$1 million is still the sweet spot

[rayvt]

It's darned hard to leave this world just as your net worth hits zero.

It's kinda like winning a war with the last bullet in your arsenal. Doesn't happen. Can't happen. You either run out of bullets too soon, thereby losing the war-----or have truckloads of them when it's over.

Several years ago, while doing planning towards FIRE, I did a lot of playing with the FIRECALC equivalent that my company's 401K plan had. There was really no happy middling ground where I died with a generous estate. Either we ran out of money before we died, or the estate was large and still growing at the end. It was quite sensitive to the input parameters. Really bang-bang. A set that looked good turned out to crash if you changed assuptions about returns even a little bit.

When my wife asked about the results, I told her that it looks like either we'd be living with the kids at the end, or we'd be leaving them with a few million dollars. She voted the latter.

 

[Alan]

When my wife asked about the results, I told her that it looks like either we'd be living with the kids at the end, or we'd be leaving them with a few million dollars. She voted the latter.

The standard answer is something like "Sorry Honey we can't afford it, you'll have to keep working"

 

[Ed_The_Gypsy]

The standard answer is something like "Sorry Honey we can't afford it, you'll have to keep working"

I hear that a lot.

 

[hankster]

It's darned hard to leave this world just as your net worth hits zero.

It's kinda like winning a war with the last bullet in your arsenal. Doesn't happen. Can't happen. You either run out of bullets too soon, thereby losing the war-----or have truckloads of them when it's over.

Several years ago, while doing planning towards FIRE, I did a lot of playing with the FIRECALC equivalent that my company's 401K plan had. There was really no happy middling ground where I died with a generous estate. Either we ran out of money before we died, or the estate was large and still growing at the end. It was quite sensitive to the input parameters. Really bang-bang. A set that looked good turned out to crash if you changed assuptions about returns even a little bit.

When my wife asked about the results, I told her that it looks like either we'd be living with the kids at the end, or we'd be leaving them with a few million dollars. She voted the latter.

I like your "bullets" analogy.

I too have been amazed at the differences in portfolio survival with just a small change to the inflation rate or investment return. It makes me realize the importance of flexibility; being able and willing to shift on the fly. I plan to enter retirement expecting to cut back as needed when I see trouble on the horizon. Some years may involve lots of travel and fine dining, others may be along the lines of "heat and eat", read books and cook at home.

I have no plans to live in a state of paranoia over hyper-inflation, EMP nuclear strikes, civil war, super depressions, etc.

 

[NW-Bound]

I also like the "bullet" analogy.

However, I sometimes wonder if I am spraying my bullets like with a Tommy gun, shooting from the hip.

Better hunker down, count my bullets, and shoot sparingly like a sharp shooter. Maybe a good RV if I happen to spot one. Heh heh heh...

 

[kcowan]

I think $1 Million is a good target for subsistence. There are a couple of things that can make it better. One is relocating to Mexico where the money will go twice as far.

The other is to get $2 million. Getting both would be perfect.

 

[Nords]

But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

Hunh, whaddyaknow. Another long-time poster driven away by the persistent "Yeah, but" responses from a relative newbie with plenty of anecdotal experience who hasn't made the time or the effort to read up on the subject under [-]disputation[/-] discussion.

"Whether you think you can or you think you can't, you're absolutely right."

 

[deserat]

Hunh, whaddyaknow. Another long-time poster driven away by the persistent "Yeah, but" responses from a relative newbie with plenty of anecdotal experience who hasn't made the time or the effort to read up on the subject under [-]disputation[/-] discussion.

"Whether you think you can or you think you can't, you're absolutely right."

Yup - I've been on almost as long as you - perhaps requiring newbie to wade through previous threads before posting might change that. And as for people who leave, well, lots of that, too. I've left for months at times - and the lather, rinse, repeat cyle has gone through several bottles of shampoo. Searching for something new becomes a more time investing endeavor.

Didn't Lincoln say people are about happy as they decide to be? Same thing - also, bosco's point about Pareto ruling is so true.....

 

[haha]

Yup - I've been on almost as long as you - perhaps requiring newbie to wade through previous threads before posting might change that.

Right. And I am sure that Andy as the site owner and beneficiary of traffic would be really pleased by this new rule to complicate participation and send people on to another site.

