How much of a buffer did you have before ER?

[audreyh1]

I retired quite early, so I made sure that I had way more than adequate as we were taking quite a risk. We wanted to be able to have plenty available for spending on travel. I was shooting for probably 2x what we needed, maybe even more.

 

[kingfisher]

I find 25x (of normal spending, barebone might be 60% of that) is too risky in today's valuation. So we would want at least 33x, that's a buffer of ~30%.

 

[Jerry1]

My buffer was about $25K to $50K depending on how you look at it. I need about $50K to live at my current level. That's no frills and barely keeping up with maintenance etc. While I hope I never have to live at that level, I could. I also realize that many live on that or less and do well, so I am grateful of my situation. To live at the level my current situation suggests takes about $75K. That includes not having to consider it a crisis if the roof needs replaced or I need a new/used car type of expenses come up. My budget and the number I used to evaluate my retirement situation is $100K. That level pretty much lets me just live and let live however I want. It's not living large, but it's comfortable for me and I don't have to think about money at that level. So, starting with $100K in my planning but knowing I would be okay at $50K is my buffer. I've been retired for just over 3 years now and I've come in under $100K each year. So, so far, so good. Portfolio and pension/SS still would support $100K. My main concern is hyper inflation followed by end of life/long term care. Those seem to be the most plausible budget busters. Not much I can do about those though.

 

[David1961]

I wanted to get to a point where my WR was 2%.

 

[Dtail]

No true major buffer. Just wanted all the retirement calculators I was using to be at 100% success rate.

 

[RobbieB]

Zero. Or negative even. Spending is well over 4%, somewhere between 5 and 6. But I keep getting richer notwithstanding.

 

[old medic]

I'm retiring in Dec with a monthly pension thats more than my current take home.
We have and plan on keeping one years expense in savings, and start building an IRA to go with my 401K. Wifes in the same boat, but a few years away...

 

[jcretire77]

We both worked at the same company and there was a voluntary severance plan. We retired with a nest egg that was 10% below my goal. Social Security would be the buffer. The first years spending rate was just a hair above 4%. With the good market since retirement our nest egg is 48% higher then when we left our jobs.

 

[NW-Bound]

Zero. Or negative even. Spending is well over 4%, somewhere between 5 and 6. But I keep getting richer notwithstanding.

The market has been going gangbuster. But if it drops 20% or more a year, and does it in consecutive years as it has done in the past, will you have the stomach to keep spending 5-6%?

 

[Vincenzo Corleone]

I don't know that my answer would be very helpful to you, as our situation was not planned at all.

We have approximately 2.25X more than what FireCalc says we need to support our current (pre-Covid) standard of living for a 45-year retirement at 100% success rate using the "Constant Spending Power" spending model. But that's taking into account a COLA'd pension and retiree healthcare that my wife still needs to work several months for in order to become eligible for it. Without those anticipated benefits, I estimate we have approximately 1.36X more than what we need.

This is without taking Social Security into account.

 

[Ready]

I worked until it was no longer enjoyable. When I stopped working I was only spending about 2% WR. So I could have probably retired earlier but I was more focused on whether I was enjoying what I do rather than if I have enough.

 

[Nature Lover]

My buffer was unplanned, as I wasn't waiting for a number in order to retire. However, when I retired @55, I had enough that the calculators said I could spend 2.5x what I had as my most generous retirement budget until age 95.

 

[scrabbler1]

I can't say I could quantify my initial ER buffer using the common terms described by others, for several reasons. I was moving quickly toward being able to retire at age 45, back in 2008.

One reason was that I was best vaguely familiar with terms such as SWR and multiples of expenses. Given that I was planning to ER at 45, I would only have unfettered access to the taxable portion of my overall portfolio for the next ~15 years, at which time I could access my rollover IRA (after leaving work and converting the 401k to it). So, a SWR using my entire portfolio would not really mean much. Similarly, a SWR using only the taxable part of my portfolio would not really mean much because it would count for only 15 years.

I did, however, have access to two important things. One was Fidelity's RIP program which, with the help of my Account Executive, I completed and ran it. In early 2008, my AE gave me a green light to ER, the first outside evaluation of my ER plan. Two was my own spreadsheet which looked in more detail at the next 15 years of projected income and expenses, after I did the rollover IRA and cashed out about $300k in company stock.

My plan was to have the projected income from the $300k now in a "big" bond fund cover or just about cover my projected expenses. This would leave the remainder of the income generated by my taxable portfolio act as a buffer. This represented a buffer of about 25%. My spreadsheet had this buffer shrinking over the 15-year period to the point where it might disappear and I'd have to tap into principal the last few years. That was fine because once I turned 59.5, the first of my "reinforcements" would arrive. Those reinforcements are the aforementioned rollover IRA, then SS and my frozen company pension a few years later. IOW, just get me to age 59.5 intact and things improve after that.

