When you have enough?

[Markola]

Quote:

Originally Posted by racy +1 I had a similar thought: Subtract annual guaranteed income (i.e. pension, SS) from annual expenses. Take that result X 33 and that's your number. YMVM

Yes, agree that these are the kinds of major factors that blow a simplistic 4% rule or whatever all to heck. Also the TIMING of such factors makes a big difference to one’s portfolio value. I like the Personal Capital Retirement Planner for the reason that it accommodates every anticipated cost and revenue one can think of, as well as their timing, plus the graphic displays of the data are clear and attractive.

[mrfeh]

Quote:

Originally Posted by Go-NoGo I recall a posting saying that Firecalc updated its recent market data, does this include the great recession of 2020 data in its models?

Won't make a difference if it is included. Equities are near where they were at the start of the year.

[big-papa]

Quote:

Originally Posted by samcat How do you know when you have enough to retire when the stock market is so wild? Even with diversification, it is crazy. I think we have plenty but as March showed us, one could lose tens of thousands of dollars in one day.

If you're not comfortable with the wild swings of the market, you can always change your AA to be more conservative. That of course also means that you're giving up potential returns and your withdrawals during retirement may be reduced. Everything's a tradeoff and absolutely nothing is guaranteed.

I will be using an approach called "Time Value of Money" which was described over on bogleheads. It's a variable withdrawal approach that not only uses what's in your portfolio, but also the net present value of any future income streams (such as Social Security, if you're delaying it). At any given time I have my first year's withdrawal calculated. I also know, historically, what the average withdrawal was and the worst case withdrawal was. I add some margin to that and as long that number is above my expenses, I consider myself to have "enough". It does require some spreadsheet savvy-ness, though.

Described here: https://www.bogleheads.org/forum/viewtopic.php?t=274243

If you dig through the thread, there are some links to some example spreadsheets.

Cheers,
Big-Papa

[teetee]

Stop being dramatic if you don't sell there's no loss.

[ShokWaveRider]

When you have "won the game" based on your own measurements of a comfortable retirement. That is what we did. We do not invest in the stock market anymore and still have more than we need.

[COcheesehead]

Quote:

Originally Posted by teetee Stop being dramatic if you don't sell there's no loss.

You do, though. If the asset’s value has dropped, you no longer have the original value. It’s still a loss. You may have the same number of shares, but not the same value.

[OldShooter]

Quote:

Originally Posted by COcheesehead You do, though. If the asset’s value has dropped, you no longer have the original value. It’s still a loss. You may have the same number of shares, but not the same value.

Certainly true from an accounting point of view. The portfolio is marked to market.

I prefer to think of it, though, as some of my money being temporarily unavailable. In history, the market has always come back. So as long as I have SORR handled with my AA, I am relatively unconcerned. Just like @swakyaby, in post 23.

I think the people who get most spun up on market dips are mistakenly thinking/fearing that their money is permanently gone.

[Car-Guy]

Quote:

Originally Posted by ShokWaveRider When you have "won the game" based on your own measurements of a comfortable retirement. That is what we did. We do not invest in the stock market anymore and still have more than we need.

Similar to what I've done with "bucket 1". I retired almost 10 years ago with zero debt. I allocated 2m in fixed income investments at that point in time (bucket 1 - or my safety net). Then I've been using the rest of my cash (bucket 2) for my on-going living expenses, hobbies and playing the market. Hey, you never know... The way it looks now, almost ten years into retirement, I may never need to touch bucket 1 unless the whole thing falls apart or I get really sloppy with bucket 2... It's working for me but YMMV....

[Navigator]

Before I retired I analyzed my finances every way I could, using Firecalc, Monte Carlo simulators and modeling ‘what-if’ scenarios. I looked at social security claiming strategies, scrutinized different longevity tables and closely looked at expenses. I did 10x as much analysis as was necessary because I was terrified of not “earning” money. As a result, though, I don’t worry about market variations because I know what I should do over a wide variety of market conditions (usually nothing!).

I would say that you are ready to retire when you know what you would do under your worst-case scenarios and feel comfortable with that.

[phil1ben]

The proper amount needed to retire is always:

TWICE WHAT YOU HAVE.

Regardless of Net Worth it is always a decision regarding the future which involves factors that you cannot precisely, or perhaps even accurately, determine. So there will be a risk. The alternative is to work until you die.

[Markola]

Quote:

Originally Posted by phil1ben The proper amount needed to retire is always: TWICE WHAT YOU HAVE. Regardless of Net Worth it is always a decision regarding the future which involves factors that you cannot precisely, or perhaps even accurately, determine. So there will be a risk. The alternative is to work until you die.

LOL. Also, CUT YOUR EXPENSES IN HALF.

