How much is enough?

[CaliKid]

We are in our mid/late 40's, two teen's, with a high income and are high net worth. My wife is not convinced we can retire though. I tried to explain there could always be a catastrophe (lawsuit, financial collapse, etc...) but generally speaking we have enough to fire now. I explained the most likely worst case scenario, if we ended up in a deep recession for example, was we might have to spend less as we do spend a fair amount. I should add we will have to private pay for medical, have no pension, and currently live in California (but not one of the super expensive areas). So, without getting in to our particulars what do you consider "enough" that you would feel relatively safe retiring in your mid/late 40's?

 

[braumeister]

So, without getting in to our particulars what do you consider "enough" that you would feel relatively safe retiring in your mid/late 40's?

The question is unanswerable without a lot more information. Present and expected expenses, for starters.

 

[Bigdawg]

Before you can decide if you have "enough" you have to have a complete and full understanding of your expenses and a good idea of what they will be going forward. HC is obviously a big unknown although California's HC options are better than most. On your own until reenforcements arrive at 59.5 (401K/IRA's) and SS at 62. Scale back to part time work? Don't retire FROM something, retire TO something. What are you RE to? Good luck.

 

[GrayHare]

about 40x annual spending

 

[travelover]

I'm pretty sure a billion is enough, but that, too, would depend on your expenses.

 

[Richard4444]

We have members on this Forum who spend a lot; we have members who wanted out early anyway and are not high net worth so they spend a little and are grateful for not having to w*rk and the most of us are somewhere in between. There are many calculators, and look at the bottom and fill in FireCalc with your own numbers. Most likely you want to maintain your lifestyle in a long retirement and it seems that the biggest obstacle that you have to overcome is convincing your wife that you have enough once you do the math and have convinced yourself that you do. There is a lot of info to receive on this Board and since no one knows who you are, feel free to throw out some numbers so that you can get wise feedback, if that is what you are asking for. Best luck ! And yes, there can always be catastrophes, even a falling meteorite can ruin your day.

Rich

 

[travelover]

......... it seems that the biggest obstacle that you have to overcome is convincing your wife that you have enough ........

And sometimes, "we don't have enough" really means, "I don't want you around the house all day, I'm enjoying the solitude".

 

[bradaz2488]

Sounds like you know you have enough. You just need to convince your wife.

Here is when I knew (felt) I had enough:

I retire at 49 (4 years ago) debt free with a NW (exclude house) of 36X expenses and a plan WR of 2.6%. I assumed: live to 95, no SS benefits, AA=60/30/10, inflation = 2.5% & 7.5% for healthcare, avg return on AA = 6%.... Now NW at 50X expenses w/ and average WR of 2%. Our ER plan will always be a work in progress and we will make adjustments as thing change. It was/is impotent for me to have flexibility (buffer) with our expenses and to have plans in place to mitigate the risk for unexpected events...

 

[Alex The Great]

As a single person living in California, I'd count on $40K per year at least to cover necessary expenses, including health care which still a big unknown (even if Trumpcare is likely to fail). But as previous posts said it all depends on your living habits and lots of other factors. According to the conservative rule of 4%, the total net worth would be $40K x 40 = $1.6M. Again, this is just a very rough estimation.

 

[Sunset]

OP - Do you both work at jobs ?
What are the plans for kids education ?

 

[exnavynuke]

1. How much is enough to "get by" for me is enough to have a 3% withdrawal rate sustain my necessary expenses.

2. How much is enough to have "FU money" for me is enough to cover my spending based on a 3.5% SWR and an average 7% return rate.

3. How much is enough to "FIRE" for me is enough to have a 95+% probability of success through calculators such as FIRECalc that expand upon #2 to incorporate sequence of return risk as well.

 

[CaliKid]

I appreciate all the great replies. Thank you all. Such an incredible website this is!

And sometimes, "we don't have enough" really means, "I don't want you around the house all day, I'm enjoying the solitude".

So true and she has acknowledged she likes her time each day when she is alone. I have plans to be out of the house. Lots of things I would like to do more of.

Sounds like you know you have enough. You just need to convince your wife.

Here is when I knew (felt) I had enough:

I retire at 49 (4 years ago) debt free with a NW (exclude house) of 36X expenses and a plan WR of 2.6%. I assumed: live to 95, no SS benefits, AA=60/30/10, inflation = 2.5% & 7.5% for healthcare, avg return on AA = 6%.... Now NW at 50X expenses w/ and average WR of 2%. Our ER plan will always be a work in progress and we will make adjustments as thing change. It was/is impotent for me to have flexibility (buffer) with our expenses and to have plans in place to mitigate the risk for unexpected events...

Yup. True. I have done very similar to your analysis. we are only at about 35x expenses right now but we could easily spend less. Plus our house will be paid off in a few years and then our 35x will be over 40x.

OP - Do you both work at jobs ?
What are the plans for kids education ?

Only I work outside the house.

Each kid has a total of about $250k-$275k in 529 and/or UGMA accounts.

 

[FIREd]

I would feel like I had enough if I could live on a ~ 3% WR to cover all expenses - not just living expenses like food, health insurance, utilities, etc... but also car replacement, home repairs, medical co-pays, etc... And of course you need to have enough to cover whatever discretionary spending your family deems necessary.

Perhaps your wife does not want to let go of the security and peace of mind which comes with a high income (for us letting go of a very comfortable income was the biggest hurdle. It took really hating the job to let go). And perhaps she is not ready to cut back during a recession - few people find the prospect attractive. One way around that would be to use lower but smoother withdrawals to avoid big budget cuts year over year (that's what we decided to do as DW was not comfortable with a highly variable budget).

