How much would you need?

[bots2019]

I'm hoping to retire in about a dozen years at age 40. Given that my wife and I will have no pension/medical coverage and likely two kids still at home (say 12 and 10) I'm shooting for total investments of 2.5-3M (in today's dollars). Way too early with too many variables to know if I'm on track as of yet.

My question is, if you were in this situation today, how much would you need to feel comfortable moving into ER?

 

[chinaco]

My vote was at the highest amount. You have to plan for 45-50 years and the cost of children through college. You could manage the college cost by having them get loans. But it is still very expensive.

 

[bow-tie]

If I were to retire today with 2 youngin's, I chose 1.5-2M. If someone wrote me a check today for an amt in the upper end of that range, I'd tell wage slavery to go get bent.

 

[Charlotte]

I plan to be in the 2-2.5 million range in my portfolio. But I don't count my children's college funds as part of that. That's separate money for a separate purpose. For them, I will stop contributing into their 529 & Coverdell accounts at about the 80K-90K mark (per child, that is), they'll still be in elementary school when we reach that mark, so they'll be plenty of time for growth.

Charlotte

 

[W2R]

OOPS. I goofed and marked less than $1,000,000. Sorry!!!

My computations say 1.5-2 million.

 

[lazygood4nothinbum]

when our electric goes out after a storm i just close the house and do a roadtrip for the week. but my brother with three kids in school and a wife at home has just installed a $30k generator to keep the house cool and the kids entertained. so i guess he needs about 10x's what i need. you should just plan to keep on working.

 

[Rambler]

I'd go with over 3M, especially if you are young with kids. My first is already out of the house and my last has 2 years to go. I'm 45 but like Medit8 I have lived overseas for a long time and I'm still having a little trouble coming to grips with what my actual expenses will be in ER and later R. Of course it all depends on the lifestyle you want to lead. (we will retpatriate and ER in the USA). As we are mid forties now and will be later forties when I plan to ER I don't want to sit still (too young for full time rocking chair duty), so I'm planning to have more rather than less. Most folks in the range of compensation that I have would call us frugal...but we'll have alot more to ER with than most of them will, because of that frugality. My dream is to be able to do what I want, when I want, whether that means puttering around the house and garden volunteering, or hopping in the RV or car at the last minute and just deciding to "go". We will be supporting our kids in college to a certain extent, largely because we have been overseas so long in circumstances that have made it difficult for them to pick up part-time jobs. They will have to work while in college for some of their living expenses and all of their play money. I paid my entire way, began saving for it when i was 11, and I think that they will value it more if they have a hand in funding it. So we will never fully fund them, even thought we probably will be able to do so.

Bottom line is that you will have to think pretty long and hard about what you want to do when you punch out. We've got a lot we want to do, and worrying about where the next dollar is coming from is not one of those things we care to do. Although I do enjoy managing investments, budgeting and planning, its the worrying part I don't enjoy. Thus, we're aiming for quite a bit higher than 3M, a SWR of about 2.5%, and we are blessed to be in circumstances where we have that option.

 

[bongo2]

Wow, I thought that I was being conservative answering $2.5M, but almost 60% of the responses (at this point) are over! Verrrry interesting.

 

[Milton]

when our electric goes out after a storm i just close the house and do a roadtrip for the week. but my brother with three kids in school and a wife at home has just installed a $30k generator to keep the house cool and the kids entertained. so i guess he needs about 10x's what i need.

Exactly! One person's "needs" are another person's "wants".

My own attitude is not dissimilar from Rambler's: I have an expensive hobby that I would like to continue enjoying in retirement without worrying about the cost, and if that means working one or two extra years, that's okay. I don't hate my job, and putting up with its (inevitable) occasional frustrations is made easier by the quiet knowledge that I could quit at any time and still be quite comfortable, even though I might not have achieved the somewhat arbitrary benchmark that I have set for myself.

 

[bots2019]

Wow, I thought that I was being conservative answering $2.5M, but almost 60% of the responses (at this point) are over! Verrrry interesting.

Yeah, I'm a little surprised that so many have picked the highest option. It’s also interesting the “barbell” results emerging between the 2-2.5 and 3+ options.

Obviously personal spending habits play a large part, along with the conservatism that comes with such a (potentially) long retirement.

We’re pretty frugal, but haven’t yet figured out how kids will change the equation. Since we LBOM by such a large margin I’m thinking working part time (in my current industry) will be part of the eventual solution. I’ve never felt it would be all that beneficial to get a low paying job just to “keep busy” in retirement. Why do that when I can make more just delaying retirement a couple of months or working severely reduced hours? National healthcare of some kind could also make the target amount significantly lower.

 

[Sam]

Wow, I thought that I was being conservative answering $2.5M, but almost 60% of the responses (at this point) are over! Verrrry interesting.

It costs nothing to dream, I think.

 

[dumpster56]

3 million is 120K a year at 4%.

2 million is 80K

1 million is 40K

 

[Rambler]

40k is a lot less than what it would take to keep our lifestyle in CA, 120k after taxes is still possible. Problem is the length of our retirement means 4% is a little too risky for me...shooting for 2.5% + or -...hopefully funding most or all expenses from dividends/lower taxes.

