Waiting on the SWR

[arrete]

I wonder how many people have been too discouraged to FIRE because they thought that their SWR "had" to be a certain percentage. It seems to me that unless you are at a bare-bones budget already, there are plenty of ways to change your spending which in turn changes your SWR. The gummy approach and/or the high-medium-low budgets that have been mentioned.

I guess what I'm saying is that trying to nail down "the" SWR is fruitless and meaningless. Nobody has exactly the portfolios that are looked at when examining historical SWRs and nobody knows the future. "Switching" schemes or mountains of rhetoric aren't going to change the fact that the rational individual will develop her own analysis, factoring in personal risk, personal inflation rate, obligations, etc.

My take is that you get a ballpark idea of what your assets can churn out for you over a reasonable amount of time. Whether you look at history or do Monte Carlo simulations, the number you come up with will be inaccurate. It may be low or it may be high, but there is no way to know what it really is until your 30-40-50 years have passed by and you can look back (hindsight is always 100% ). So why waste time and bandwidth dithering about tenths of a percent?

Almost everyone who has FIREd has said they didn't do it soon enough. I personally would do whatever it takes not to go back to work, including downsizing my house and living on mac and cheese. The first step is the hardest and making SWR the make or break deal for FIRE doesn't do any service for the beleaguered working folk.

YMMV

arrete

 

[sgeeeee]

I wonder how many people have been too discouraged to FIRE because they thought that their SWR "had" to be a certain percentage. It seems to me that unless you are at a bare-bones budget already, there are plenty of ways to change your spending which in turn changes your SWR.  The gummy approach and/or the high-medium-low budgets that have been mentioned.

I guess what I'm saying is that trying to nail down "the" SWR is fruitless and meaningless.  Nobody has exactly the portfolios that are looked at when examining historical SWRs and nobody knows the future.  "Switching" schemes or mountains of rhetoric aren't going to change the fact that the rational individual will develop her own analysis, factoring in personal risk, personal inflation rate, obligations, etc.

My take is that you get a ballpark idea of what your assets can churn out for you over a reasonable amount of time.  Whether you look at history or do Monte Carlo simulations, the number you come up with will be inaccurate.  It may be low or it may be high, but there is no way to know what it really is until your 30-40-50 years have passed by and you can look back (hindsight is always 100%  ).  So why waste time and bandwidth dithering about tenths of a percent?

Almost everyone who has FIREd has said they didn't do it soon enough.  I personally would do whatever it takes not to go back to work, including downsizing my house and living on mac and cheese.  The first step is the hardest and making SWR the make or break deal for FIRE doesn't do any service for the beleaguered working folk.

YMMV

arrete

Well said, arrete. I've always known that the thing I felt most uncomfortable with in planning RE was my wild-assed guess of what my future budgets would be. I could probably be very happy spending half or less than I planned for or I could be very happy spending significantly more. And I knew that my spending varried significantly from year to year. Why would this change in retirement? If my budget in retirment plan is + or - 75%, why worry about SWR + or - 0.2%?

 

[unclemick]

When I was layed off/ER'd in 1993 - the rule of thumb was 16-18 $/ each dollar of income needed from your investments. Times change. I think SWR should either be trashed or taken with a huge grain of salt. Or only used as a limited metric within the context of the data set it's run in.

After eleven years of ER - I think YMOYL method of income/expense lines is better - EVEN THOUGH they blew it on inflation. Nobody's perfect.  

 

[John Galt]

Well, I don't think we should "trash" SWR. I don't follow
one but I think it is an interesting concept. Re. YMOYL,
it's a classic of the genre, but other tomes are worthy as well. Frankly, I mostly use what makes sense to me,
meaning what I am comfortable with. Of course, I have
a financial background, so in my case it is pretty
effortless.

John Galt

 

[JonnyM]

I am in such incredible over the top agreement. The obsession with SWR in some of the threads, and in particular with a one (two?) posters borders on the bizarre. No, it's well past, it's truely surreal. It seems to feed off the insecurity of those that worry about percentages of percentages.