 

[ERD50]

... According to the conservative rule of 4%, the total net worth would be $40K x 40 = $1.6M. Again, this is just a very rough estimation.

Way more than 'rough'. Most here would not consider 4% 'conservative', even for a 30 year time frame. A mid/late 40's has to plan for more than that.

3% of anticipated expenses is more reasonable, IMO. And maybe a buffer on that, lots can happen over many decades.

-ERD50

 

[YVRRocketSurgery]

With all the discussion around a 4% SWR not necessarily being as solid nowadays due to the current financial environment (rightly or wrongly), at minimum, I'd consider a 3% WR so ~33x spend including insurance to cover as many of the potential pitfalls that worry you. To be extra safe, you can also sock away an additional 3-5 years of core spend in cash.

But it's a fairly personalized question. I'm currently mid 40's but want to be super conservative with a portfolio that would allow a 2% WR to support typical annual spend. If things go well, the WR would increase and we'd have "more fun". If things go well but we run into unexpected costs, the more fun money would be re-allocated.

 

[Blue Collar Guy]

I'm pretty sure a billion is enough, but that, too, would depend on your expenses.

 

[Cobra9777]

...we are only at about 35x expenses right now but we could easily spend less. Plus our house will be paid off in a few years and then our 35x will be over 40x...

Even with a 45-year time horizon, FIRECalc gives a 100% success rate for 35X, which equates to a WR of 2.9% (e.g. $100K spend, $3.5M portolio, all other default). Also, initial spend of $125K at 95% with $3.5M.

I'd say you're good to go. I retired at 52 when investments were 28X and my BS bucket was overflowing. It's now grown to about 35X and we under-spend by about 30% vs FIRECalc 95%. Seems to me it's a question of your wife getting comfortable with the arrangement and how full your BS bucket is. If you decide to keep working, chances are you're just enriching the kids.

 

[daylatedollarshort]

Before SS and pension ages, our basic planning formula was: years until SS X annual expenses, less hobby income.

Once we reach SS age, our formula is: are retirement expenses <= Social security + pensions + 2% withdrawal rate + optional hobby income?

I made a detailed spreadsheet year by year with all the details and we used some online planners but these were the key metrics we looked at in deciding if we had enough. We use a matching strategy so do not plan for either a lot of growth or sequence of returns risk in the portfolio.

 

[racy]

....So true and she has acknowledged she likes her time each day when she is alone. ..... Only I work outside the house....

There's your answer: you retire and she gets a job!

 

[rodi]

I retired at 52 with a planned 3% WR. I had planned on working a few years longer but two things happened: 1) DH retired and was having too much fun... I was jealous. 2) my BS bucket overflowed with a new assignment and I couldn't see remaining at the job when we could afford for me to retire.

3 years later - no regrets.

It sounds like you've achieved the FI (financial independence) side of FIRE... now it's just figuring out the timing of the RE (retire early) side of FIRE.

Have you showed your wife the numbers/budget/etc? My DH was skeptical but when I showed him the numbers... went to our account advisor at schwab and her show him the numbers... he realized we were good....

Only differences between your situation and mine - we paid off the house first (I wanted the mortgage payment out of our budget) and I was older than you.

 

[Luck_Club]

Enough is when passive income exceeds active spending without touching the principal.

 

[socca]

Enough is when passive income exceeds active spending without touching the principal.

This is the viewpoint I subscribe to. It's not popular on this board, especially after a massive bull market in equities. This is also why I continue to work in the family business part-time, and have no regrets for doing so. A standard full-time job basically dominates your life; part-time work is much more pleasant.

 

[Sunset]

My pet peeve here:

She is already retired, so she doesn't understand why you would want to retire.

When the kids were young sure some parent can stay home, but when teenagers no way.

I'm sure she has tons of excuses not to work, my relative did, and after I pointed out all her kids were off in College, she claimed she couldn't work because someone needed to take care of the dog (which was in fine health).

Bottom line is: She is retired, why not you ?

 

[Blue Collar Guy]

My pet peeve here:

She is already retired, so she doesn't understand why you would want to retire.

When the kids were young sure some parent can stay home, but when teenagers no way.

I'm sure she has tons of excuses not to work, my relative did, and after I pointed out all her kids were off in College, she claimed she couldn't work because someone needed to take care of the dog (which was in fine health).

Bottom line is: She is retired, why not you ?

The dog might have had separation anxiety, some people are very private with regards to heath info, HIPPA laws etc

 

[scrabbler1]

Enough is when passive income exceeds active spending without touching the principal.

This was my objective, too, to not have to touch principal.

I retired nearly 9 years ago at 45. Part of my ER plan included splitting it into 2 parts. The first part was getting from age 45 to age ~60 intact, using only my non-retirement assets which represented about 2/3 of my portfolio. If at some point I had to dip into principal, that was okay as long as it wasn't a lot and wasn't until near the end of this 15-year period.

After I hit ~60, I would gain access to my "reinforcements." Those included (a) unfettered access to my rollover IRA, (b) my frozen company pension at age 65, and (c) Social Security as early as age 62, but something I wouldn't expect to need until age 65 or 67, the latter being FRA.

My longer-term retirement picture only gets better after age ~60 with those extra money sources. So, my main priority is getting to age ~60 intact. I'm 9 years into this 15-year timeframe and not only is everything well, but my SWR remains well below 3% (of all assets). And the principal has grown thanks to market gains since late 2008 when the market had tanked (and was a huge benefit to my ER BTW).

OP, you may want to split your ER plan into two parts if you have significant income sources becoming available in your 60s.