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How much can we realistically spend for a long time?
Old 08-10-2021, 03:34 PM   #1
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How much can we realistically spend for a long time?

Here is the financial information:

Him/Her: 57/56. all assets: tax-advantaged, taxable, HSA, Roth, etc., total $4.8M as it is showed yesterday.

Asset allocation: about 70/30 (stocks/bonds+fixed income), about 18% of stocks are international. All in Vanguard/Fidelity Total Stock Market Index Funds, Total Bond Market Funds, Stable Value Funds, or equivalents.

Combined social security at 62: $40,000. House: worth about $700,000, paid off.

Location: in a low cost of living area, state tax rate 5% flat.

Initial annual expenses: minimum $100,000, including everything (health insurance, taxes, etc)

Things could have been easier, except I have a 25 year old unemployed son who does not seem to be interested in working for others. He has a computer science degree and is doing something computer related and hope to commercialize his game skills some day. I am not interested in comments about if we should take care of him. We decided to take care of him no matter what. That is why I am asking for a potentially long period withdrawal of my portfolio, covering my son's life if he is not successful.

I am tired of working. Assuming we both retire now. How much can we realistically spend for about 70 years? (beyond the minimum $100,000).

(I am a regular visitors to this forum and I am very familiar with the 4% rule, FIRECal, safe withdrawal rate, etc. I do have some ideas to answer my own question. I am thinking to spend about $100,000 (everything included) per year initially and maybe move up as the market goes up and time goes. But $100,000 seems to be my bottom number. I would love to have some comments and suggestions from other people).
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Old 08-10-2021, 03:41 PM   #2
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Put your data into FIRECalc and then select the Investigate tab and select
Quote:
Given a success rate, determine spending level for a set portfolio, or portfolio for a set spending level
Search for settings that will get a success rate of as close to 95% as possible (usually within 1%) by changing... X Spending Level or Starting portfolio value
Then click on Submit. I'm thinking about $180k.
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Old 08-10-2021, 03:42 PM   #3
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I have an unusual question: what would you choose to spend on every year during that 70 years if you and your spouse retire today?

Just the big items as examples.

No judgement here just curious. I would like to go on trips at exotic places (north or south poles) or try living on a cruise ship for like a year which can cost a lot but I don't plan to do something like that every year. Maybe I could get some ideas from you so I can get more motivation for continuing my work.
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Old 08-10-2021, 03:45 PM   #4
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Originally Posted by teetee View Post
I have an unusual question: what would you choose to spend on every year during that 70 years if you and your spouse retire today?

Just the big items as examples.

No judgement here just curious. I would like to go on trips at exotic places (north or south poles) or try living on a cruise ship for like a year which can cost a lot but I don't plan to do something like that every year. Maybe I could get some ideas from you so I can get more motivation for continuing my work.
Please, 70 years include potential life of my son.
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Old 08-10-2021, 03:49 PM   #5
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Originally Posted by pb4uski View Post
Put your data into FIRECalc and then select the Investigate tab and select


Then click on Submit. I'm thinking about $180k.
Just using the information provided which includes the combined 40k SS, I get a maximum spending of 190k for 70 years at 100% success rate.
So definitely in that neighborhood of spending.
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Old 08-10-2021, 04:00 PM   #6
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Just using the information provided which includes the combined 40k SS, I get a maximum spending of 190k for 70 years at 100% success rate.
So definitely in that neighborhood of spending.
Thank you for running that, I did run FIRECalc many many times. I would like think that number(s) is (are) a little bit liberal. I would like to see some comments about how much you might choose to spend if you were in a similar situation.
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Old 08-10-2021, 04:16 PM   #7
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What is your current annual spending? If $100,000 covers it, then the firecalc $180-190,000 examples above would give you plenty for a good retirement.

