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Old 07-26-2017, 06:33 PM   #161
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From CNN -

"That doesn't mean retirees will get nothing by 2034. It means that at that point the program will only have enough revenue coming in to pay 79% of promised benefits."

I personally have more faith in the SS 79% number than I would in any Firecalc future predictions (for all the various reasons previously discussed.) That and old people are a big voting block.

The system can change. Congress has changed Social Security before and can do so again. Amendments in 1956, 1961, 1962, 1965, 1972, 1977 and 1983 made minor changes to ensure Social Security’s solvency.
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Old 07-26-2017, 06:56 PM   #162
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The system can change. Congress has changed Social Security before and can do so again. Amendments in 1956, 1961, 1962, 1965, 1972, 1977 and 1983 made minor changes to ensure Social Security’s solvency.
Taxes, inflation, stock market returns, interest rates - everything is open to change over 50 years. I'm not assuming an unlikely worst case on SS (zero instead of 79%?) and not much change on everything else.
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Old 07-26-2017, 07:46 PM   #163
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I figure that planning on about 65% of projected SS is a relatively safe assumption. This ignores nuklar war and the Zombie Apocalypse.
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Old 07-26-2017, 08:03 PM   #164
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In reading a bunch of different posts across the forum, I'm struck by how little $$$ by comparison I have and consider myself now "FI." Right now I have $950K investable assets (I don't include the equity I have in my house).

I determined I reached FI because a SWR of 4% on average, over a span of 35 years, as confirmed by several retirement calculators and FIREcalc, will pay for all my current and anticipated expenses pre and post receiving social security. I am counting on receiving my SS at age 67 and that's part of my calculation. I have no heirs or dependents so it's just me. There will be an inheritance I receive, but I'm not counting that in my calculations.

Yet I see some people in their 50's biting their nails with $1.3M or more in investments, not counting their house, no debt, some not even counting SS, and wondering if they can make a go of it and quit their job. Seriously?

The very definition of "FI" is that the income/dividends earned from investments along with a 4% SWR or less, per the Trinity Study, will fully cover one's expenses. I suppose if someone is planning on a more luxorious retirement, above their current lifestyle, that FI number will necessitate being higher.

If you have $1M in investments and you can easily live on $40K/year on average, and you're going to get SS benefits, then I'd say you are "FI" even if you don't think you are.


We are in very similar circumstances wrt assets, dependents, expenses, etc...

4% would cover my current expenses. Factoring in SS (even with a haircut) at 67 drops that to around 2% so I should really be good to go.

Is it possible we've concentrated so much on saving that we've sailed passed the finish line and didn't notice?
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Old 07-26-2017, 08:43 PM   #165
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So your "how much is enough" number is millions.



Then what do you consider FI for an individual if it's not that? This is important, IMO, because all the various early retirement bloggers and such use the 4% as a benchmark to determine when FI has been reached. That doesn't necessarily mean affluence, it means investment returns + some withdrawal covers all expenses.

I know I don't want to be working to my mid to late 60's if I can help it. At some point time becomes important. There's also the enjoyment factor. If you like what you do and you have the opportunity to do it, then there's no reason to quit or even retire. But many are in a different situation. Not enjoying the job, no pension forthcoming, feeling done, tired of the BS and job hunting in your late 50's is no picnic. To me hitting FI means options can be explored. It doesn't mean one has to retire, only that one can opt to do something else, even something that earns less money but is more enjoyable, and be okay.
The. number is different for everyone. But to be FI, IMHO, requires enough income to cover living expenses, plus income to build an adequate buffer. The you ger one is and the higher ones COL, the bigger that buffer has to. be. Since I am already 59.5, and never even considered retirement before 60 (for various life reasons), I readily admit that I don't have a real feel for the amounts needed. If all ones income is strictly from saved investments, then I agree with the consensus here. The younger and more in the family, the more needed and the lower the SWR. For couple planning to retire at 61, with already established spending patterns and a paid off home, 2/3's of gross working income either from pension and SS, or saved investments (any combinations) plus about a $1m saved means total FI. The Mil allows one to buy the SS annuity at whatever age makes sense based on health, market etc.

