Poll:Care to share a bit?

[Gumby]

The young wife and I are planning to hang it up in 3 years. At that time, two cola'd pensions will fully cover our expenses. After 1.5 years, my social security will kick in and give us about a 30% buffer. And if both pensions and social security should vanish, our liquid nest egg will be 30x expenses from the start. If we sold the house, that would be another 8-9x expenses (given that about 25-30% of our current expenses are taken up by real property tax, homeowners insurance and maintenance, we could afford to rent a pretty decent place). Hopefully, that won't be necessary, and we can simply spend our time going on extravagant vacations.

That is the plan, at least. It could all go to hell in a handbasket tomorrow.

 

[scrabbler1]

FIREmenow, I ERed in late 2008 at 45 when the markets were crashing. But regardless of that, the ratio you ask has been a moving target for me.

First, if I use only my non-retirement assets, a subset of my total portfolio (because I lack unfettered access to my IRA until I turn ~59.5), the ratio at the time I ERed was about 28. Once the markets began bouncing back, that ratio rose because my expenses didn't grow as quickly (or they actually fell at times). Using that same reduced denominator, that ratio has risen to about 36.

But once you include my IRA that ratio rises to about 56. And that doesn't include my other "reinforcements" such as SS and my frozen company pension which become available in my 60s which is less than 10 years from now.

 

[medved]

When people here talk about their annual spending (as a percentage of total or invested assets), do they tend to include as part of that spending whatever taxes (both ordinary income and capital gains taxes) you pay?

I am particularly focused on capital gains tax because around 80% of what I have saved is in taxable accounts, and I will have to accept some capital gain in order to generate liquidity in retirement.

 

[W2R]

When people here talk about their annual spending (as a percentage of total or invested assets), do they tend to include as part of that spending whatever taxes (both ordinary income and capital gains taxes) you pay?

I am particularly focused on capital gains tax because around 80% of what I have saved is in taxable accounts, and I will have to accept some capital gain in order to generate liquidity in retirement.

Yes, I think most of us include all of our income taxes in our spending, or else specify that they are not included. Like you, much of my income comes from taxable accounts and the taxes can be quite different depending on my tax strategies.

For this poll, I used the number including taxes.

For other threads when we are asked what our spending is, I'd say it was "$xx,xxx, plus income taxes".

 

[Ronstar]

When people here talk about their annual spending (as a percentage of total or invested assets), do they tend to include as part of that spending whatever taxes (both ordinary income and capital gains taxes) you pay?

I am particularly focused on capital gains tax because around 80% of what I have saved is in taxable accounts, and I will have to accept some capital gain in order to generate liquidity in retirement.

Yes, I do. But for me, taxes are almost negligible now that I'm retired.


Sent from my iPad using Early Retirement Forum

 

[W2R]

The young wife and I are planning to hang it up in 3 years. At that time, two cola'd pensions will fully cover our expenses. After 1.5 years, my social security will kick in and give us about a 30% buffer. And if both pensions and social security should vanish, our liquid nest egg will be 30x expenses from the start. If we sold the house, that would be another 8-9x expenses (given that about 25-30% of our current expenses are taken up by real property tax, homeowners insurance and maintenance, we could afford to rent a pretty decent place). Hopefully, that won't be necessary, and we can simply spend our time going on extravagant vacations.

That is the plan, at least. It could all go to hell in a handbasket tomorrow.

Just 3 more years? This is getting EXCITING!

Sounds like your financial preparations are unusually solid. You'll be fine. I think you will be able to throw away that handbasket.

 

[devans0]

I polled us to over 25 x (33 x actual).

It's not that we are so rich as that annual spending is hugely variable. Being used to saving a large chunk of earnings trained us to keep a nice lifestyle with little spending. We can manage nicely with $20,000 gross which includes health insurance and a nice allowance for both of us. This is our first year out, so we are staying on the conservative side. Spending can ramp up as we feel more settled and comfortable.

 

[daylatedollarshort]

If I divide my budgeted spending into our planned savings total, I get about 18.6. I think this is the number that the adage 25x is needed to retire. It seems to work in RIP and Firecalc tools. Spending includes plan for SS, but SS not included in the division.

What's up with that? Am I that far behind? Does EVERYONE discount SSI entirely and assume more savings? Is this too complex to consider with the SS variable?

Would you retirees care to share what your multiplier number was when you retired? Did you factor in SS in your decision?

I do not discount SS, but I leave a lot of pad in the retirement plan in case it is less than expected. We use mainly liability matching and the plan is to keep our annual expenses lower than our (interest income + SS + pensions + hobby income).

 

[Sycamore]

I'm not retired yet. My savings to spending ratio is 31x. I'm targeting a 35x multiplier as my FI target. Recent and projected market returns are a concern for me given our planned 40+ year retirement time frame.

It's interesting reading actual experiences from other posters. Sometimes I wonder if I'm being to conservative with my 35x goal.

 

[daylatedollarshort]

I am also not sure why one would not factor in SS at all, unless retirement savings or other income streams were high enough that $500K - $1M+ is chump change. At current investment rates, the net present value of SS for a working couple at the maximum benefit end is worth over $1M, $600K at the lower end:

https://www.kitces.com/blog/valuing...s-as-an-asset-on-the-household-balance-sheet/

At current projections, without program changes SS benefits may drop to 75% in 2035, but the projections are not 0%.

https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

 

[jollystomper]

Without pension and SS income, my ratio is 15.6. But I will be getting a pension that, along with interest and capital gains, cover our required expenses, so our budget is a very comfortable one. If I lost my pension completely we could cut back on spending so that the ratio would be 23, again not including SS.

 

[523HRR]

Quit w*rking at 49, so given what could be 40+ years in retirement we are targeting a portfolio withdrawal rate <2.5%. Investable assets are currently about 50 x annual household expenses (including taxes).

 

[NW-Bound]

It's not surprising to see the majority choosing the ">25X" category. After all, the 25X ratio goes with a 4% WR, and many here have stated they go with 3.5% WR or lower.

And yet, I doubt that everybody here will live for another 25 years. And there's SS on top of that WR. This means that our offsprings or heirs will have a great time. May they retire early too, and at a younger age than we did.

 

[scrabbler1]

The Over-25 category should have been split up into more subgroups such as 25-30, 30-35, 35-40, 40-45, 45-50, >50, perhaps.

 

[Totoro]

I am also not sure why one would not factor in SS at all

Me neither. Governments can be fickle but most western ones tend to honor their SS type agreements.

In my case I do a 30% discount (roughly) on what I expect to get from the equivalent of what SS is in the US.

Reasons being inflation (it's a long way out for me), government funding (cost of living adjustments), taxation and my current country has made the minimum age contingent on life expectancy.

Not that I am accruing much, but every little bit helps.

 

[Major Tom]

Late to the party here, and you already have your answer FIREmenow, but I'll play.

When I began withdrawals from my portfolio, the amount of savings, not including SS (my only other source of future income), was 41x. That was 5 years ago. My draw has not changed (not even an inflation increase), and due to market growth, the savings factor is now at 48x.

I do take SS into account, as I expect it to be there, but because I am fairly conservative, my plan doesn't rely on it's existence. In fact, my future spend is very flexible. I have no idea where I will be living, or how much it will cost (I am a renter), and am very flexible in that regard.

Being single with no dependents, and modest requirements, makes the whole business of ER quite straightforward. The ACA helped as well

 

[tmm99]

Adding the tax part may be a little off, but mine is probably about 36x because USD is so strong against CAD. If it were 1:1, it may be closer to 29x.