How much of a buffer did you have before ER?

[disneysteve]

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?

 

[RunningBum]

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.

 

[Time2]

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.

 

[teetee]

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.

 

[Dash man]

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.

 

[RunningBum]

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/fo...days-for-2-retirees-106166-7.html#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?

 

[Green Papaya]

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.

 

[RetiredAt55.5]

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??

 

[EastWest Gal]

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.

 

[teetee]

Well, I'll give you a point for consistency. You used the same number in this thread:
https://www.early-retirement.org/fo...days-for-2-retirees-106166-7.html#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.

 

[Montecfo]

buffer is about 60 percent. way too much.

 

[GenXguy]

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.

 

[Gumby]

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).

 

[MRG]

About 25% buffer except that doesn't include my SS. It will provide 50% of our required income.

 

[flyingaway]

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).

 

[Dash man]

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.

 

[bada bing]

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.

 

[USGrant1962]

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

 

[jollystomper]

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.

 

[RunningBum]

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.

 

[Mmm Rrr]

My buffer was to not consider SS in what I needed, and to aim for "pleasantly plump" Fire. Ten years later, it is working out just fine, and my net worth is still growing.

 

[HarveyS]

I added 20% to my annual spending for the first 15 years of ER for excess spending. I suppose that could be considered a buffer. I have not spent any of that yet as frugal habits die hard. But, alas, DW has stepped up and had planned some very extensive trips for this summer and 2022.

 

[YVRRocketSurgery]

I'm factoring in lots of buffer but it depends on how you define buffer and what the retirement police rules are.

I'm planning to retire next year but the missus is going to continue working for another 5-8 years because she works a quasi public sector job, has a db pension, and wants to build it up to a certain level because they've implemented various penalities because too many members were retiring early and putting strain on the viability of the plan. No guarantees though as she could get pushed out of her job as soon as tomorrow because of the situation at her workplace.

When I retire next year, our investable assets will be about 50-55x our current spend.
However, our retirement plan is to travel half the year. Based on that budget, our investable assets at my retirement drops to about 27x that estimated spend.

For sake of simplicity:
If we run into a rough patch, first level of buffer will be being flexible with our travel spend.
Second level of buffer is that we haven't factored in government benefits in our estimates because who knows what changes there might be to benefits with the current environment.
Third level of buffer is our house which we can tap into the equity or trade in for a retirement community/assisted living facility.

It's likely too much buffer but not having to sweat it out when the markets take an extended hit is worth it for us.

 

[flyingaway]

If you retired with 75x, please don't advise people with 25x to jump.

 

[tb001]

When we started making those irreversible decisions that set us on the path to ER, yes, we had a buffer, but nothing like what some here are describing. At that point, we had a 95% success rate, if we included SS.

But I tried to be generous in our budget so we had a bit of flex. I also counted a few riskier investments as zeros. And also assumed zero income from an investment which had been delivering about 5-10% of our spend, which ended up being a good thing as it was in the hospitality industry in nyc and went under not long after covid. We also have a significant percent of our net worth (and spend) tied up in our home, so if we decided to sell it at some point that would change the numbers significantly.

The flip side is that we have young kids, so spend is inherently more difficult to forecast, and a longer time horizon.

Almost three years later, DH has continued to work as a consultant and we’ve had a few of those riskier investments return capital. That, coupled with market returns and three fewer years of retirement horizon, means we’re now at 100% and can theoretically spend about 10% more than my initial budget.

Three years in, our initial planned budget looks like it was about 10% higher than what we’re spending, but we’ve had some ‘one time’ costs I’m not including in that spend. Those extras felt ok with ‘extra’ income coming in from DH’s consulting, but we’ll definitely cut back on that type of spend now that business is slowing down.

I agree with the comments around understanding the source of funds and the spend. We are relying mostly on our portfolio and are funding a relatively fat fire. While it wouldn’t be our preference right now, the ability to downsize our lifestyle gives us a built in buffer.

One other point I would make. I was miserable in my job and wanted out. Because of that I was willing to push the numbers and take on more risk. When we started first thinking about ER it was 95%, assuming we sold our house in 20yrs and downsized, which I was good with. But it feels far better to have the buffer we have now. I think my stress level would be an order of magnitude higher without it.