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How much of a buffer did you have before ER?
Old 05-03-2021, 05:12 PM   #1
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How much of a buffer did you have before ER?

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?
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Old 05-03-2021, 05:22 PM   #2
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Not me, not unless my job was bad for my health due to stress or conditions, or if I really just hated it.

So I went part time, which didn't add a lot to my savings but took a few years over how long the savings had to last. When I ER'd, I was at about 3.5% WR, counting a pension and reduced SS in my calcs. The last 10 years have been very good to me so I have a bigger buffer to splurge on more now than I felt comfortable doing when I first retired.
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Old 05-03-2021, 05:25 PM   #3
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Originally Posted by disneysteve View Post
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?

We had an extra 57%, and a good thing, as we can pay for our daughters Dental school tuition. But ya, we over saved and 3 years later it's only got better.
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Old 05-03-2021, 06:02 PM   #4
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I think 4M total has a good buffer.

500k for buying a house, and it's associated recurring charges (tax, insurance, maintenance and repairs)

500k for medical bills, health insurance and long term care premiums, meds, and / or nursing home living costs,

3MM to cover the market fluctuations (if it goes down 70% like in 2008 I won't lost sleep over it because I can still survive on 900k with the same withdraw rate).

Would that figure be totally outrageous for most people? Yes. Would it cover everything that is not predictable? Heck no. Would I care? Not likely because I have a good buffer to not make my life a liability for others.
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Old 05-03-2021, 06:07 PM   #5
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We figured $50k/year over planned spending of initially $180k/yr. Due to purchasing a beach house we blew that out of the water and it was good to have the buffer. Market performance with some good stock picks have supplied a good buffer for the future.
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Old 05-03-2021, 06:22 PM   #6
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I think 4M total has a good buffer.
Well, I'll give you a point for consistency. You used the same number in this thread:
https://www.early-retirement.org/for...ml#post2589603

But that's the only point I'll give.

Are you really going to keep working until you have that much? Did you get some kind of windfall, or did you pile it up yourself?
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Old 05-03-2021, 06:29 PM   #7
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To our target number, we added children wedding costs (or any future big budget items you may envision now) plus three years of base line living costs (excluding discretionary spending) just in case stock market cratered immediately after we FIREd. You may do differently but it's good to plan for contingency.
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Old 05-03-2021, 06:32 PM   #8
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Quote:
Originally Posted by teetee View Post
I think 4M total has a good buffer.

500k for buying a house, and it's associated recurring charges (tax, insurance, maintenance and repairs)

500k for medical bills, health insurance and long term care premiums, meds, and / or nursing home living costs,

3MM to cover the market fluctuations (if it goes down 70% like in 2008 I won't lost sleep over it because I can still survive on 900k with the same withdraw rate).

Would that figure be totally outrageous for most people? Yes. Would it cover everything that is not predictable? Heck no. Would I care? Not likely because I have a good buffer to not make my life a liability for others.
So, how do you protect the 500k designated for healthcare from market fluctuations AND inflation??
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Old 05-03-2021, 06:34 PM   #9
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I wanted a buffer. However, I actually was over our minimum number when I started thinking about ER for real in 2014, when I found FIRECalc and this forum. A SWR of 3.3% now about $60K over regular spending. This will allow for replacing cars, some overdue home maintenance/upgrades. And some bucket list travel in the next few years.
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Old 05-03-2021, 06:40 PM   #10
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Originally Posted by RunningBum View Post
Well, I'll give you a point for consistency. You used the same number in this thread:
https://www.early-retirement.org/for...ml#post2589603

But that's the only point I'll give.

Are you really going to keep working until you have that much? Did you get some kind of windfall, or did you pile it up yourself?
I just did a copy and paste nothing fancy. The answer is positive, I will continue working until I reach 4 million net worth or cant work no more. It is only one more decade to go without major recessions.

I am still not sure why this goal is difficult to understand or believe by many. There are so many milestone posts on this forum that exceeded 4m net worth. Good thing I already stopped letting others' opinions bother me a while ago.
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Old 05-03-2021, 06:44 PM   #11
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buffer is about 60 percent. way too much.
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Old 05-03-2021, 06:45 PM   #12
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Originally Posted by disneysteve View Post
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?

