have overcome them, as it also gives me confidence to know that I have looked at this from different perspectives.

I was wondering how many of you also struggled with this question while working and what were the factors that led YOU to decide how far beyond FI to work?

Thanks

 

[travelover]

......... I have also solved the healthcare issue for my family...........

Care to share your solution?

Re your other questions, I'll let others answer. I was monitoring my spending needs and my assets and when an offer came for an early out package, I jumped knowing I had enough.

 

[Aiming_4_55]

It really does depend on your situation (your lifestyle/budget) and can you adjust in lean times.

For me, I have 2 young kids, a parent, and DW to consider beyond me. I have assets but I don't have a pension or SS until age 62/67, so at age 47, I have to make a plan. Sure, more is better, but time/activities have a value.

I've not overcome the question yet as I'm still working, but for me it might be more age based. I am more comfortable with the idea of retiring at age 50 due to personal reasons. I'm confident in my lifestyle needs and don't have to match the "Jones", and I'm risk averse in some ways. I've exceeded my magic number, but I think it would of been targeted budget +25%. Higher % if your budget is below $40k, just less wiggle room.

Also, I see most calculators like to project out to age 95 or 100. While I think I would be happy to last to age 90, I'm not sure I will make it to 80 with family history, but I still use 95 for planning.

 

[dunkelblau]

I wanted out pretty much my first week on the first megacorp job I took out of school. The pain there was enough to make saving >50% of after-tax income seem easy by comparison. But over the years my job became tolerable so when I ticked into FI after 11 years service, I decided to stay on for some padding. The job improvements continued over the next decade, until I applied for a surprise early buyout that was offered to all hands a few years ago.

To my surprise management declined my application and so began some negotiations on work conditions. My wish list involved work location, schedule, and most of all content control. My willing to give up list was raises and promotions. To my surprise we quickly agreed on terms, and despite my initial reservations about how it would pan out, I'm still full time to this day. I guess what I do now is what I had hoped work life would be like when I was in school, and it's especially sweet given my initial rude awakening upon first joining the workforce.

Nirvana can disappear quickly, all it takes is a management restructuring or some challenging quarters on profitability, and the rules can change, but I've got plenty of padding to walk away with or without a parting gift. So for me the 'how far beyond' timing isn't really my decision-- unless something changes such that I want it to be.

So I guess my advice is if there's parts of your job you like, give your employer a chance to arrange something around what you want before taking a binary decision. Mine got more creative than I expected.

 

[TGL405]

My solution to the healthcare issue is the retired state employees health insurance plan which costs 3% of my final annual salary.
I'm 57 and although I expect our expenses to go down as we age, I'll never have the opportunity to go back-so I gotta be sure of walking away from what I have. My pension increases $30 for each month I stay moving forward. There is no chance to re-structure or receive a package deal.

 

[Whisper66]

My decision process was pretty straightforward. At 50 yrs old, felt comfortable that I could retire finanically. Would have meant living within a reasonable budget at our current standard of living. But I liked my job still and if I worked until 55, I could collect a partial pension which would increase our assets by ~60% assuming I took it as a lump sum payment. If I worked until 60, could collect full pension. Collecting a pension meant we wouldn't have to worry too much about budgeting. Wife didn't want me to work forever so we agreed I'd plan to retire near when I got to full pension. So at 50, I decided to continue working.

When I reached 54 yrs old, things changed at work such that it wasn't really fullfilling or much fun anymore. Things also changed in my home life that made having more time available to spend with family much more important to me. So I waited a couple months until I was 55 and then it was an easy decision to retire.

So I worked about 5 yrs beyond FI but didn't regret it at all. Worked out well for us.

 

[Jerry1]

At 55, I earned my last major benefit - retiree healthcare (not free, but a good deal). I went part time which was a gift because it only happened due to some combined events. So now, like you, I sit FI but still working. It gets harder every day. The good news is that it's had to imagine a downside (financially speaking) of working longer. So not too risky. I imagine one of a few things will happen. 1. I'll get fed up and leave. 2. Downsizing will create a buyout opportunity. 3. I'll realize something outside of work is more valuable than staying at work. All are kind of working together at the same time, so I'm not sure which one will hit first, but another year or so certainly wouldn't hurt financially.

