How much is enough to retire early on?

[OrcasIslandBound]

Well? Did you do retire? Did you keep 2/3 in cash? Would've been brilliant if you had...
The last posting was 8-19-07, 2 1/2 years ago. I'm curious how this retirement worked out so far?

[DallasGuy]

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Originally Posted by sbwitte Well? Did you do retire? Did you keep 2/3 in cash? Would've been brilliant if you had... The last posting was 8-19-07, 2 1/2 years ago. I'm curious how this retirement worked out so far?

I worked on and off (semi-retired) as a computer programmer contract worker until June 2009 and then I quit my job, not so much because I wanted to retire, but because I was really burnt out on computer programmer type of work after doing it for about 30 years. My net worth is up about 40 grand from 8/19/07 and I'm sitting at about 75% in cash right now, the majority of the cash in CD's. I actually increased my cash investments in Oct/Nov 2008 by selling some stock mutual funds right before the stock market downturn. I feel as though my high percentage of cash helped me in weathering that stock market downturn fairly well. My spending budget is $30,000 per year but my current spending rate is closer to $25,000 per year. All in all retirement is working out pretty well. With a withdrawal rate of about 2%, I'm probably pretty confident that my money will outlast me and my decision to retire last year was a good one. But if interest rates stay as low as they are now, I may be looking around for other types of cash investments soon since I have several CD's maturing this year.

[Alan]

Quote:

Originally Posted by sbwitte Well? Did you do retire? Did you keep 2/3 in cash? Would've been brilliant if you had... The last posting was 8-19-07, 2 1/2 years ago. I'm curious how this retirement worked out so far?

Welcome to the forum

Quote:

Originally Posted by DallasGuy I worked on and off (semi-retired) as a computer programmer contract worker until June 2009 and then I quit my job, not so much because I wanted to retire, but because I was really burnt out on computer programmer type of work after doing it for about 30 years. My net worth is up about 40 grand from 8/19/07 and I'm sitting at about 75% in cash right now, the majority of the cash in CD's. I actually increased my cash investments in Oct/Nov 2008 by selling some stock mutual funds right before the stock market downturn. I feel as though my high percentage of cash helped me in weathering that stock market downturn fairly well. My spending budget is $30,000 per year but my current spending rate is closer to $25,000 per year. All in all retirement is working out pretty well. With a withdrawal rate of about 2%, I'm probably pretty confident that my money will outlast me and my decision to retire last year was a good one. But if interest rates stay as low as they are now, I may be looking around for other types of cash investments soon since I have several CD's maturing this year.

Thanks for updating us, and congratulations on stepping out and ER'ing

[chinaco]

It sounds like the OP is is pretty good financial shape. If the income needs are $40k, I think they are ready. Just make sure that medical/insurance expenses are factored in.


Here are my approaches/rationale:

• In retirement, I am more worried about capital preservation than hoping to get a lot wealthier. Of course, I would like to grow our money so I will take some measured risk in terms of volatility of security prices. I also want to beat inflation. Therefore, I will invest some percentage of money in broadly diversified equity mutual funds. Our goal is to spend our money and enjoy it while we are younger and save some for when we are older. We are not planning to leave a large estate.
• I will keep enough near-term money in high quality cash equivalents and medium term fixed securities (including TIPS) (5-7 years of projected income needs). This money will ensure we have a reliable income stream.
• IMO - Deferring SS till 66.x or 70 is the best deal available to mitigate the risk of outliving your money. It is the highest quality inflation adjusted annuity most of us can get. For married couples, this is essentially a Joint Life Annuity. Since we have enough bridge money we will defer taking the largest SS income amount till 66.x or 70 (depending on the situation at the time).

[Alan]

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Originally Posted by chinaco It sounds like the OP is is pretty good financial shape. If the income needs are $40k, I think they are ready. Just make sure that medical/insurance expenses are factored in. Here are my approaches/rationale: In retirement, I am more worried about capital preservation than hoping to get a lot wealthier. Of course, I would like to grow our money so I will take some measured risk in terms of volatility of security prices. I also want to beat inflation. Therefore, I will invest some percentage of money in broadly diversified equity mutual funds. Our goal is to spend our money and enjoy it while we are younger and save some for when we are older. We are not planning to leave a large estate. I will keep enough near-term money in high quality cash equivalents and medium term fixed securities (including TIPS) (5-7 years of projected income needs). This money will ensure we have a reliable income stream. IMO - Deferring SS till 66.x or 70 is the best deal available to mitigate the risk of outliving your money. It is the highest quality inflation adjusted annuity most of us can get. For married couples, this is essentially a Joint Life Annuity. Since we have enough bridge money we will defer taking the largest SS income amount till 66.x or 70 (depending on the situation at the time).

That pretty well describes our approach almost exactly. This is the first year of ER and we expect the expenses to be much higher in the earlier years while we are still fit and able to do a lot of living in different fun places.

We've also decided at this point for DW to take her SS at 62 and then me at 67 or 70.

[REWahoo]

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Originally Posted by Alan ...we expect the expenses to be much higher in the earlier years while we are still fit and able to do a lot of living in different fun places.