Pick a number. Step up to the plate. ER. Adjust expenses as needed to maintain reasonable lifestyle. Survive the slow economic times, thrive when it booms again. Or average it out if you're the guy in the "Queen" song, and like little highs, little lows. But if it's your destiny, the by all means ER. Think Nike, Just Do It.

The point is don't spend so long planning the trip that you never get started. There is no sure thing, but don't plan it so secure that you miss out on the fun of the journey.

JonnyM - "easy for me to say, still working, wife is ER"

Tick tick tick, target date 3 years, at age 52.

 

[John Galt]

52 is good. Sooner even better IMHO.

John Galt

 

[arrete]

I think SWR should either be trashed or taken with a huge grain of salt. Or only used as a limited metric within the context of the data set it's run in.

I think this was always the intent. Others may have dragged it out and claimed that it should cover all possibilities; but I don't think any reasonable person (and I'm crazy enough to include intercst among these) would deny that it is history, it is based on history, and, well, use it to make your own decisions as you will. Nobody is going to go back and change the history (unlike edits, which I find scary).

I wonder how one would correlate changes in SWR and changes in budget. I guess I have to think about this after dinner. My turn at cooking

arrete

 

[arrete]

Pick a number. Step up to the plate. ER. Adjust expenses as needed to maintain reasonable lifestyle. Survive the slow economic times, thrive when it booms again. Or average it out if you're the guy in the "Queen" song, and like little highs, little lows. But if it's your destiny, the by all means ER. Think Nike, Just Do It.

I love it! Well, said.

Back to the pork roast.

arrete

 

[BUM]

Arrrete,

My right brain says YES. Whats important is the RE road. If one chooses the high road or the low road... thats up to the individual. Pick your own WR . "S" or otherwise.

A marketing mentor of mine always said that if you wait until you are 100% sure of your path, you probably waited too long.

But my left brain just loves to crunch those numbers.

I have a good braim.

PORK ROAST? A far cry from mac and cheese

BUM

 

[dex]

Excuse me it this doesnt' make much sense - I'm on my third glass of Reisling - $6.50/bottle.
My goal is to retire at age 50 - next year with about $1.2m in investment money excluding a home of $280K - no debts - I'm single - penson of 13K at 61 and SS at 63. The fear/concern is to live the lifestyle I want from 50 to pension & SS.

Believe me when I say I never thought I would have so much money. I think this money came from saving not investing. In other words, I understand that based on past performance you can project potential future earning but I don't think my wealth came from asset growth. The concern is that I will not be able to get the return to have the income I want.

Yes I can retire on much less but I'm thinking of the quality of life here. My current estimate of what I would like is $45K after taxes for the way I want to live.

A quick idea of what I'm thinking is $20K to take care of existing - food, clothing, taxes, gas, health insurance, misc items. The other 25K is for travel, education and other areas of enjoyment.

I can live on the $20K (and I do while working), but is life about existing or growing, enjoying and giving? The $25K is for that part of life and that is the part of my income that I'm unsure of.

There isn't a simple answer for everyone. I believe that if you know how a person if you how they thinks about money or sex.

The bottom line is that the early retirement question is not so much about money than it is about the balance between love and fear. When love of what we want to do (live) outweighs what we fear; we will retire early.

Will I retire next year? I'll keep you informed. As each day passes the more I believe it.

 

[Nords]

"It's good to have choices."

(Apologies to Mel Brooks, who'll probably never ER...)

Dex, I agree that more ERs have been created by saving (and by low spending in ER) than by brilliant investing.

But if you have the first two, then you can do without the third. If you can live on $20K/year, then you can ER and decide if you want to spend more that year. You can also decide if you want to work for the spending cash or just defer your spending until your portfolio has a socko year. I know a couple who live on their military pensions and bag groceries when they want to splurge for luxuries. That makes it pretty easy to tell the "needs" from the "gimmes".

The point is that the decision is in your hands when you ER, but if you're working full-time then it's in your company's hands.