The idea, to me, is to ignore a SWR until SS is filed. Based on my income (under $150k) the difference, long term, of claiming SS (which is the max permitted amount for me) at 62 vs 70 is about $5k a year, more from delaying. The plan is to live on the amount I will get at 70, starting at retirement, just it will come from the savings accounts, not SS. Then I back calculate a conservative approximation of what will remain after delayed filing, and THEN apply The 4% rule to that remaining amount. Which, coincidentally, is about the same as what RMDs would be.

So I reduce my RMDs, live as if I claimed SS at 70, and evaluate each year whether I am on track and the economy of the situation works. This way, I enjoy and spend more when I have the most saved. When SS kicks in I no longer worry about a SWR, because while my income never changed, a much smaller percent comes from savings and a much larger amount is all annuities and covers all my living expenses and most of the discretionary as well. SS alone dor the two of us, when I am 70, would be kver $60k. Savings then can grow if needed with only RMDs as the drain. I can meter perceived risk against market health, and claim any time acter FRA. In addition, as a belt and suspender move, I have a $160k ROTH that is not figured in at all, By 70, it should be well over $200k if not used. Or it may be half gone if I buy a vacation place overseas. Total splurge money.
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Old 07-26-2017, 09:33 PM   #166
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2/3's of gross working income either from pension and SS, or saved investments (any combinations) plus about a $1m saved means total FI.
So let's say we're not talking about a couple, but just one person, 60 years old, no dependents, no spouse.

And let's assume this person has a yearly gross income of $100K (round numbers for ease of calculations), no pension, just 401Ks, IRAs, and in the future SS.

Let's assume yearly current expenses for this person are $35,000 and upon leaving their job, they assume yearly expenses will rise to $50,000 to cover additional healthcare costs & premiums.

You're suggesting for FI this person would need:

2/3 of gross working income x $100K per year + $1MM

That's $66,667 per year in "gross working income" + $1MM in addition for some kind of additional annuity, to cover yearly expected expenses of $50K, and by your definition this person has not reached FI until that point?

Thus this person would need a lump sum of $1,666,675 (to generate the $66.67K/yr working income) + $1,000,000 = $2,667,675 to be "FI."

Sorry, but that is not the definition of FI. It's gone way beyond.


Here's the standard definition of FI:

Let's say a person says they'll need $60K/year for expenses. Their expenses are actually $50K/year in retirement and the extra $10K/year is a buffer just in case.

A total amount of $1,500,000 would allow this person to take out $60k/year at a maximum withdrawal rate of 4% or, if they chose instead to only take out $50K/year for actual expenses their withdrawal rate would be 3.33%/year. That's not counting any SS they might get, which would decrease their withdrawal from their investments starting the year they take SS.
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Old 07-27-2017, 06:15 AM   #167
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I agree that most people look at how much they want to spend in retirement and then decide how much they need to save to achieve this. Once this(FI) is achieved, retirement can be considered.

There are others however, (myself included) that approached it the other way around. That is, save as much as you can (within reason) then set your spending in retirement to match the funds available. Works best if you can end up with a fairly large portfolio or have a generous pension. Could certainly backfire if you don't save very much.
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Old 07-27-2017, 06:20 AM   #168
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I agree that most people look at how much they want to spend in retirement and then decide how much they need to save to achieve this. Once this(FI) is achieved, retirement can be considered.

There are others however, (myself included) that approached it the other way around. That is, save as much as you can (within reason) then set your spending in retirement to match the funds available. Works best if you can end up with a fairly large portfolio or have a generous pension. Could certainly backfire if you don't save very much.
Agree with this. Our decision(s) is actually a hybrid of the two methods above.

The first paragraph is our step 1, using this to insure (really)bare minimum spending costs covered.

After that core baseline trigger point is achieved, the second method takes over and it is a sliding-window/grey-area of "excess" savings amount vs. bored/frustrated/exhaused from w*ork.