Exactly the reason we decided to buy the motor home now instead of waiting until we were in our late 80's and absolutely positive we could afford it.

[youbet]

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Originally Posted by Alan This is the first year of ER and we expect the expenses to be much higher in the earlier years while we are still fit and able to do a lot of living in different fun places.

Don't forget to pencil in enough funding to buy the necessary services to keep on partying in your later years. DW and I, in our early 60's, are already using guides on remote fishing/camping trips and that sort of thing so that we can "keep on doing" instead of throwing in the towel. So, our expenses for some of our activities have actually increased (some substantially) compared to when we were younger and could do robust outdoor activities without any help.

Another example might be REWahoo and DW bringing along a combo driver/cook/go-fer on RV trips to handle everything except the fun.

It's just another way of handling growing older and becoming less physically fit. You throw in the towel on some activities and go sit in the rocker or you simply hire the appropriate help and keep on rockin'!

[Alan]

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Originally Posted by youbet It's just another way of handling growing older and becoming less physically fit. You throw in the towel on some activities and go sit in the rocker or you simply hire the appropriate help and keep on rockin'!

Brilliant - I don't suppose I'd have thought of that. We certainly want to keep as active as we can for as long as we can.

[Onward]

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Originally Posted by youbet So, our expenses for some of our activities have actually increased (some substantially) compared to when we were younger and could do robust outdoor activities without any help.

That's one of the reasons I could never swallow the idea of planning to spend less as you get older.

[rescueme]

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Originally Posted by Alan Brilliant - I don't suppose I'd have thought of that. We certainly want to keep as active as we can for as long as we can.

That's why I have expenses for "nurse Nancy" in my later years retirement plan allocated ...

[Alan]

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Originally Posted by Onward That's one of the reasons I could never swallow the idea of planning to spend less as you get older.

I agree.

I monitored what we actually spent in the last few years before ER and budgeted to spend no less in ER. It looks like we can afford to spend more but it's early days yet.

[Alan]

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Originally Posted by rescueme That's why I have expenses for "nurse Nancy" in my later years retirement plan allocated ...

I also have a fund outside of my ER investments for "nurse Nancy" but for some reason it hadn't occurred to me to also spend money on someone to help me when I'm not actually sick, just not as physically capable to do the things I want to do.

[angelbaby]

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Originally Posted by DallasGuy My question is: Do I have enough savings/investments to retire on? I know it's very specific to each individual, but I'd just like a few opinions on my situation. I'm single, 51 years old, have about 1.2M in savings/investments with about 2/3 of it invested in cash investments (yes, I know this is probably too much in cash at my age, but I can sleep at night, so I don't want to discuss this part...I know the pros and cons of this) and the rest invested in individual stocks (not that much) and mutual funds. My house is paid off, I have no debt, I live in a fairly low cost area (Dallas, TX), and my yearly cost of living is about $30,000. This cost of living includes paying for all of my insurance (health, auto, house, etc.), taxes, 2-3 trips a year as well as all other living expenses. I'm guessing I could probably increase my spending to about $40,000 if unexpected expenses arose with little trouble. Compared to most people I'm guessing I live pretty cheaply and don't feel like I'm suffering at all. From all of the retirement calculators I've run the numbers through, I "appear" to be safe in taking my my early retirement now. What is your gut feel? Is early retirement a fairly safe bet for me at this point? Thanks in advance for any opinions.

Take about $120K of that money (10%) that's in cash and immediately move it to some physical gold and silver. Trust me, it's rather small and compact, so storage shouldn't really be a problem. It'll all fit inside of a small shoebox.

Why do I suggest this? Well, it's your backup plan in case the government gets stupid and we end up with serious inflation down the years. The Fed has printed a lot of money... A LOT! I wouldn't feel too comfortable sitting on all of that cash.

Look at it this way: If precious metals plummet to the basement, you've only risked 10% of your portfolio. If inflation skyrockets, like many very noted world economic authorities predict, you're adequately hedged against the risk.

[plex]

I think inflation is a serious risk coming up, but I also think gold/silver (which is clearly recognized, at the very least, as not historicly underpriced right now), is not the only way to protect cash needs against inflation. Right of the top of my head, TIPS do the same thing, without a significant risk of losing your shirt on that portion of your portfolio. Stable value funds, and then switching possibly to CDs once rates drastically increase, would be another approach.

[jdw_fire]

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Originally Posted by angelbaby Take about $120K of that money (10%) that's in cash and immediately move it to some physical gold and silver. Trust me, it's rather small and compact, so storage shouldn't really be a problem. It'll all fit inside of a small shoebox.

not if most of the $120k is used to buy silver

[smjsl]

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Originally Posted by angelbaby Take about $120K of that money (10%) that's in cash and immediately move it to some physical gold and silver.

Is that much safer than buying GLD? Is it worth the extra premium and less liquidity and extra insurance to buy physical commodities?

[Milton]

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Originally Posted by smjsl Is that much safer than buying GLD? Is it worth the extra premium and less liquidity and extra insurance to buy physical commodities?

There are pros and cons to both options.