On of the biggest regrets expressed on this board by ERs is "Gosh, I wish I hadn't waited so long." So if you feel that you're leading a life of quiet desperation at work, you're probably right. Many ERs have retired on smaller portfolios and I believe they're spending more than $20K/year. You won't know how you're doing until you've tried it, and hopefully you won't regret waiting until your fear drops...

 

[unclemick]

(heh, heh - apologies to Ronald Regan and 'The Big Fella Upstairs')

If the fickle finger of fate hadn't seen fit to lay me off at age 49 -- I can picture myself still working away - trying to get my 1.3 mil at age 63 - so I could retire 'early'.

The mental hurdle is a biggie for many and during the first year I was 'unemployed' until my brain shifted to ER.

Ten - going on eleven years so I tend to forget it's more than just 'running the numbers'.

 

[dex]

Thanks Nords,

"So if you feel that you're leading a life of quiet desperation at work, you're probably right."

I think you are refering to Threau's Walden here.
"The majority of men live lives of quiet desperation."
I just finished listening to the the book and I would recommed it to everyone thinking about retirement. It does put in perspective what is important and the importance of a simple life and education.

My retirement goal is May of next year. I'm trying to get everything ready.
Health check ups - hart , colon, dental, getting the house ready for sale - etc

 

[cute fuzzy bunny]

I wasnt really planning on staying ER'ed, I just figured I'd take a year and see how I liked not working.

You can ALWAYS go back to work, sometimes at the same place, sometimes for a better job at the same place, sometimes for more money and a better job at the same place.

Four years later...apparently I did like not working...

 

[Nords]

Bagging groceries for fun & socializing.

GDER,

I agree, but it seems to work for them. One's a retired Navy O-3 and the other's a retired USMC CWO4. The O-3 is a legit commercial artist who sculpts and carves and has been supplementing the military pension for 15 years at art galleries & shopping malls. (I wonder someday if our small tchotchkes will show up on Antiques Roadshow or at Christie's.) The Marine could still wear her dress blues and is a testament to lifelong fitness-- she looks quite sweet & innocent but she could snap my spine like a dry twig.

They're doing fine financially-- own their Texas home, no mortgage, frugal & low-key by habit vice necessity. They retired in the Reagan years-- before the TSP and before the big pay raises of the '90s. They're covered by COLA'd pensions & military medical, of course, and in a couple years they'll be collecting SS. I don't think they're suffering from inflation erosion or tech-stock losses.

They've tried other "entertainment employment" (but the grocery bagging really stuck in my brain). Both are licensed customs inspectors; they fill in a couple weeks a year (holidays & vacations). They literally tried being Wal-Mart greeters until one of them was nearly flattened by a 400-lb shoplifter. IMO they think bagging groceries sucks too-- that's how they decide if they're willing to "earn" those fantasy vacations and big home-improvement projects. To them it's a series of poignant little reminders of why they're ER'd in the first place.

But you won't see me smiling at you over your groceries at the checkout. And I tip baggers 4% just to make up for our fellow veterans who think 50 cents is plenty. Of course, the sales tips I pick up from the baggers has saved me far more than I've tipped the baggers...

 

[Billy]

We just posted an article on our website which addresses some of these issues. Titled: ER as a Lifestyle Check it out.

Akaisha
WEBSITE www.geocities.com/ba264

 

[BarbaraAnne]

Thanks Billy and Akaisha for your inspiring website and essays. We are both about 50, and as soon as our youngest finishes school we will unload our suburban home (the "money pit") and explore the world like you and the Terhorsts. Parenting has been very rewarding, but we are ready for adventure!

 

[Billy]

Hi BarbaraAnne,
Thank you for visiting our site. We wish you both the best in fulfilling your ER dreams. With some solid planning and the willingness to be flexible to change, your new lifestyle will be most rewarding.

Money is a significant ingredient to ER. However, one's own attitude coupled with self knowledge is invaluable.

Good Luck!
Akaisha
WEBSITE: www.geocities.com/ba264