In any case after that second trigger point, we will lower (if needed) our lifestyle to make it work.
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Old 07-27-2017, 06:21 AM   #169
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Well, no, I was outlining a couple, and for a net retirement income that about equals preretirement net income based on a roughly $150k salary and INCLUDES SS. Certainly it makes sense that the if there is one person only plus the less one needs, the less one needs to save. And I assume the couple wants no change in lifestyle, except some extra delayed retirement gratifications during the first 10-15 years as is typical.

If one was a single $100k inflation adjusted earner for 35 years (easily could be, retiring at 60), so assume FRA SS of $30k/yr, $40k at 70, and as a single with that income, instead of $1M extra, use only $666k. So using your numbers, only $30k is needed from just savings, or $750k, plus $.666M, for a $1.416m total. When he retires at 60, he assumes SS annuity @70 of of $40k, so his WR is just over 4% from 60 - 70. At 70 he only needs an inflation adjusted $20k, from his now ~$1.2m remaining. So regardless if SS takes a haircut, or LTC is needed, or any major expense expense requires a principal reduction, he is covered. In actuality, I would agree to an even lower amount needed, at that income level, because SS would be entirely tax free. In my example, 85% of SS is taxed at 25% bracket, so $8500 is needed for taxes. So I would use $52k, not $60k, as the final calculation point, but still assume $60k gross, so only $550k is needed plus the $666k, or $1.216M. So at 70, about $950k is left as the WR bumps up to a ~5% for the 10 years before SS. After that, its easy street even if there are hard times. So, if you want to use my original $1M instead of $666 to bring it to your $1.5 needed, that works too... :-)

At that income, the tax torpedo at RMD time becomes very viable, so delayed filing is extremely beneficial. Collect SS at 62 of only $22k/yr and suddenly enough income to cover $38k is needed. So 1/2 SS of $11k plus $38k is $49k & will bring a single person to paying taxes on SS PLUS the $38k. If he delays until 70, 1/2 SS is $20k plus the $20k WR is only $40k, so likely no tax on SS, just the $20k. Big net difference. Of course, at age 70.5, if there is $1m in pretax savings.. then RMDs jump the WR to $40k and the tax bite is back. At that income level, to ignore SS is silly, (how can you ignore the equivalent of a tax benefited $40k/yr, equal to $1m with 4%SWR!!) IMHO, UNLESS you are only 30 now where the future is too murky. In which case this is all an academic exercise, as there is no idea what healthcare, your future marital status would be, etc etc. Or your income is planned to be $300k a yr in which case SS is incidental.

That is why I say it always depends on net income wanted and is age and taxable status specific. My definition was roughly based on a couple that is close to or at 60 today. SS is a given for us. But, with a lower income, one can easily not realize that at 70.5, an added $10k in taxes will be levied, eroding your nest egg far faster than assumed because one has not been paying that tax for the previous 10 years in retirement. Hence the term, tax torpedo.
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Old 07-27-2017, 07:28 AM   #170
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I think you've made this an overly complicated determination by bringing in tax issues, RMDs and whatnot and making lots of other complicated if/or/then assumptions.

Determining the point where your investments with a specific withdrawal rate will fully cover your expenses isn't supposed to be that difficult. At the point investments with a specific withdrawal rate cover current expenses, that is considered "FI". FI means a person no longer needs to rely on a job and salary and if they want to explore other options they can.

The RE part is separate. One doesn't have to retire at the point they reach FI. That's a separate decision. Some will choose to stop working altogether, others won't or will leave a corporate type job to pursue something else.
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Old 07-27-2017, 09:17 AM   #171
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I apologize.. you are absolutely correct...I WAS thinking about and assuming FIRE, not just FI. In fact, I myself in other threads have said that I have been FI for a few years, but not ready to RE, because of what I listed. It is on my mind a lot with 22 months to go, even though I have fairly flexible hours, no oversight, a low stress job, insignificant commute and am paid well with great benefits, I still look forward to in eagerness.
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Old 07-27-2017, 10:45 AM   #172
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seriously , some you people really overanalyze and confuse this issue
-track your expenses for a couple years prior
-take your liquid net worth and see if with your expenses you can take 4-5% per year out of that net worth up until SS comes in
-run those numbers through a retirement calculator with your comfortable asset allocation
90% + success ratio you will be fine
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Old 07-27-2017, 10:45 AM   #173
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<snip>


The very definition of "FI" is that the income/dividends earned from investments along with a 4% SWR or less, per the Trinity Study, will fully cover one's expenses.