I initially thought we would be traveling, doing spontaneous trips, etc. And we did that the first year or so. Then Grandkids came along and our desires changed.Now we enjoy being more homebodies, gardening, etc and spending time with family nearby. Not necessarily spending less money though! :-)

Spend it on whatever you wish--what does your retirement dream look like?
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Old 08-10-2021, 04:32 PM   #8
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Quote:
Originally Posted by flyingaway View Post
Thank you for running that, I did run FIRECalc many many times. I would like think that number(s) is (are) a little bit liberal. I would like to see some comments about how much you might choose to spend if you were in a similar situation.
Just another thought on the Firecalc liberal side of spending comment.
Early Retirement Now, which is another fairly popular retirement blog has a 97% success rate at 75/25 equity/bond ratio for 60 years at a 3.5%WR.
Effectively Firecalc has a 95% success rate at 3.52%WR for 70 years.
So not materially different.

In terms of actual spending, I would first think about it in 2 buckets.
How much for both of you and how much for your son.
I would look at keeping spending at no more than 3%WR, but again matters how much is allocated to your son.
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Old 08-10-2021, 05:19 PM   #9
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We have an intellectually disabled son. We have decided to use 3% WR as perpetual withdrawal rate. At some point we were thinking 2.7% but we decided that was too conservative. So you can spend about 120k from your portfolio “forever” without diminishing portfolio value. Plus your 40K from SS. So total 160k is what I would spend.
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Old 08-10-2021, 05:36 PM   #10
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Kid is still young enough for Guard/Reserve...could even use their CS degree there...gets them out of the house a few days monthly, leaves them plenty of time to develop whatever CS project they're currently working on.
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Old 08-10-2021, 06:13 PM   #11
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Originally Posted by pjigar View Post
We have an intellectually disabled son. We have decided to use 3% WR as perpetual withdrawal rate. At some point we were thinking 2.7% but we decided that was too conservative. So you can spend about 120k from your portfolio “forever” without diminishing portfolio value. Plus your 40K from SS. So total 160k is what I would spend.
Is the 3% WR inflation adjusted or against the size of the portfolio?
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Old 08-10-2021, 08:02 PM   #12
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Quote:
Originally Posted by flyingaway View Post
Here is the financial information:

Him/Her: 57/56. all assets: tax-advantaged, taxable, HSA, Roth, etc., total $4.8M as it is showed yesterday.

Asset allocation: about 70/30 (stocks/bonds+fixed income), about 18% of stocks are international. All in Vanguard/Fidelity Total Stock Market Index Funds, Total Bond Market Funds, Stable Value Funds, or equivalents.

Combined social security at 62: $40,000. House: worth about $700,000, paid off.

Location: in a low cost of living area, state tax rate 5% flat.

Initial annual expenses: minimum $100,000, including everything (health insurance, taxes, etc)

Things could have been easier, except I have a 25 year old unemployed son who does not seem to be interested in working for others. He has a computer science degree and is doing something computer related and hope to commercialize his game skills some day. I am not interested in comments about if we should take care of him. We decided to take care of him no matter what. That is why I am asking for a potentially long period withdrawal of my portfolio, covering my son's life if he is not successful.

I am tired of working. Assuming we both retire now. How much can we realistically spend for about 70 years? (beyond the minimum $100,000).

(I am a regular visitors to this forum and I am very familiar with the 4% rule, FIRECal, safe withdrawal rate, etc. I do have some ideas to answer my own question. I am thinking to spend about $100,000 (everything included) per year initially and maybe move up as the market goes up and time goes. But $100,000 seems to be my bottom number. I would love to have some comments and suggestions from other people).
If your spending is truly $100k per year, you have won the game. Congratulations. You can retire and your resources will last quite some time.
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Old 08-10-2021, 09:13 PM   #13
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There are some challenges with a time frame that long. First one is, Firecalc wouldn't be including some of the common failure starting points from the mid 60s. Second challenge isn't really a problem, but if you mimic many of the starting years you will have far more money than you need.

