Safety Margins

[Hyperborea]

To carry on the whole flexibility beyond the SWR, what about safety margins?  What kind of safety margins did those who FIREd have?  How did they work out? What safety margins do you wish you had?

What safety margins do the FIRE wannabes plan on having?

I'll start as a FIRE wannabe still about 7 years from RE.

1) I'm planning to retire with with a couple of hundred thousand US$ beyond what a SWR calculation says.  This is potentially for the retirement house after we stop travelling.  If things are bad though we can delay or forgo the purchase.

2) Portfolio is well diversified beyond the S&P500 / US CDs.

3) I'm not counting US SS or Canadian equivalent in my planning calculations (about 15-20 years after retirement to be able to start collecting).

4) Variable withdrawal system that will give a fixed base plus a topup based on portfolio performance (see gummy's "Sensible Withdrawals").

5) Variability in my retirement budget that will just vary how/where we travel.  3 months on the trans-siberian express stopping out in lots of little towns or 3 months in Western Europe?  Depends on the returns.

6) Professional skills will still be reasonably marketable on a contract basis for a number of years after FIRE though with a likely declining remuneration.

7) Plans for backup jobs that could bring ~$10-20K / year without too much hassle or stress - guided travel tours for well off boomers to "exotic" locales, music instruction, translation services, etc.

 

[unclemick]

After eleven years of ER - I take a barbell view: ala YMOYL make sure your income line is north of your core expense line. To the extent that it's north - that's the fun part of ER.

1. Core - day to day living plus maybe some reserve buckets for car/house stuff etc. My rule of thumb - if my income didn't cover this - I'd have to get a job.
2. Lagniappe - all the extras - travel, entertainment, hot rod cars, fishing, toys, etc.

Between 1. and 2. you can play all sorts of games. I still recommend digging out Dory36's old post - 33% That's my story. Practicing 1. while working is what you are in effect doing as you are saving for ER. Understanding your income streams - will give you confidence to overcome the mental hurdle and make the leap.

 

[John Galt]

I agree. Dory's "33% that's my story" is a must read
for all ERs and ER wannabees. But, Paul Terhorst is still
my ER guru.

John Galt

 

[TheOtherFrankSinatra]

I just shot for a 3.5% instead of the 4%. A guy named William Bengan did a Trinity-Like study and determined taht 3.5%+inflation would last something like 70 yrs and that's about forever. In actual practice... I;m doing about 2.5% so I am looking good

I did an audit of ALL previous life's emergencies. They didn't amount to all that much. Mostly car-related and travel related stuff. And even that crap is a lot less likely to happen now because all those emergencies were somehow related to having a job. Another job-related expense dispensed with!

I took right off the top the cost of a new car. I know I'm gonna need one someday. I put that in I Bonds to help retain it's buying power

I Also took right off the top about 50 grand in emergency funds. I havent had anywhere near that much emergency spending in 30 yrs. I think I can get by for another 30 as long as I dont spend it all at once

So my "Annuity", grub steak, investments needs ONLY to throw-off annual beer and preztles money, plus amusements. What else is there to spend on?

 

[JonnyM]

The Plan:

Work until I can achieve a sure income that I expect (hope, pray, think, pretty sure, should be enough, going to have to be won't it) will sustain DW and I for the next couple of hundred years should we live so long. Pretty simple. Once I commit (DW is already ER) I will obviously have to insure expenses to not exceed income. I don't have a 'safety margain' so to speak, I prefer to think of it has a Fun Fund, the investment part of my portfolio that is not fixed, but is also not counted on for living expenses. Depending on this funds success will determine the extent of our travels. I'm hoping for trips to Europe and such based on these returns.

A decade after ER when we hit 62 and SS kicks in with that little stipend, we can use that to replace/enhance/recharge the Fun Fund. I'm hoping for about 24K total for the two of us conseratively.

To sum up.

1. Work until I achieve a Inflation Adjusted Pension that I can live with (about 40% at age 52 in 3 years)
2. Enjoy added benefit of permanent fully paid Medical benefit plan (DW has same deal)
3. Use minor 457 plan (should end up about 100K) to fund some extra fun trips and such.
4. Consider SS as a nice windfall to be realized in 10 years of ER time.
5. In the end. we get what we get, so we have no choice but to live with our means. We have picked a modest lifestyle that outside of toy acquistion we are living now.

Should Work.

