Income If You Retire Today

[ejman]

Is it gauche if I tell you this: $100K+, Age 58, retired?

FIRECalc gave me a number quite a bit more than $100K, after I entered in our actual SS numbers. Surprisingly, SS at 62, FRA, or 70 did not change the amount it said I could spend.

Do I spend that much? No way. I want to have a lot of money to count. Having money is nice, just to behold it. No need to spend it. Remember that if you spend all that FIRECalc says you can, there's a good chance you become a thousandaire near the end of life, and that's not a good feeling.

Counting IS FUN Sr. Rico McPato.

Actually, if you want to have some fun numbers the Vanguard Financial Engines calculator consistently gives me about 25% more than Firecalc So I take comfort in that number whenever I think I'm blowing the budget.

By the way, I get about the same answer on the when to take SS question. That's what makes those frequent threads on SS so much fun at this forum. Everybody is right!

 

[NW-Bound]

25% more than FIRECalc? Whooeee!

Oh, but wait. I can get FIRECalc to give me a higher number if I enter in my pessimistic longevity expectation, and not use the standard 30-year retirement period.

That should also make me feel good about under-spending. Somehow, that doesn't feel right though. Happy to be dying young and rich?

 

[Senator]

I'd have been gone about 5 years ago

I often wonder why I stay... January will be the start of more 401K contributions. Since I put in 75% of my salary, and there is a 4% match, January is like double pay. The pension increases by ~10% on 6/30.

2013 was the first year of the major rental cash flow, so I am still tip-toeing until I see it more consistent for a few years. I bought a property in 2012 that was not 100% rehabbed and rented until 1/1/2013. That gave me ~$31K in extra cash flow as it was a cash purchase.

I have since paid off a 188K mortgage in 2014, and my own house in 2014, so that bumped up my cash flow and reduced my expenses. A $30.5K change.

I was able to track quite a bit of savings this year as I did not buy any properties. I am saving 100% of my net pay from my job, plus my 401K max of $23K, plus another $7K per month. So the properties should be enough to live on. I want to break $1M again in investable assets, and bring it up to ~$1.25M and I am gone.

So, the light is at the end of the tunnel. I am practicing FIRE, getting my activities lined up and my mindset ready. When I am finally free, I will hit the ground running.

 

[ejman]

25% more than FIRECalc? Whooeee!

Oh, but wait. I can get FIRECalc to give me a higher number, if I enter in my pessimistic longevity expectation, and not use the standard 30-year retirement period.

That should also make me feel good about under-spending. Somehow, that doesn't feel right though. Dying young and rich?

Right on. Actually I think that's part of the secret of the Financial Engines calculator. I think it assumes on average bucket kicking takes place per actuarial tables.

 

[daylatedollarshort]

The intent here was NOT to get a gauge on if one feels safe at their own spending levels. It was to get an idea of retirement income levels at various ages.

We looked at the CES:

Consumer Expenditure Survey

Plus we just do some of the light weight kinds of stuff from urban homesteading books and blogs and that lowered our expenses quite a bit more:

http://urbanhomestead.org/urban-homestead

My new motto is freedom is low overhead.

 

[NW-Bound]

Right on. Actually I think that's part of the secret of the Financial Engines calculator. I think it assumes on average bucket kicking takes place per actuarial tables.

Looking at the two concurrent polls on this forum, one about wealth and the other about expected life span, do you think posters here are so lucky to be wealthier than the general public, and outlive it too? Oh, and there have been many threads about whether luck is an essential part of all of this.

The problem is when a poster drops out, either for wealth or health reason, we do not know about it. Self selection...

 

[unclemick]

12k, 1993, because I had too. I never heard of FireCalc til later. I did have a Vanguard retirement booklet. Interestingly in those days 6-8% withdrawals were not out of the question assuming you croaked on time. I think they also started retirement at 65.

heh heh heh - Webtv, found the forerunner to this forum and became a high class ER. Mr Market, time in the market, AND marriage has improved my income 10 fold. Who'd have thunk it!

 

[Quantum Sufficit]

Firecalc puts DW and I at 100% success with an overall pre 62 withdrawal rate of 2.8% based on projected retirement expenses. I tried to put some fluff in the numbers for the budget. Plan on pulling the plug April 2015 at 49!

 

[ejman]

Looking at the two concurrent polls on this forum, one about wealth and the other about expected life span, do you think posters here are so lucky to be wealthier than the general public, and outlive it too? Oh, and there have been many threads about whether luck is an essential part of all of this.

The problem is when a poster drops out, either for wealth or health reason, we do not know about it. Self selection...