 

[jollystomper]

I reached FI once we had hit our "magic number" of savings/investmensts to meet our planned retirement expenses and our last known major expenses (kids college). In addition, in 2014 Megacorp provided a financial planner that went through our finances, expenses and plans and that study showed we were FI and I could retire.

I have continued to work after study primarily for these reasons:
- To build up a buffer for healthcare expenses before medicare eligibility, the biggest unknown we now face. Megacorp provides expensive retirement healthcare, and we will have enough income to not be eligible for any ACA (or whatever happens to it) subsidy.
- To build cash so that we would not be forced to sell equities during a market downturn
- To pay for major one time/long term expenses out of current income instead of savings (new roof, driveway, bathroom renovations, family trip to Asia, etc). Also, even though we had college savings, we also wanted to cover that as much as possible from current income.
- To get the best years of my pension growth before it started leveling off.

Three years later, at age 59, I have been able to meet the above goals. The timing was fortunate as the market as also done well during this period, and our retirement expense level has moved from "comfortable" to "more than comfortable". With no known major expenditures that we have not anticipated and saved for, our youngest child finishing college by the end of the year, and my pension growth leveling off (each additional year is now less than a 1% increase), The timing seems right for me to retire. Now it is much more of a mental/emotional decision than financial.

 

[Hermit]

I hope that you have seriously taken into consideration that the market is at a high.

That said, I retired at 63 so not that early. FI was not an issue for me with pension and SS, but it is nice to have enough to do what I want in retirement. Its a call you have to make between the pain of work and the comfort achieved over just barely FI for the rest of your life.

 

[socca]

I still test different scenarios using FireCalc and some other similar planners as confirmation...

Nope - no confirmation - sorry

Any attempt to predict the future depends upon assumptions. The more financially secure you are, the fewer assumptions you need to build into your predictions. For example, the use of FIREcalc for prediction depends upon the assumption that investment returns during the last 100 years have something useful to say about investment returns for the next 50 years. If this assumption turns out to be false, the many FIREcalc worshippers on this board could be in a world of hurt.

 

[2017ish]

"FI" with how much discretionary spending?

Most people would say DW and I have "a lot of money," but we don't have health insurance provided except that which we'll purchase after COBRA (so, will be on our own from 58-65). No real way to really tie that down although I presently am projecting 3k per month, all in. If it doubles that, we are ok--cut vacations down a bit. If it triples, things start getting tight and may only one international, budget trip a year. IF it quadruples, we are cutting present expenses to the bone and likely exceeding our desired withdrawal rate.

So, are we FI? Dunno. Figured odds are in our favor, so we are retiring. Otherwise, we would work until very close to 65, likely double our net worth, but miss out on the healthiest years of retirement.

Life is a trade off. If you take no risks, you'll get nowhere.

 

[ABQ2015]

My first opportunity to retire was at end of 2015 when I became eligible for a pension at age 60. My retirement income assuming pension and 3 ½% 401k withdrawal would have been $12K more than my 2015 expenses. But I had unexpected home repairs in 2014 that made me nervous and that extra $12K would not have covered both my travel wants and more home repairs without accessing my small Roth IRA. Also I had to help subsidize a needy relative for about 15 months. I could have managed on that income but did not want to be in a situation where I’m sitting home retired but cannot afford to travel – I preferred to keep working and pad my income.

By end of 2016 or OMY, I felt more comfortable retiring as my net worth and emergency fund increased to where I could better deal with large expenditures. But by then I was only 9 months away from age 62 when my pension gets a one time bump of almost 4% salary before leveling off to the regular 1% a year. So I’m now FI but am going to tough it out for the extra pension to go beyond FI.

 

[Alan]

My solution to the healthcare issue is the retired state employees health insurance plan which costs 3% of my final annual salary.
I'm 57 and although I expect our expenses to go down as we age, I'll never have the opportunity to go back-so I gotta be sure of walking away from what I have. My pension increases $30 for each month I stay moving forward. There is no chance to re-structure or receive a package deal.

