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Extra buffer for travel/fun advice?
Old 03-07-2021, 09:55 AM   #1
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Extra buffer for travel/fun advice?

I'm preparing to give up a high salaried position this fall and take a break while I figure out whether to RE or just move into some other form of work. I have stopped learning and am no longer challenged by my current job, and the boredom is killing me. That said, I'm just not sure what I want to do going forward, other than travel and pursue hobbies--which could end up being expensive.

My question is around managing a bucket of cash of, say, 100k that is set aside to spend freely over the next few years. My current portfolio should support 3.5% SWR, including about 12k/yr as a budget for travel/hobbies. But given I'm young-ish and have lots I'd like to do, I'm thinking it would be good to bump that up for the first few years.

Has anyone done this heading into RE? Would it be better to just invest that amount in the general portfolio? 100k = 4k/yr using 4% rule, but that's less than I envision spending. If I leave it in cash that'd be 20k/yr extra.

Thoughts on managing this?
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Old 03-07-2021, 09:57 AM   #2
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That’s what we did anticipating serious pent up demand and a lot of initial travel. We did travel very heavily the first two or three years.
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Old 03-07-2021, 10:21 AM   #3
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Quite common for people to spend more in first years of retirement due to checking off bucket list items, house upgrades, buying vacation home, or whatever. I don't see anything wrong with your plan, as the long term spending and savings are sufficient for your anticipated needs.


I do think you are kind of in the one more year (OMY) thinking, in order to pad that cash bucket. Nothing wrong with that if it helps make you feel better making the decision. But if you have the means now, it does require the extra working which you already stated that you do not want to do.


Another thing that I have said here many times, you may have a job to retire from, but you need something to retire to. My advice is think about what you want your retired life to be, the travel and the hobbies are great ways to spend time and add enjoyment to your retirement.
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Old 03-07-2021, 10:46 AM   #4
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Originally Posted by 38Chevy454 View Post
Quite common for people to spend more in first years of retirement due to checking off bucket list items, house upgrades, buying vacation home, or whatever. I don't see anything wrong with your plan, as the long term spending and savings are sufficient for your anticipated needs.


I do think you are kind of in the one more year (OMY) thinking, in order to pad that cash bucket. Nothing wrong with that if it helps make you feel better making the decision. But if you have the means now, it does require the extra working which you already stated that you do not want to do.


Another thing that I have said here many times, you may have a job to retire from, but you need something to retire to. My advice is think about what you want your retired life to be, the travel and the hobbies are great ways to spend time and add enjoyment to your retirement.
Thank you I appreciate that. I’ve been OMY for a bit now and have been thinking a lot about what to “retire to,” but can’t seem to come up with anything other than hobbies. “Pursuing a career” seems to be as wide as my imagination takes me thanks to a lifetime of indoctrination! Just keep feeling like a big change may provide perspective. Huge risk I know.
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Old 03-07-2021, 11:15 AM   #5
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So your current retirement investment savings will support 3.5% withdrawal and you have or are trying to save up 100K separately for travel/hobbies in the next few years?
If you want to keep it separate, and plan to use it in the next year or so, I would use a good bank or credit union to stash it in whatever highest interest account you can find.

Hobbies are great things to retire too! Keep you busy, learn new things. Consider classes at Community Colleges if you want to explore--our local one has education classes in photography and other arts, culinary, auto, foreign languages, etc. Great place to see if something holds your interest.
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Old 03-07-2021, 11:26 AM   #6
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Quote:
Originally Posted by tmitchell View Post
I'm preparing to give up a high salaried position this fall and take a break while I figure out whether to RE or just move into some other form of work. I have stopped learning and am no longer challenged by my current job, and the boredom is killing me. That said, I'm just not sure what I want to do going forward, other than travel and pursue hobbies--which could end up being expensive.

...
When I faced this I thought.... hmmm work 1 more year at my high paying job, or 5 more years at Walmart

The choice was obvious, and glad I didn't pick Walmart as they laid off some greeters
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Old 03-07-2021, 11:28 AM   #7
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OP - You haven't stated how young you are. I'm not sure 3.5% is a safe amount depending upon how young.

Did you include Health care, which since you have a high salary right now, you might be shielded from ?
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Old 03-07-2021, 01:30 PM   #8
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OP - You haven't stated how young you are. I'm not sure 3.5% is a safe amount depending upon how young.

Did you include Health care, which since you have a high salary right now, you might be shielded from ?
I'll be 54. Firecalc is saying I'm ok even w/o SS. Add that in and I'm at 100%.
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Old 03-07-2021, 03:12 PM   #9
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Originally Posted by tmitchell View Post
... My question is around managing a bucket of cash of, say, 100k that is set aside to spend freely over the next few years. My current portfolio should support 3.5% SWR, including about 12k/yr as a budget for travel/hobbies. But given I'm young-ish and have lots I'd like to do, I'm thinking it would be good to bump that up for the first few years. ... Would it be better to just invest that amount in the general portfolio? ... Thoughts on managing this?
What you are doing is what the behavioral economists call "mental accounting." (https://en.wikipedia.org/wiki/Mental_accounting) There's nothing wrong with it; we all do it all the time, budgeting, segregating our retirement assets from our day-to-day spending, etc. But it's IMO good to recognize it for what it is. In your case you are mentally segregating some of your retirement assets to be used for a specific purpose. Like it or not, this money is in your portfolio and part of today's AA. Since it's a short-term need, it should be liability-matched to a short-term investment like a CD. There is no right answer on picking that asset. CD, MYGA, t-bills, etc. get it done. You may already have a suitable asset or you may have to rearrange the furniture a little bit. You also might choose to increase the fixed income side of your AA by the amount of your set-aside.

The only wrong answer is to match a short-term liability with a long-term asset. Then you are rolling the dice on the money's availability.
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Old 03-07-2021, 03:21 PM   #10
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May help you think about things....

https://michaelhyatt.com/creating-a-life-plan/
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