It depends whether that $40,000 was barebones required expenses or if it included a significant amount of discretionary spending. Currently, I calculate based on barebones expenses, and my stash is over 300% of what it needs to be for my required expenses, so my discretionary allowance is basically my buffer.
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Old 05-03-2021, 07:06 PM   #13
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We had a 100% buffer. That is, at double our actual spending, FIRECalc still gave us 100%. Did we work too long? Probably, but we never worry about money (and our work didn't suck).
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Old 05-03-2021, 07:11 PM   #14
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About 25% buffer except that doesn't include my SS. It will provide 50% of our required income.
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Old 05-03-2021, 07:14 PM   #15
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Reading the replies in this thread makes me think that many of the SWR, 4% rule, bond tent, etc. discussions are meaningless. When someone is talking about 25x, the person might actually have 75x,(300% buffer).
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Old 05-03-2021, 07:19 PM   #16
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Reading the replies in this thread makes me think that many of the SWR, 4% rule, bond tent, etc. discussions are meaningless. When someone is talking about 25x, the person might actually have 75x,(300% buffer).

You have to remember the market returns of the past decade may not continue as they have. Nobody knows the future.
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Old 05-03-2021, 07:36 PM   #17
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FIREcalc says I'm 100% with a predicted final estate of somewhere between $1M and $14M, inputting a generous spending budget. I sort of look at it as "man plans and god laughs".

I would think it depends somewhat on what a portfolio failure means for an individual's circumstance. In my case, I'll be more or less SIRE after age 70, so even running out of savings isn't the end of the world. Other people's circumstances are far more dependent on their portfolio to keep food on the table and the heat on.
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Old 05-03-2021, 07:44 PM   #18
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Originally Posted by teetee View Post
I think 4M total has a good buffer.

500k for buying a house, and it's associated recurring charges (tax, insurance, maintenance and repairs)

500k for medical bills, health insurance and long term care premiums, meds, and / or nursing home living costs,

3MM to cover the market fluctuations (if it goes down 70% like in 2008 I won't lost sleep over it because I can still survive on 900k with the same withdraw rate).

Would that figure be totally outrageous for most people? Yes. Would it cover everything that is not predictable? Heck no. Would I care? Not likely because I have a good buffer to not make my life a liability for others.
Wow. 4M for a 40K/year expense. Serious question - why are you on an early retirement forum? You are promoting a 100X SWR. Almost no one can ever retire under your guidance.

Anyway, to OP's question, I had around a 20% buffer above 100% success in FIRECalc when I ditched MegaCorp in 2017. Between consulting income and market performance since 2017 I'm now about 60% overfunded
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Old 05-03-2021, 07:49 PM   #19
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Our "buffer" was more based on what level of "very generous" spending (some might call it "Fat FIRE") we desired to have in retirement. FIRECALC and other calculations and financial advisors said our assets would support a little more than $100K/yr expenses (which, accounting for a reduction in taxes, was more than our pre-retirement spending), but we wanted to plan for at least 25% more than that and built our buffer accordingly.
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Old 05-03-2021, 08:10 PM   #20
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Originally Posted by flyingaway View Post
Reading the replies in this thread makes me think that many of the SWR, 4% rule, bond tent, etc. discussions are meaningless. When someone is talking about 25x, the person might actually have 75x,(300% buffer).
Not meaningless, IMO. 4% is a good goal. What buffer you want depends on each individual. My plan was to strive for 4% and then decide if I want to keep working to add some buffer and allow for some extras. I went for a few years (can't remember how many) of easy part-time work cruising on the tech skills I had to add that buffer and do some splurging.

People here who have 75x today might have retired at 25, 30, 33X, whatever. Now they have a lot more buffer. But that doesn't mean they have lost the perspective of what 25x means.

The other things to watch for are the big pensioners, or low spenders. If my pension covers all but $1000 yearly income, I could have $75,000 to make 75x, but that's really not that big of a buffer. And social security might similarly cover just about everything a low spender needs, which can create the same kind of buffer multiplier is not so huge. Both may be good enough, but don't make for super-fat retirement.
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