A click by someone who just arrived on site is as good as one by a "veteran".

Ha

 

[Ltyoungbuc]

My wife and I also plan to retire early (both age: 39). We are currently 27 years old, and have a 3 year old son. We have about $106,000 in the stock at the moment. My wife stays at home, and I am an Air Force Officer (Prior-Enlisted 2d Lt). I have 12 years until I can retire from the Air Force. I went to the ingyournumber.com website, and to retire at age 39 and spend $120,000/year through age 85, we need to have about $5 million. That's an annual return of about 35% for the next 12 years. I currently bring in $10K/month from writing covered calls. This income is immediately rolled back in to the investment. I know $5 Million is very aggressive (overkill), but we want to have the ability to spend $10,000/ month and not run out of money. We don not plan to live in a mansion or anything like that, but a nice sized 5 bedroom house with a few custom features is all we need. Does anyone else have a better idea to hit the goal? All comments are welcome.

 

[youbet]

Pretty conservative Ltyoungbuc. Assumes no pension or SS or other retirement income source and a 2.4% withdrawal rate.

 

[Ltyoungbuc]

I am not counting my military pension, which is enough for us to live on alone. An officer's retirement is substantially higher than enlisted. The goal is to make it on our own, and the military pension will just be a pleasant surprise. I don't think we could just stay at home and spend money. We would travel more, and work more for the fulfillment...rather than out of necessity. It's just great to have the option of taking-off if you want to.

 

[jdw_fire]

...

We have about $106,000 in the stock at the moment.

...

I currently bring in $10K/month from writing covered calls.

care to provide the details? what stocks do you write said calls on, in the money or out of the money calls, how far in the future do you write them, do you switch out your stocks? etc.

 

[Ltyoungbuc]

I use the 3x Leveraged S&P 500 Exchange Traded Fund. I Write ATM calls, every month. You bring in a lot more going month to month as opposed to writing long contracts. I repeat this process every month. Instant diversification with one investment. You have to take into consideration that it is a 2-way street. The triple performance I mentioned is also on the downside as well. Anyway, the Ticker Symbol is UPRO. There is also a double leveraged fund Ticker Symbol: SSO if UPRO is too expensive at first. But that's all I do. Like said before...the cycle repeats every month.

 

[hguyw]

I used to come here to read inspiring stories about adventurers and risk takers retiring on $500K-$1M or less in a fishing camp on Lake Pontchartrain or on a sailboat circumnavigating the globe. All I read nowadays are stories of people with multimillion dollar portfolios who think that $1M is chump change and spend their time worrying about every possible financial disaster no matter how unlikely.

Thank you FIREdreamer. I'd been thinking the same thing for awhile now, but I thought it was just me. When I first landed on this board a couple years ago, I enjoyed reading the 'Hi I am...' forum. Lots of different folks in all income strata, and a fair number who were obviously folks of modest means like myself. Not any more. Now it's almost exclusively folks who are just swimming in money, and when they start fretting about whether they can retire or not it's almost a little offensive.

 

[Bikerdude]

Generous SIRE involves less risk than pure FIRE. Hopefully you'll concede that someone with a COLA'd pension and lifetime retiree healthcare has significant less risk than another person with neither.

You want less investment risk? Then buy an annuity for your pension benefit and buy another to pay for your health care. It's only $$$. I got mine as a benefit as part of my overall compensation. You have to buy yours with money you were paid. What's the difference? I don't get your point.

 

[DangerMouse]

Our intention is to retire with a nest egg between $1-$2 million, but likely skewed to the lower end. We are in our late 40s and will have no pensions and if I can get DH to let go of his job we will move into retirement this later this year. I haven't worked in any capacity for the past 12 months.

I believe that $1 million will be enuf for us. We are resilient, if we pull the plug and find that we can't live on what we have we will take some temp work for a few months of the year to supplement. We are fortunate in that we have a national health system in Australia to fall back on.

Personally I would rather retire at 48 with $1 million and try and live on a 4% withdrawal rate for the next 40 years, than wait until I am 60+ and live on a 3.2% withdrawal rate. Life has a funny way of working out, who knows if I will even be alive at 60.

We are not doing any estate planning with the intention of leaving large amounts behind, rather our focus is on living life to the max while we still can. There is so much out there to do, I don't want to wait until I am 60 to do it.