<snip>
I agree with almost everything you've posted... but the line I highlighted isn't correct. The trinity study considers total returns... so you can't have your dividends and interest AND 4% SWR on top of that. The dividends and interest are part of the portfolio - reinvested or taken as PART of the withdrawal.
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Old 07-27-2017, 10:58 AM   #174
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seriously , some you people really overanalyze and confuse this issue
-track your expenses for a couple years prior
-take your liquid net worth and see if with your expenses you can take 4-5% per year out of that net worth up until SS comes in
-run those numbers through a retirement calculator with your comfortable asset allocation
90% + success ratio you will be fine
Doesn't 90% success ratio leave a 10% potential failure rate? And that assumes Firecalc is 100% accurate at predicting worst case future returns.
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Old 07-27-2017, 11:09 AM   #175
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Doesn't 90% success ratio leave a 10% potential failure rate? And that assumes Firecalc is 100% accurate at predicting worst case future returns.
The 10% failure rate can be modified by cutting back on spending if there are bad years in the market... Trinity study and other spending models tend to be rigid, and not follow real world reactions to down markets.

I think it was Unclemick who said it pays to be agile and flexible in retirement to adjust to the circumstances... If you rigidly maintain the inflation increased withdrawal rate after a series of down years... you risk being part of that 10% failure.

Firecalc doesn't claim to predict the future... but it backtests the plan. Most folks here put in a margin of safety... either discounting an income stream (SS for example), over estimating spending, or setting aside some money outside of firecalc... No one can predict the future market returns... not even firecalc... but firecalc considers the worst of the actual past performances.
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Old 07-27-2017, 11:13 AM   #176
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Isn't that basically what I said? In my case I assume (which is true for us) that about 2/3s current gross covers all expenses in retirement. Pensions and SS cover that, so savings is for all the extras.
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Old 07-27-2017, 11:26 AM   #177
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2/3 current gross covers my expenses 2x over. It's one reason I've been able to get to FI faster in the last few years because my expenses are low compared to my gross income. I don't need 2/3 gross to live on. Nice to have, yes, but not necessary to reach FI.
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Old 07-27-2017, 11:45 AM   #178
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The 10% failure rate can be modified by cutting back on spending if there are bad years in the market... Trinity study and other spending models tend to be rigid, and not follow real world reactions to down markets.

I think it was Unclemick who said it pays to be agile and flexible in retirement to adjust to the circumstances... If you rigidly maintain the inflation increased withdrawal rate after a series of down years... you risk being part of that 10% failure.

Firecalc doesn't claim to predict the future... but it backtests the plan. Most folks here put in a margin of safety... either discounting an income stream (SS for example), over estimating spending, or setting aside some money outside of firecalc... No one can predict the future market returns... not even firecalc... but firecalc considers the worst of the actual past performances.
Exactly
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Old 07-27-2017, 11:49 AM   #179
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2/3 current gross covers my expenses 2x over. It's one reason I've been able to get to FI faster in the last few years because my expenses are low compared to my gross income. I don't need 2/3 gross to live on. Nice to have, yes, but not necessary to reach FI.
Yep...what you made while working is pretty much irrelevant...it's all about the expenses....and duration of retirement....which usually means much higher stock allocation if you're retiring early....
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Old 07-27-2017, 12:14 PM   #180
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These are always interesting threads. They never seem to include a personal risk profile though.
My first iteration through FireCalc gave me a 80% chance of 30 year success historically. I thought that was a perfectly reasonable number as I have a high amount of discretionary spending. So your personal risk profile is important in the what is FI discussion. (Refining it to match reality was a much better chance of success.)
The second thing rarely discussed is the date of death. Back in 1966 (the evil recent year) the life expectancy of a 55 to 60 year old was 21.4 years, so half the singles in that age range retiring then still win by dying before they ran out of money.
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