A lot of things happened since then. First, the ACA was created and that has kept my HI costs under control, unlike the skyrocketing premiums I faced in 2010 and 2011. Then, the markets improved a lot starting in 2009. On the downside, the big bond fund's returns have shrunk considerable although I had added many more shares of it to offset the return. I never had to tap into principal, which is nice, so my buffer has only grown.

 

[GravitySucks]

No buffer. Planned a 4.5% WR and that gave about a 10 - 15% discretionary spend. I stuck to that for 5 years and my nest egg grew almost 50%. At that point I was 59.5 and figured I could bump spending up to a max of 5.5% of the new value for the next 5 years and reevaluate when I was Medicare eligible. Haven't come close to spending that.
Turned out part of the essential expenses are discretionary. New car every 5 years wasn't necessary. Food is less when you shop careful and have the time to cook beans and soups.
Also had back up plans to down size or move into a duplex and let the renter pay taxes.

Turned out I was miss informed about SS survivor benefits and started collecting a small monthly check and that makes a big difference.

 

[CyclingInvestor]

After I hit my # I had 2.3 years of easy and pleasant job before everything inevitably turned to &%&* and left me with about 60% more than planned when I finally retired.

 

[brett]

I had no number. I estimated what we we need over and above our pension incomes and compared same to our financial resources. Our withdrawal rate on investments is less than one percent.

 

[1242Vintage]

I have a COLA adjusted pension and I worked until the estimated pension was 20% over our monthly expenses.

 

[Spudd]

I went as soon as I got there, no buffer. I hated my job. However, I was flexible to the idea of taking on part-time work post retirement. I haven't needed to, but I have done it anyways just to pass the time. Rather than doing corporate mumbo-jumbo I've been doing minimum wage retail stuff, which I actually enjoy. But only for like 6 hours a week, because I'm lazy and I don't really need the money. An extra 5-10k per year is a lot when your spending needs are 30-40k.

 

[daylatedollarshort]

We didn't have any particular buffer, except we were prepared to downsize or move to a lower cost of living city, if need be. We looked at the Consumer Expenditure Survey as to what other retirees spent and realized we had more than enough for a nice middle class life, if we got a better handle on our expenses. So we did. In the end we kept the house as we like the location but optimized everything else like making the house more water and energy efficient, putting solar lights outside and LEDs inside, buying groceries at ethnic markets and discount stores instead of the overpriced supermarkets in our neighborhood (small change - huge difference in prices), and a 100+ other small changes that really added up.

 

[dheb]

My buffer is less of an amount than it is an approach to my plan. First, I assume a long life. My grandfather made 92, so I'm planning to 102. I currently spend under 36k a year, and even though I have it figured so I'll be at 0 fed tax until I hit RMDs or collect SS, I've set my FIREcalc spending number at 52k. I left the equity in my house out of my calculations even though I plan to sell it, get a new mortgage, and plunk most of my equity into my portfolio. And I left any potential inheritance out of my calculation. Finally, if I wanted to reduce my drawdown, I could always do some work -- but I'm not counting on it.

 

[Koolau]

I guess I had a couple of buffers. I figured I could start SS earlier than my planned age 70. Also, even though I became Financially Independent, I continued to w*rk because I was suddenly "digging" it again - long story explained several times. YMMV

 

[gooddog]

Income 4 times yearly expenses was our magic number. Didn't want any surprises.

 

[DireWolf]

My yearly spending was based on some especially high years (major medical). I added several thousand a year to that as a buffer. I used a conservative WR of 3.5%. Between my actual spend being lower without the medical, and my returns, my portfolio is way up since I pulled the trigger. Starting to transition over to VPW as an upper bounds of what I could spend each year. Suspect I won’t come close, but nice to know I can. When we have days in the market like today, I’m no longer fazed

 

[WhenIsItTime]

We often talk about the number we need/needed to retire. How much of a buffer do you factor into that number?



Let's say your expenses are 40K and you're using the 25x income for your number, so $1M. Would you actually retire when you hit $1M or would you want 10% or 20% or some other amount over $1M before you felt comfortable walking away from the paycheck?

Most of the replies are about what other people did. I think the ? depends on circumstances. How old are you? Health? Any dependents? What is the current employment income annually as a % of net worth to determine if OMY makes a difference. How rigid is $40k spend - can it flex in a down year or years? What is housing situation - potential for big expenditures?

 

[plex]

I am very close to giving notice and pulling the plug at 37, if I had to give a base WR, it is going to be about 2.5% for my normal spending, but I expect a few years to spike above that, such as for house buying costs (I am not buying in the current bad buy vs rent climate), or a small spike for moving costs/car replacement. I will someday have SS, a small pension, and a likely moderately sizeable inheritance, none of which have much of an effect when considering the buffer I want before retirement, due to the long time horizon.

Work is flexible but I have a new supervisor I like significantly less, a non-work lifestyle I really enjoy, and I simply don't see the need to go too crazy building a buffer for expenses I don't reasonably expect.