 

[teejayevans]

You want less investment risk? Then buy an annuity for your pension benefit and buy another to pay for your health care. It's only $$$. I got mine as a benefit as part of my overall compensation. You have to buy yours with money you were paid. What's the difference? I don't get your point.

Annuity for health care? That better have one heck of COLA.
TJ

 

[LOL!]

Personally I would rather retire at 48 with $1 million and try and live on a 4% withdrawal rate for the next 40 years, than wait until I am 60+ and live on a 3.2% withdrawal rate. Life has a funny way of working out, who knows if I will even be alive at 60.

Isn't that backwards? Aren't you supposed to use the lower sustainable withdrawal rate when you retire earlier? That is, retire @ 48 and live on 3.2%, instead of retire at 60+ and live on 4%.

 

[Bikerdude]

Annuity for health care? That better have one heck of COLA.
TJ

It's just money. Everything has it's price.

 

[DangerMouse]

Isn't that backwards? Aren't you supposed to use the lower sustainable withdrawal rate when you retire earlier? That is, retire @ 48 and live on 3.2%, instead of retire at 60+ and live on 4%.

Actually my point was that it seems as if many on this board could go at an earlier age and live off a 4% withdrawal rate, but they choose to endure years of additional labour so they can have a smaller withdrawal rate.

If you look at the recent Hi I Am posts it seems as if a lot are FIRing in their early 60s or they are in the 20-30 range and want to be done in 10 years time. What has happened to everyone in their 40s making the jump to FIRE?

 

[LOL!]

What has happened to everyone in their 40s making the jump to FIRE?

I think folks saw their portfolios get shredded with a dose of reality.

 

[jdw_fire]

I use the 3x Leveraged S&P 500 Exchange Traded Fund. I Write ATM calls, every month. You bring in a lot more going month to month as opposed to writing long contracts. I repeat this process every month. Instant diversification with one investment. You have to take into consideration that it is a 2-way street. The triple performance I mentioned is also on the downside as well. Anyway, the Ticker Symbol is UPRO. There is also a double leveraged fund Ticker Symbol: SSO if UPRO is too expensive at first. But that's all I do. Like said before...the cycle repeats every month.

i must be missing something, UPRO is currently selling for $159.54 per share so if you have $106k in this you have about 660 shares which will allow you to write 6 covered call options. the feb $160 call option is currently priced at $8.50 netting you $5100, about half of the $10k you said in your post. (SSO is even worse.) please clear up my misunderstanding.

 

[traineeinvestor]

Actually my point was that it seems as if many on this board could go at an earlier age and live off a 4% withdrawal rate, but they choose to endure years of additional labour so they can have a smaller withdrawal rate.

If you look at the recent Hi I Am posts it seems as if a lot are FIRing in their early 60s or they are in the 20-30 range and want to be done in 10 years time. What has happened to everyone in their 40s making the jump to FIRE?

I am in my 40s and hope to hit my retirement number at the end of 2012 after which I will work reduced hours for 1-2 more years before FIREing before I turn 47 to (i) provide a transition period and (ii) [-]some play money to spend on my vices [/-]an extra cushion and (iii) to give us a dry run of living off our investments.

Of course, I could retire now and I would be fine but my wife might have a few problems after I have gone as she is expected to outlive me by around 14 years according to the actuarial tables.

To address the question in the OP, with no pension or other [-]taxpayer funded[/-] govt support, US$1million is well short of what is needed (even if I assume I own a debt free home as well). The money may have to last for 50 years and we will still be supporting our children for 15+ years after I FIRE.

 

[Midpack]

You want less investment risk? Then buy an annuity for your pension benefit and buy another to pay for your health care. It's only $$$. I got mine as a benefit as part of my overall compensation. You have to buy yours with money you were paid. What's the difference? I don't get your point.

Relying on insurance company investment performance and solvency for the next 30-40 years is not without risk IMO. The folks with AIG annuities got pretty nervous, some bailed and took losses, we'll see how it goes for the next few decades. If insurance companies and therefore annuities were without risk, I would definitely make annuities part of my plan. Annuity losses are by no means unheard of. And I'm not aware of an annuity that will keep up with the inflation rate we should plan on for health care expenses. I didn't say SIRE is without risk, just relatively less than folks with no SI assets (esp COLA's).