Response from Dr. Milevsky about Early Retirement.........

[FinanceDude]

He gave me a very short response to the question I posed him about how his research applies to early retirees........

Basically, he said that to him, early retirement is a recipe for financial failure, on a variety of levels......

I am e-mailing him back for clarification..........:confused:

I wasn't quite expecting that...........

[brewer12345]

I'm not surprised at all at his response.

[Notmuchlonger]

I guess you take more risk by retiring earlier. Id be curious to know his reasons why.

[cute fuzzy bunny]

Eh, if you consider it in terms of the average reality, he's probably right.

Most people spend too much and keep too much debt. So most people cant save enough and if they did, might spend themselves into oblivion. Inflation has a marked effect on a retiree style budget which may be heavy in food, energy and health care costs. Many people cant or wont manage their own finances and will simply hand their money over to someone who will charge them half of their personal inflation adjusted returns for the pleasure. Which doubles the amount they'd need to successfully make it. When most people cant garner enough for a satisfactory "normal" retirement.

So you're left with someone who can amass a large amount of money, manage it on their own, figure out how to avoid the vagaries of humongous price increases in several areas that economists like to set aside when measuring "core" inflation do all thatover 3-5 decades, and be willing to do a lot of this in direct conflict with the way almost everyone else thinks they ought to be living their lives.

Hmm, a huge economic and social stress over 30-50 years. Sounds like a recipe for failure on a lot of levels...

[FinanceDude]

I e-mailed him back asking for a couple points of clarification. If he responds, I'll report back.

[FinanceDude]

I just had a thought. If we had another 10 year market like 1973-1982, would that bankrupt a fair number of early retirees, or would they adjust by lowering their budgets and SWR until their portfolios recovered??

[cute fuzzy bunny]

Both. Some people might stick to their plan even when they were spent down considerably and just adjust their spending to suit. Some might react and do stuff that works out either more or less favorably, probably at a rate of coin flipping. Some might go back to work.

Having already stuck my foot in a bear right on retirement (2000-2003) I cut my spending and if it'd gone on for a couple more years I'd have probably gone back to work. I dont think I'd enjoy a nice relaxing time in retirement while my investments were going down and/or sideways into 8+ years.

But with no debt and adaptable spending, I wouldnt have to go back to the shirt and tie 60 hour grind. I'd probably pick up a few handyman jobs and maybe a part time sales job.

[Lsbcal]

Quote:

Originally Posted by FinanceDude I just had a thought. If we had another 10 year market like 1973-1982, would that bankrupt a fair number of early retirees, or would they adjust by lowering their budgets and SWR until their portfolios recovered??

Isn't this a natural question to pose to FIRECalc?

[FinanceDude]

Quote:

Originally Posted by lsbcal Isn't this a natural question to pose to FIRECalc?

I was looking for a human response rather than a software response. FIRE Calc is a great program,but it doesn't always take into effect human variables........

[Art G]

I'm guessing his response will be in relation to:

lack of medical coverage until medicare takes hold
lack of social security until age 62
lack of pensions in existence

lack of workers in Uruguay

[megacorp-firee]

Quote:

Originally Posted by cute fuzzy bunny Both. Some people might stick to their plan even when they were spent down considerably and just adjust their spending to suit. Some might react and do stuff that works out either more or less favorably, probably at a rate of coin flipping. Some might go back to work. Having already stuck my foot in a bear right on retirement (2000-2003) I cut my spending and if it'd gone on for a couple more years I'd have probably gone back to work. I dont think I'd enjoy a nice relaxing time in retirement while my investments were going down and/or sideways into 8+ years. But with no debt and adaptable spending, I wouldnt have to go back to the shirt and tie 60 hour grind. I'd probably pick up a few handyman jobs and maybe a part time sales job.

Good to hear from someone that actually survived a downturn using logical courses of action. Thanks cfb.

[Alan]

Quote:

Originally Posted by FinanceDude I just had a thought. If we had another 10 year market like 1973-1982, would that bankrupt a fair number of early retirees, or would they adjust by lowering their budgets and SWR until their portfolios recovered??

Speaking personally, I plan to RE with enough fat to sustain a long financial diet if needs be. Plenty of other folks I know have had to cut back a lot during bad times and I'm sure we would do the same.

[Bikerdude]

Quote:

Originally Posted by FinanceDude I was looking for a human response rather than a software response. FIRE Calc is a great program,but it doesn't always take into effect human variables........

Exactly. FireCalc says you have a 95% chance of success however after your portfolio is cut in half how do you know you’re not in the 5% of failures? I would say it takes a strong will to continue making your 4% withdrawal under that scenario. I know I would cut back .

[FIRE'd@51]

Bear in mind that he is a tenured university professor. Isn't that sort of like being retired anyway?

[FinanceDude]

Quote:

Originally Posted by FIRE'd@51 Bear in mind that he is a tenured university professor. Isn't that sort of like being retired anyway?

A CANADIEN professor, no less..........

[Nords]

Bernstein is no fan of ER either. But then he & Milevsky have certainly found their avocations.

Quote:

Originally Posted by FinanceDude I just had a thought. If we had another 10 year market like 1973-1982, would that bankrupt a fair number of early retirees, or would they adjust by lowering their budgets and SWR until their portfolios recovered??

If the choice was "lower budget, reduce SWR, and eat ramen" or "go back to work", I wouldn't have to invest a lot of thinking on the decision.