Luck or not I dunno but every poll I've seen at this forum shows that most posters here self select at way over the 2 sigma level on NW and since from everything I've read there is a direct correlation to longevity (on the aggregate, unfortunately) so yeah a very unusual distribution

 

[ejman]

12k, 1993, because I had too. I never heard of FireCalc til later. I did have a Vanguard retirement booklet. Interestingly in those days 6-8% withdrawals were not out of the question assuming you croaked on time. I think they also started retirement at 65.

heh heh heh - Webtv, found the forerunner to this forum and became a high class ER. Mr Market, time in the market, AND marriage has improved my income 10 fold. Who'd have thunk it!

Uncklemick you my hero! YOUR PSST Wellesley made me look real hard at that fund and it ended up as 1/3 of my liquid NW.

 

[nun]

FireCalc says my 100% success income is twice what I have spent in my first year of ER.

 

[pb4uski]

I often wonder why I stay... January will be the start of more 401K contributions. Since I put in 75% of my salary, and there is a 4% match, January is like double pay. The pension increases by ~10% on 6/30.....

It is a insidious disease called OMY syndrome. You continue to find reasons to continue working until you die or get so sick that you can't work any longer.

 

[Senator]

It is a insidious disease called OMY syndrome. You continue to find reasons to continue working until you die or get so sick that you can't work any longer.

As I look at the numbers, my desire for the OMY is less and less. Unless something crazy happens, I will not be around a real job on 7/6/16.

I knew I would never be a billionaire, as long before I am a billionaire, I would have enough. The reason i work so hard now, is because I am lazy and do not want to work later.

 

[Totoro]

The reason i work so hard now, is because I am lazy and do not want to work later.

So true.

In my student years I was lazy, and none of my friends thought I could work hard, go very far and succeed at the job I took. They didn't even think I could manage to get a Phd. Until I started to kick myself into gear the last year and did a very well-received master thesis.

The friends I made at the last job I had have the opposite view: Most of them don't believe I can slack off and be permanently lazy Until they started seeing me barely working in the last few months.

Good lesson in there for me too: extrapolation of people based on past behavior can work, but isn't everything.

 

[pb4uski]

.....The reason i work so hard now, is because I am lazy and do not want to work later.

Same here. DS seems to have inherited it too.

My laziness reminds me of an old Beetle Bailey cartoon where Beetle complains to Sarge that Sarge always assigns him the most difficult tasks and Sarge replies that since Beetle is so lazy that he thinks that Beetle will find the easiest way to do it.

 

[jerome len]

What I need is different from what I spend.
What I need is what I spend on DW and myself, then what I spend includes charitable contributions, kids/grand kids educations, "nice" annual gifts to kids/grandkids. And, my benchmark is my dividend and interest checks each month. So, I'm lucky, share a little and get a lot of enjoyment watching my family appreciate the gifts. It's a low 6 figure amount, we don't live "high on the hog" but we don't live cheaply either.

 

[Fermion]

People obsess so much on here about having enough money. Run simulations, worry if their 2% SWR is too aggressive, then they have a doctor's visit and find out they have about 3 years to live.

Just retire. Adjust your spending if we have a downer market. You can't buy life.

 

[rodi]

The intent here was NOT to get a gauge on if one feels safe at their own spending levels. It was to get an idea of retirement income levels at various ages.

For example:

Income, Age, Retirement Status

$67,000, Age 47, Not Retired

Or since this is gauche maybe:
$100k+, Age 53, Retired


We could all then take a look at the answers and say:
-I'm right about where most everyone else is
-oh my goodness I need to retire already
- or maybe I'll hold off on retiring a little bit more.

$84,000, Age 53, Recently Retired.

What isn't mentioned there - family of 4, no mortgage or debt, 529 funding coming from a different source. Trip-of-a-lifetime(TM) next year is coming from a set aside of $ not included in the annual budget. Some planned home improvements also have set asides.

That's my actual budget. Firecalc puts it over $90k for 100%. Firecalc uses the SS numbers I put in, as well as small pension and rental income I put in - so the WR is smaller than it would otherwise appear.

 

[Mulligan]

It is a insidious disease called OMY syndrome. You continue to find reasons to continue working until you die or get so sick that you can't work any longer.

At least some understand their choices...Now on the other hand my friends...as they near retirement which are pension based, they comment on how much more their pension is if they stay one or two more years like it's free money...then I simply explain the opportunity costs involved such as closer to dying and foregoing the pension income that could have been received but is lost by continuing to work. They look at me like I decoded the Rosetta Stone.