 

[arrete]

For those like me who couldn't remember all of dory36's post on 33%, here it is

http://early-retirement.org/cgi-bin...s_board;action=display;num=1033641894;start=9

Otherwise, I'm pretty much like Hyperborea said, minus any inclination to go back to work. I'm 6 years retired now, so between that and the fact that I'm getting older, a new job doesn't seem likely.

There's lots of stuff I could cut out, like bird rehabbing, which is fairly expensive (I've bought several hundred dollars of mealworms this year). Last resort would be selling our home (we have a double lot). We could get $$$ just for the land itself, since they would tear down the house and put up 2 in its place. That really is last resort and is not part of our retirement analysis.

I was saving for a new car, but my mother-in-law sold me her '92 Honda Accord stationwagon for $50 because she wanted a Prius, and at 84, she figured she better get it now. It kind of balances out the tooth implant I wasn't expecting (boy, are they expensive).

arrete

 

[Ol_Rancher]

arrete

I taught middle school science and raised my own meal worms ...

get a one gallon glass pickle jar, fill with wheat meal, add worms (say 30 or so) ... for water put in a baby food jar with a small wet paper towel inside (no top to baby food jar) ... the small jar prevents the moisture from spoiling the meal... tip over baby food jar on surface of meal ... worms will find the moisture ... after a few weeks you will have worms (larval stage, beetles (adult stage), white dormant pupa

change wet paper towel after each 3 or 4 days

You can raise thousands in a dozen such set ups...

Note: mealworms - tenenbrio molitar -f ound in grain silos of ancient Egypt ... no record of them, fossil or otherwise until man stored grain

 

[Hyperborea]

1.  Work until I achieve a Inflation Adjusted Pension that I can live with (about 40% at age 52 in 3 years)

The pension with cola provides a minimum level of guaranteed imcome that using a portfolio and SWR doesn't. You do lose out on the possibilities of big returns but that may be worth it. The level of planning for this kind of retirement appears to be less and the needs for backup smaller. The only big concern would appear to be if the payer went bankrupt which isn't too likely with a government (does happen though - e.g. Orange County - what happened to their pensions?) However, few of the late boomers (you) or the early gen-x'ers (me) have a pension unless they are government and the numbers are continuing to drop.

 

[Hyperborea]

Otherwise, I'm pretty much like Hyperborea said, minus any inclination to go back to work.  I'm 6 years retired now, so between that and the fact that I'm getting older, a new job doesn't seem likely.

Oh I'm not planning on working I just have some ideas for backups in case things fail. Mostly as part of working this stuff out with my wife - i.e. "what happens if this fails" type discussions. I'm planning to retire in my mid-40's so I won't be "old" for at least a little while after retirement so getting a job, especially a temporary job, might not be too onerous if it keeps me mostly retired.

If things turn bad during the first couple of years I could probably pick up reasonably high paying contract or temp jobs in my field (either in my specialty or in more general computer software work). If we have problems more than 3-4 years out then there are still the less lucrative contract software jobs out there that could fill the gap. Once you start pushing much beyond 7-8 years then using my skills again will be harder depending on the kind of contract, how much I've been doing for hobby stuff, and how much things change (i.e. when will the next C, C++, Java, etc. come along and knock these out). I could potentially even do some of this work on site in some emerging country as we travel where the company would be perhaps happy to get an "expert" (I've worked at some of the companies that developed the technologies lots of people use).

The other ideas are fill in the gap ones that won't require too much stress but could be used to save a losing portfolio or to top up our spending if the "variable" portion of our withdrawals doesn't come up to what we would like to spend. We'd have to make the tradeoff decision at that time.

 

[arrete]

raised my own meal worms ...

Actually, during the non-summer months, I do raise meal worms, just in case I get an injured insectivore.

In the summer, however, I'm using 10-20 thousand a week. I don't have room to raise that many, and I need big ones for robins, etc. The group I work with does pay for some, but not all. Robins can plow through 10K worms in no time. And I've had over a 100 worm-eating birds in the last 2 months.

People do weird things in retirement...

arrete

 

[unclemick]

Weird things? - isn't that the point - ER = freedom to do what you want?

 

[Cut-Throat]

As far as work goes, now that I've been away from it for 3 years - I could not do it again. Not even part time.

I used to think that would be my fall back, if I needed one. - I have heard once you leave the workplace for 18 months - It's over. You're retired

 

[John Galt]

Yep Cut-Throat, it would take an event of Biblical proportions to get me to do any "real work".

John Galt

 

[unclemick]

They say - never say never. BUT after ten, going on eleven yrs --WORK!!!! never. heh heh heh.