[street]

My feeling is prepare for the worst and hope for the best. In saying that, my plan was to have enough in cash/CD's to live plus SS, so if I lost all in the markets, I wouldn't loose a beat. That was my plan and I'm working that plan now. If everything goes according I should never have to spend a dime from my investments if I choose to do so.
That is how I knew I had enough.
My stash has 15% in CD's which I call cash. The rest (85%) if I lost it, I could still live my life with what I need and be very comfortable. I hope that never happens but I'm prepared for the worse.
Again that was when I felt comfortable and knew when enough was enough.

Good Luck.

[targatom2019]

When you have to withdraw less then 3% a year to live off then you have enough.

[KarlH]

Quote:

Originally Posted by vipertom1970 When you have to withdraw less then 3% a year to live off then you have enough.

I think this is a bit conservative (I really have been planning for several years with 3.5-4% in mind). That said, when I look at the numbers, I calculate 3% and ask myself "could I live off of that?". I am planning a budget of 3.5-4%, but wouldn't be surprised if I found myself living on 3% or less.

[Koolau]

Not to be too flip about it, but I suppose you have enough when you stop asking yourself the question "Do I have enough?"

I went well beyond my 'comfortable-to-spend-4%-of-stash' by w*rking longer. (I actually WANTED to stay as relayed elsewhere.) BUT, when the time came, I didn't even really think about it. Gave my notice (and due to saved vacation) left at the end of the week. Didn't recheck my numbers. I don't recommend this method because YMMV.

[Badger]

During my accumulation years I played with Firecalc and a few other similar programs. I would put in my annual expenses needed (with a little buffer) along with the amount saved/invested at the time without consideration of SS and any small pensions we might have. When the results came up 100% under all conditions then I figured I had enough saved Being a belt and suspenders person I saved a little more after that. Easy Peasy!



Cheers!

[Retired Expat]

Quote:

Originally Posted by samcat How do you know when you have enough to retire when the stock market is so wild? Even with diversification, it is crazy. I think we have plenty but as March showed us, one could lose tens of thousands of dollars in one day.

Run all your firecalc or other Retirement Calculators starting with today’s numbers then at 10% less, 20%, 30% etc. can you handle a 20% fall right at the beginning? Similarly look at your retirement budget, could you reduce it 20-40% if needs be? If you are good after a Crash like we had this year then you should be fine.

Our spending this year will be down 40% for example but we travel a lot and go out to eat regularly. Or we did....

[Retired Expat]

Quote:

Originally Posted by OldShooter Certainly true from an accounting point of view. The portfolio is marked to market. I prefer to think of it, though, as some of my money being temporarily unavailable. In history, the market has always come back. So as long as I have SORR handled with my AA, I am relatively unconcerned. Just like @swakyaby, in post 23. I think the people who get most spun up on market dips are mistakenly thinking/fearing that their money is permanently gone.

Well if your shares were in Sears for example that money isn’t coming back.....

But timing is a an issue here and I agree in the long term or even the medium term you will get back to where you were before the fall. But if you are planning from day 1 and on day 2 lose 30%.... That is different than growing your money for 10 years and then losing 30% in year 10. This pandemic was/is a catastrophic event, like a once in a hundred year storm, which doesn’t mean we won’t have another one next year!

Like earthquakes in California it is not a question of if, but when will the next crash come?

How we prepare for it and the various calamities that we may face is the question? Not a “prepper” living in a bunker but I am sure those folks have a different attitude than most, so we all need to find that level of preparedness that makes us comfortable. How many xtra rolls of toilet paper are you keeping in the closet? That might give you an indication....

[lordjust]

Quote:

Originally Posted by deserat VPW spreadsheet does that in the retirement tab - it shows a hypothetical 50% reduction in the stock portion of your portfolio (you specify your AA) and calculates the decrease to the suggested withdrawal based on that possible portfolio hit. If you believe you can cover your expenses with that decreased amount, you have a high probability of success. https://www.bogleheads.org/wiki/Vari...age_withdrawal spreadsheet is at link...

so line 35 (Portfolio Withdrawal) if the market has crashed and line 14 if things are normal??

[tenant13]

It's really impossible to know since none of us knows what the future brings. I think flexibility is the key: assume that you'll die at 90 but when you get a heart attack (as I just did) shave a few years off that estimation and live a little Hope for the best when it comes to the stock market but be ready to stay at Holiday Inn instead of Belmond during your travels. Count on Social Security but prepare to move to a cheaper location if it gets cut in a half - and I don't mean a shack in the middle of a corn field. There are great options all over the world if you're willing to be somewhat adventurous (clearly that's not quite feasible now).

I wonder if there are RE folks around this forum who look back and say: "I wish I worked 5 more years"....