I'd be inclined to use some kind of variable spending model that lets you spend more when times are good, but immediately starts making adjustments when times go bad. The basic 4% "rule" says you start with 4% spending and adjust that by the inflation rate, even if you lost money the year before. The theory is that over the long haul the market will recover so just stay the course. That's all fine, unless it just doesn't recover, like one of those historical runs that keeps your success rate from being 100%. At some point you'd have to change, so I'd rather make smaller changes early than make a drastic change when it may be too late. On the flip side, it allows you to spend more when the market is good.

How is your son with money? Assuming you both pass first, will he be able to manage the money responsibly?
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Old 08-10-2021, 09:31 PM   #14
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I would think about it as spending for the three of you for the next thirty years and then once you are gone the spend rate should go down. Model with Fire calc as a drop in spend by $50k once the two of you pass?
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Old 08-10-2021, 09:49 PM   #15
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There are some challenges with a time frame that long. First one is, Firecalc wouldn't be including some of the common failure starting points from the mid 60s. Second challenge isn't really a problem, but if you mimic many of the starting years you will have far more money than you need.

I'd be inclined to use some kind of variable spending model that lets you spend more when times are good, but immediately starts making adjustments when times go bad. The basic 4% "rule" says you start with 4% spending and adjust that by the inflation rate, even if you lost money the year before. The theory is that over the long haul the market will recover so just stay the course. That's all fine, unless it just doesn't recover, like one of those historical runs that keeps your success rate from being 100%. At some point you'd have to change, so I'd rather make smaller changes early than make a drastic change when it may be too late. On the flip side, it allows you to spend more when the market is good.

How is your son with money? Assuming you both pass first, will he be able to manage the money responsibly?
Yes, flexibility may be helpful. I am thinking to start low at $100,000 per year, which is actually tighter than what we would like to spend.

My son is not interested in investing at this time. But I hope he will learn when he is really matured.
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Old 08-11-2021, 04:48 AM   #16
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With 3% WR you can spend about 120k from your portfolio “forever” without diminishing portfolio value. Plus your 40K from SS. So total 160k is what I would spend.
+1
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Old 08-11-2021, 04:52 AM   #17
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Is the 3% WR inflation adjusted or against the size of the portfolio?
Conceptually the 3% would be inflation adjusted, but personally I prefer to use this concept against the size of the remaining portfolio.
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Old 08-11-2021, 05:10 AM   #18
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There are some challenges with a time frame that long. First one is, Firecalc wouldn't be including some of the common failure starting points from the mid 60s. Second challenge isn't really a problem, but if you mimic many of the starting years you will have far more money than you need.
Agree, even with a 50 years span that I am looking at quitting at 47 the sample size is smaller (and also has a lot of data points from a very different economy... not that 50 years from now will not be very different from now as well). In my obsessing prior to quitting, I would run back to back 20/30 year cycles using the lowest ending value as the new starting value. Essentially seeing how I would fair if I fired and had the two worst n-year periods back to back -unlikely that I'd do that poorly but it's a reference and almost all will fail at somepoint forcing back to back "worse times" but seeing how bad and when is comforting. Of course, if you picked the worst time in history, you would know pretty soon after FIRE when, presumably, you'd be young enough to implement some mitigation efforts by reducing spending or seeking income.



I'd consider doing the similar, perhaps one cycle through the likely retirement phase, then using the remaining value with the new lower withdrawal rate for the expected life of your son from that point on.
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Old 08-11-2021, 05:28 AM   #19
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I agree with the others that you look pretty solid based on the numbers.

Are either you or your spouse self-employed? If so, I would consider hiring your son to do some p/t work so he can earn enough quarters to qualify for SS. This would help decrease the withdrawal rate of your portfolio in his retirement years.
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Old 08-11-2021, 05:32 AM   #20
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Perhaps a good investment might be for a life coach for your son to help him find his path in life independent of you and your DW.

FWIW, we charged our son $400/month rent when he lived with us. We told him that we would pay him back all the rent that he had paid when he moved out. I would periodically give him a "statement" of the balance in the "[son's name] Freedom Fund". While he moved out for other reasons, the idea was that once there was $5k+ in the account that there would be a strong financial incentive to move out.
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