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[NanoSour]

Just based on spending and assets, FIRECalc gives me a 1.8% chance of success.

Adding my Military pension gets me to 72.8% chance of success.

Selecting Bernicke's Reality Spending gets me to 100%

Good thing I'm a realist.

 

[Closet_Gamer]

People obsess so much on here about having enough money. Run simulations, worry if their 2% SWR is too aggressive, then they have a doctor's visit and find out they have about 3 years to live.

Just retire. Adjust your spending if we have a downer market. You can't buy life.

As one of the worriers, I think there is a lot of wisdom in your comment.

Interesting, the drivers of my obsession about income and withdrawal rates actually aren't lifestyle driven.

One is a sense of obligation to the world around me -- for all my blessings, shame on me if I hang it up too early and the become a burden on those around me (family or society).

The other is a sense of obligation to myself and DW -- after 20 years of busting my hump in corporate life, I will be really pissed if i mis-judge and leave too early. At this stage I put away in a year what used to take 5 years.

 

[daylatedollarshort]

At least some understand their choices...Now on the other hand my friends...as they near retirement which are pension based, they comment on how much more their pension is if they stay one or two more years like it's free money...then I simply explain the opportunity costs involved such as closer to dying and foregoing the pension income that could have been received but is lost by continuing to work. They look at me like I decoded the Rosetta Stone.

Between pensions, much lower income taxes, tax credits, qualifying for financial aid, no longer having to save for retirement, hobby jobs, having time for more DIY and price shopping - we are still kind of in shock we can live the same basic lifestyle only not have to work full time any longer. I'm sorry I didn't run the numbers in this detail years sooner. We saved a lot on unnecessary expenses that really didn't add to our quality of life just by having more free time to review and analyze the budget. Our pensions aren't super huge but with lower expenses they cover a much bigger chunk of our spending than we initially thought they would.

 

[23Red]

Age: 35
Retirement: Yes, 18 months ago
Firecalc@100%: $191,000

That's using Firecalc at its default settings.

 

[Looking4Ward]

If you retire TODAY (or are already retired) what income would give you 100% success in FIRECalc?

For our family it would be $67,000 age 47 (Not Retired)

FIRECalc Settings:
Constant Spending
CPI Inflation
Total Market 60/40
Investigate Tab Set to 100% by Changing Spending Level

Without including SS in 15 years @ age 70 and an AA of 65/35, FireCalc tells me I'm 100% with a 3.65% withdrawal rate - an amount just about equal to the amount of SS that I should receive. If I eliminate the Great Depression by starting the analysis at 1940 and do not inflation adjust anything by withdrawing a true constant amount, FireCalc then tells me I'm 100% with a 7.08% withdrawal rate.

Given both cases provide ample income for me to live on, I think I'm good.

 

[sengsational]

We could all then take a look at the answers and say:
-I'm right about where most everyone else is
-oh my goodness I need to retire already
- or maybe I'll hold off on retiring a little bit more.

It would seem to me that the annual $ amount from FIRECalc, age, and if you're retired or not is less than what you would need...you'd also need what your current burn rate is.

100k, 55, recently retired means something different if my current (or post retirement) burn rate is 50k versus $150k, right? I see all of these people in the bay area with huge mortgages (but fewer square feet to live in than I do), huge taxes, etc.

To me, what you really want to know is the spending multiple.

One way to calculate it would be to get a current value on future income streams (social security, pensions, etc). You'd have to agree to all use the same discount factor, otherwise the results would be all over the place. And we'd all have to use the actuarial tables to keep apples-to-apples. So then you'd add the present value of your income streams to your spendable assets. (I'm not going to use the "N" word ["NW"] or people freak out with their own definitions). But you take that total of spendable plus present value of future streams, and you divide it by your current or projected annual expenditure.

I did a little googling, but couldn't find a calculator that would give one the present value of social security payments. I figure it must be out there, but I just didn't see it. I wouldn't need to be social security, per se, it just has to let you put in how many years in the future the payments will start, and how long. And also allow for inflation and discount percent input (this is important because there's time between now and when the payments start).

But rough numbers, I'm totally underspending (but I knew that)...When I add in a quickie present value of SS to my nest egg and divide that total by my current burn rate, I can get myself to over 100 years of age.

So although we lose the FIRECalc "market" aspect and fall back to assuming the portfolio will keep up with inflation, I think this calculation is a better yardstick to measure if you are behind, equal, or ahead of others in your quest to RE.

Calculate the present value of your future cash flows, add that to your nest egg, divide the total by your projected annual spending, then add that to your current age. Is that number higher than the actuarial table for you?