 

[Alan]

I voted $2.5M 'cos with kids college and health care etc, I'd want to have plenty in reserve.

 

[Salaryman]

I'm going to go on a limb and say that you'd need 5mm+ for ER.

We live in a NE metro area and our 200k+ income (4% of 5mm) just makes us one of the "Jones". Would hate to be ER'd feeling not sure if there was enough funds in the kitty to last.

 

[Webzter]

I'm going to go on a limb and say that you'd need 5mm+ for ER.

We live in a NE metro area and our 200k+ income (4% of 5mm) just makes us one of the "Jones". Would hate to be ER'd feeling not sure if there was enough funds in the kitty to last.

But, given the numbers you posted in your other thread, I'm guessing you've been saving much more than the Joneses; you've got an impressive net worth number right now. Excluding retirement / investment savings, do you know what your actual yearly living expenses are? Do you know what your personal rate of inflation is?

Obviously, your retirement may change a lot from how you live now... cost could skyrocket, go way down, or stay relative to where it is now. But, it'll show you a good baseline for what you need. Look at covering your expenses not your salary.

 

[haha]

Another reason to overestimate your needs is divorce. The type of person who ERs seems less likely to divorce than the base population; but many here can testify it is still a non-zero possibility. So you want enough that it can be cut in half, or worse, and you still not be forced onto a lifetime of red beans and rice. I know, it's not a bad meal, but you know what I mean.

Ha

 

[Terry]

Disclaimer: I make no warranty or guarantee about the accuracy or completeness of this information. I am not a financial planner, my comments only represent my opinion. (I like this line)

I would invest as much as you can ad still pay your bills. I would also not put all your eggs in one basket. At 40 you have a lot of options. Do not be afraid to use the equity in your home. I am just over 50 and my wife and I are doing some things that will give us a very secure investment with around $1,500 a month dividend. This more than covers the increase payments for the equity loan and allows us to invest in other things.

Hope this is helpful.

 

[Salaryman]

Webzter and Terry, thanks for the compliments and encouragements.
Looking back, we haven't really changed our lifestyle or our approach since when we had much much less.
We're firm believers of LBYM and banking every spare penny for tomorrow...having the kind of background that my wife and I have gave us a great appreciation of life's little graces and a deep sense of hunger.
Not to rest on our little successes, we still have much more to achieve before we can relax.

Our third child is due later this year & the Mrs wants to go to grad school afterwards. If this isn't a stiff test of our resolve don't know what is.
The upshot will be that we can really step up our progress and ER will be a nearer term reality.....if we live to tell about it.

Haha, thanks for your perspective but only way divorce will happen in our lifetime will be if one of us is six feet under.

 

[Spanky]

Salaryman,

Are you saying that you do not have $5 million in assets. It seems that Webzter thought that you might.

 

[Salaryman]

Spanky, we're not quite at 5mm mark yet.
Past 1mm on our way to hopefully more in the future.
How about you?

 

[Webzter]

Salaryman,

Are you saying that you do not have $5 million in assets. It seems that Webzter thought that you might.

No, in another thread he mentioned that he and his wife were past the $1mm mark. My only point is that, even though he stated that he needed $200k/yr to FIRE, he probably actually doesn't if he looks at his actual living expenses (as opposed to the household $200k salary).

Point being, if someone has saved $1mm on a $200k salary, then he's probably living on much less than $200k a year.

I just realized something though, I always think in terms of today's dollars and assume my allocation will grow above inflation and plan accordingly (I stay a bit conservative and plan on a 4% real return). So, Salaryman and I might not even be talking the same dollars.

 

[Salaryman]

No, in another thread he mentioned that he and his wife were past the $1mm mark. My only point is that, even though he stated that he needed $200k/yr to FIRE, he probably actually doesn't if he looks at his actual living expenses (as opposed to the household $200k salary).

Point being, if someone has saved $1mm on a $200k salary, then he's probably living on much less than $200k a year.

I just realized something though, I always think in terms of today's dollars and assume my allocation will grow above inflation and plan accordingly (I stay a bit conservative and plan on a 4% real return). So, Salaryman and I might not even be talking the same dollars.

Webzter, you really pay attention to details. You must run a tight ship at your company.

Here's our breakout percentages:

36% taxes
30% expenses
34% investments

The ratio hasn't changed much over the years.
And as it sometime made me physically ill, I did not change the investment allocation or traded on emotion.
The worst was losing 50% of the portfolio during the tech meltdown...but I digress.

The 200k year/4% of 5mm present value number is what I consider the 'safe' NUMBER.
You are correct about the future/present value assumption. For myself, I use a benchmark of 3% inflation 8% annual investment returns.

 

[Spanky]

Spanky, we're not quite at 5mm mark yet.
Past 1mm on our way to hopefully more in the future.
How about you?

Salaryman,
No, I have a long way to go before hitting 5mm mark. My goal is only $2mm within 4 years - I hoped.

 

[Medit8]

I voted for 2-2.5 mill. Part of that is a tax issue. If you have US or other taxes to pay, that wouldn't be enough in my view with 2 kids to educate and a comfort level that funds wouldn't run out. I don't have that problem hence a 3% withdrawal rate of USD 60,000 is net of taxes for me. That makes for a comfortable, albeit unspectacular ER. Who could really ask for anymore than that anyway