Something similar was the tipping point for me. We were FI a couple of years before retiring but kept working until I qualified for retiree insurance.

 

[brucethebroker]

The original question was how far to go beyond FI before pulling the trigger, right?

Some one posted the following wisdom "You have already won. No reason to run up the score."

Can you can tighten up your discretionary spending if needed? If so, sounds pretty good to me.

 

[traineeinvestor]

For me it was a trade off between (1) not wanting to lose sleep over our finances and (2) maximising the number of years in retirement. The longer I worked the more secure we were financially but the sooner I FIREd the more quality years I would have to enjoy.

I ended up staying an extra couple of years beyond FI to have a sufficiently high degree of confidence that I wouldn't be faced with a choice between crimping our lifestyle and looking for a job in my sixties or seventies.

Even then we were very conservative in running our numbers, assuming we would spend an arbitrary 20% more in retirement than when working and making no allowance our daughters to eventually leave the payroll. We also ignored any income from part time jobs. We are now in our 4th year of retirement and, while our expenses are higher the extra is largely down to increased school fees (DD1 is now in boarding school and DD2 will follow in 2019) and my tuition fees for another university degree, both of which are discretionary. Income from investments is also up, so it's all good.

 

[exnavynuke]

Financial independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities.

Based on that definition, my answer would be to go AT LEAST as far past FI to cover your current discretionary expenses going forward as well.

My "basic necessities" (housing, food, clothing, utilities) are covered now. However, doing nothing but staying at home and only paying for necessities isn't a lifestyle that I want, so I'll continue working until I can also pay for my discretionary expenses. The main question I expect to face is whether or not to stop when I can "just barely" cover my current spending or if I want to continue working to finance a retirement that would be more comfortable than my current lifestyle (more vacations, more rounds of golf, etc). If so, the follow on question is "how much more?"

 

[scrabbler1]

Based on that definition, my answer would be to go AT LEAST as far past FI to cover your current discretionary expenses going forward as well.

My "basic necessities" (housing, food, clothing, utilities) are covered now. However, doing nothing but staying at home and only paying for necessities isn't a lifestyle that I want, so I'll continue working until I can also pay for my discretionary expenses. The main question I expect to face is whether or not to stop when I can "just barely" cover my current spending or if I want to continue working to finance a retirement that would be more comfortable than my current lifestyle (more vacations, more rounds of golf, etc). If so, the follow on question is "how much more?"

One condition of my being able to ER was to be able to live the same day-to-day lifestyle I had been enjoying before. Not that I lived a very extravagant lifestyle by any stretch, but if I wanted to go out to eat once in a while or go on some small spending spree once in a while, I wouldn't have to worry about where the money would come from or otherwise bust my budget.

And my budget always included a cushion, or surplus, available to cover any small, unforeseen expenses while maintaining a larger slush fund available to cover any rare, larger one.

As for the timing of my ER, I was trying to balance my limited loyalty to the job in finishing up my one large project before I would resign. I was also waiting to hit my magic number, which was a certain value of the large company stock holding within my 401k I planned to cash out at lower tax rates and invest in a bond fund whose monthly dividends would cover my expenses. I hit that number in the middle of 2008 although the stock value dropped slightly (only slightly, despite the crashing markets in the third quarter of 2008) at the end of September (the stop was evaluated once every 3 months which was very helpful). The crashing market was actually very helpful for me because that bond fund's price fell a lot so I was able to buy 25% more shares than originally planned. Sell high, buy low, right?

I had also found an affordable individual HI policy for 2009 after my COBRA expired at the end of 2008 (I was not working enough hours to remain eligible for the group health plan since 2007), so that was another piece of my ER plan which had fallen into place in 2008.

I think I found the right balance between ERing too soon and waiting around too long.

 

[bingybear]

Wiki defines FI as:
"Financial independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income and/or cash flow from dipping into the assets that is at least as great as their expenses"

The real wild card in this definition it how are basic necessities. Some might call an Audi A8 a necessity where others would consider a Kia or even public transport.