 

[John Galt]

Well, gee Cut-Throat, that applies to almost any
activity of life, don't you think?

Believe I posted before that if I was FORCED back to "real work" it would be in real estate investment
(including some landlording). Not everyone's cup of tea for sure. Anyway, even if I felt like working for some
reason, it's a bad idea for me. As an extreme Type
A, I can make work out of the most harmless
pass time. Anything I do, I tend to overdo. Thus,
any work and it would shortly be "Damn the torpedoes, full speed ahead!" By the way, a relative of mine said
that originally. There is a prize if you know who and bonus points if you know when and where. Prizes
to be revealed later of course

John Galt

 

[Cut-Throat]

Well, gee Cut-Throat, that applies to almost any
activity of life, don't you think?

Yes, I do and that is why I think we are here, instead of at work

 

[Jarhead*]

Jarhead, I've been on more guided fishing trips than anyone I know. And my firends that I fish with are also guides in all parts of the world.

- All it takes is one *******, and the fun is over! - Trust me!

BTW - If you want to read a very good piece on Guiding Cand being guided - Chapter 11. The Author is John Gierach and the Book is "Sex, Death and Fly-Fishing" - You'll love it

Cutthroat:

If my post was interpreted by you to be an endorsement for guide service , as a possibility of part-time work, I failed miserably.
Jarhead

 

[Nords]

Oh, c'mon, John Galt.

I don't even have to crack open my Naval History 101 textbook.

Admiral David Glasgow Farragut at the Battle of Mobile Bay.

I did have to look up 5 August 1864.

 

[John Galt]

Man, that's impressive! Even I didn't know the exact
date, only the year. BTW, for you history buffs, they
were not torpedoes, but floating mines. Anyway,
congratulations and your prize information will be
posted soon

John Galt

 

[Cut-Throat]

Cutthroat:

If my post was interpreted by you to be an endorsement for guide service , as a possibility of part-time work, I failed miserably.
Jarhead

Well, it kinda sounded like that. - I read your post again and you seemed to hint that one could find something that you could make money on that was more enjoyable than work. -

My point is -that once money has been exchanged the activity becomes a four letter word - WORK.

BTW - If running out of money is one of your primary concerns, you've got it made in this life. - I won't elaborate on this.

 

[BUM]

Beware: another cocktail hour post

Cut-Throat,

To hijack a phrase "megadittos"! Once out of work, I cant imagine I'll ever work again. Especially doing crossover work. That is charging or getting paid for doing something you love to do. My neighbor is a devoted surfer and recently started selling surfing lessons. I talked to him about it and it seems to work fine for him... no judgements here.

But for me pleasure and work are mutually exclusive. The further apart the better. Makes for an better prespective.

However if facing starvation, I could work.


BUM

 

[John Galt]

Re. "megadittos", Rush Limbaugh is a guy who has faced a lot of trouble. He promised to be
"host for life". I hope he keeps his promise but I
doubt it. The guy has already gone through several
firings (including the ESPN fiasco), rapid onset total deafness,
drug dependency, and now a divorce. I've got to tell
you, I wouldn't blame him if he took his bazzillion
dollars and played golf.

John Galt

 

[cute fuzzy bunny]

Eh, I'd go back to work if this sitting around all day stuff became too monotonous, I started running out of money, or the economy fell in a very deep hole.

I wouldnt like it at first, but I'd bet in a few months I'd be plugging away like before.

 

[Hyperborea]

Eh, I'd go back to work if this sitting around all day stuff became too monotonous, I started running out of money, or the economy fell in a very deep hole.

This was exactly my point. The go back to work fall backs are at the bottom of my list. If however, my portfolio dropped to half the year after I retired then I would be looking at some contract work to pay the current bills and leave the portfolio alone or maybe even add to it. If it was 10 years after retirement and I took a hit of 20% I would probably just tighten the budget, do some reallocation, and perhaps live off the fixed income portion for a year or so. Most of that in fact would be taken care of by the fixed+variable system.

 

[unclemick]

If my portfolio fell by half, I'd salute the Norwegian widow, reread page 108, on Mr Market in my Ben Graham, check the SEC yield of my portfolio (should take 5- 10 minutes) and get back to ER. I suffer from the illusion, a 50-60% drop in the S&P 500 should be 'a planned possible event' in todays market environment. Bernstein, Bogle, or Ben Graham - take your pick - they understand 'Markets Fluctuate'.