Trying to figure out what health insurance, health care and LTC is going to cost is really a wildcard. Health expenses were more manageable while working (HI especially), but getting a pacemaker at 51 gave me a new insight as to what healthcare can cost.

The other wild card is how long are you going to live? I RE at 53. I likely over saved if I live to 62, not so much if I live to 115.

We typically can live on fairly little. We likely saved beyond the definition of FI. By how much depends on lots of factors that are still to be determined.

 

[gamboolman]

TGL405
I could have written your post. It is so very similar to my wife and I’s situation.

I’m age 57, she’s 55 and we have just reached the lower end of FI.

My wife does not work as she has been with me for ~15 years on a permanent resident oversea’s assignment for a major oil company.

We too are “struggling to determine just how far beyond FI we need/ want to go.”

We have tracked expenses for years and have also prepared a Retirement Budget that we have reviewed and discuss/cuss regularly over the last few years. We feel that we are very conservative in our retirement budget and have included significant travel, discretionary and fun monies well beyond the basic necessities.

For now, our plan is for me to continue work and retire on 1-Jan-20. I will be age 60. This will allow us to increase our savings and for the pension / Lump Sum to increase a good bit.

Part of our reasoning to delay until age 60 is that we are planning for me to take Social Security at age 67. So we will be looking to bridge the 7 years from age 60 to 67. My wife will take the ½ spousal benefit based on my SS when she turns 67.

Just knowing that we could retire today and be comfortably OK – is a great feeling, really it is surreal.

All the best TGL405. Please keep up posted as to your plans and status. I agree there are lots of members in very similar situations as yours.

gamboolman

 

[LARS]

Guess I came at ER a different way than most. Money was never the issue/litmus test. For me, I knew it was time to move on when my favorite phrase became "the client is the enemy".

 

[bradaz2488]

Interesting topic. Got me thinking on when I technical reached FI and when I mentally reached FI. Technically I reached FI in July of 2000 (age 36) right before the tech bubble burst. Unfortunately most of my net worth was tied up in company stock and options. Lost 58% of my net worth in 4 months. Big lesion learn here was diversification. It took 11 years (age 47) to get back to technical FI status. Matured a lot financially in those 11 years with lesions like the 2002 recession and the "great" recession of 2008. By this time the j*b BS bucket was overflowing and I started the serious effort to put a solid plan to ER. Mentally reached FI status late 2012 and pulled trigger May 2013 (age 49)... No regrets, but healthcare cost was/is the biggest risk in our ER plan.

 

[candrew]

It depends....

From your post, it appears a great deal of planning has gone into the FI part of retirement. Have you devoted a proportionate amount of planning and thought as to what your life will look like after ER?

At the urging of other members on this board DW and I read the book "How To Retire Happy, Wild & Free" and found it incredibly valuable in helping prepare us emotionally & mentally for ER.

 

[kaudrey]

I am FI at a basics level now, at 48. However, I plan to work until 57 for a few reasons:
1) That's when I can keep my federal health care bennies and get an immediate pension;
2) I plan to have a large travel budget in the early years of retirement.

 

[W2R]

There is something reassuring to hear from people who have been through the same struggles and have overcome them, as it also gives me confidence to know that I have looked at this from different perspectives.

I was wondering how many of you also struggled with this question while working and what were the factors that led YOU to decide how far beyond FI to work?

Thanks

I retired in 2009, and was FI in 2007. Back then, the ACA did not exist and medical costs were going up at a breathtaking rate. So, I waited until I qualified for retiree medical, in 2009. That was very, very hard for me to do.

During those last two years I kept saving as always, out of habit. And then there was an unexpected inheritance. So, my retirement is a bit overfunded but I am having fun figuring out what I want to do about it.

 

[DrRoy]

I have been FI for a couple years, but stayed on to maximize the modest pension, which I saw as free money. Last summer I set the date for Mar 31. In that time, work was mostly OK but this year it has gotten tough, and I am really glad to be quitting. Also, the NW continued to grow and we now will do very nicely on a 2% WR or even less. It will give us some comfort to splurge on travel more.