You Only Live Once

[RetireAge50]

Thanks for all the great responses! I thought everyone would go for 5.

 

[UtahSkier]

I'm going with #3 as I'm living this situation right now. I just removed 1.5 SWR from my portfolio and purchased a motorhome.


So, now I have a smaller portfolio and a smaller SWR. I expect to have 10 years of expenses just above the new SWR and then have appropriate spending for the following 25-35 years.


This is not really a financial plan... more of a financial concept!

 

[papadad111]

If the 40 years would be guaranteed then I would approach very differently from "there is a chance we will need it to last for 40 years". That darn time variable is impossible to predict.

So... Back to reality. I guess I seek a withdrawal rate that maximizes fun and minimized stress of running out of money. Whether that's a cool million to blow in the early years or a safe withdrawal rate will probably change day to day based on many factors - health. Economy. People around me. My age. And my post FIRE confidence. Etc etc.

I think generally someone who reached 4M net worth had sacrificed to get there and probably will do themselves a disservice by NOT splurging a bit on a few "nice things" in life be it toys/travel/giving or what ever makes you super happy inside.

Personally I am having problems letting go of my cheap and miserly habits - Worse now post fire. Debated whether to get extra stuff on my burger last night. Driving a 21 year old Subaru with dents all over and such as my daily driver to keep the miles off the newer car. Maybe it's because I am in early days of FIRE still and filled with anxiety over whether or not we have enough.

So for now I would land in the very safe withdrawal camp ... And trying to get the Withdrawal rate down further... I would not blow a million. Maybe 50-100 grand to fix up the house get a newer vehicle or do some travel. Keep balance is key..

But it would suck if I dropped dead today not having ever owned a new vehicle, for example, or visited a few places that are on d bucket list.

I keep reminding myself of that.

 

[Andre1969]

Probably a combination of #2 and #3. If $4M fell into my lap, I'd go ahead and buy my dream house. That would be my big splurge, although it would be less than $1M. And afterwards, I'd spend whatever I felt like from year to year, rather than a consistent amount, although I'd keep an eye on the total amount, to make sure I didn't blow through it like your stereotypical lottery winner.

 

[FANOFJESUS]

Why would that be better than giving a smaller amount of a smaller income and still living like a king? Just curious.

Well it would be the same but I don't have 4 million. So the church's share would be much bigger. With 4 million I am sure I could double my tithe with no problem.

 

[ChicagoGal]

#3.

First year would be bigger (I've already planned in my head the cruise I'll take the entire extended family on when I win the lottery....), so shades of #2, but after that it would totally be whim-based, within limits.

 

[FUEGO]

I'd go with #3, which I would consider to be about the same as #4.

I think spending 4-5% of $4M or whatever is left each year is very sustainable. Even if I spend it down or the portfolio drops to $2M, I could probably make do on 4% of $2M ($80k/yr).

At 5% of $200k, I honestly don't know what I would do with all that money since we live on $32k/yr or so right now. I guess I could stop looking at price tags? I'm pretty sure we could travel around the world for a year very very comfortably on $200k assuming we stayed in one place for a while (which would be a requirement anyway given my distaste for spending multiple hours inside an arid metal tube with 17" of personal space).

But would we even want to trot the whole globe for a year? We could marginally afford to do so now (with more budget travel options) but choose not to (as FIREd says about his plans to buy the $1M CA house).

 

[Whisper66]

My plan:

Starting with (1) for at least first year of retirement. We have 4-5 yrs of good data on what I THINK we will spend in retirement but want to confirm those values using actual retirement data. Just retired so this will be our first year of real data.

Assuming that our expenses are what I think they will be, we have enough saved to splurge on things. So for year 2 of retirement, I plan to set aside a chunk of funds to splurge on things when we want. We aren't huge spenders so probably won't be a whole lot of stuff at once. More likely things like: get a new car when we really want rather than me working like a dog to keep things running, spend more on trips we go on, give yearly gift to kids to help encourage them to save, invest and get FI eventually (thanks Dad for doing this with me!).

 

[Totoro]

Spend 200k in the wildest dream category. Set aside 2M to live off.

The rest is money to invest in strange ventures or fund other people's financial independence.

 

[robnplunder]

#3, but I am tempted to do #2. I want to flop down $1M for one hand of blackjack at Las Vegas. Win or lose, I stick to #3 afterward.

 

[sengsational]

#3, but I am tempted to do #2. I want to flop down $1M for one hand of blackjack at Las Vegas. Win or lose, I stick to #3 afterward.

Blackjack is the wrong game for one hand...some of the player edge comes from the various moves over many hands. The best bet would be the "don't come" box. That would also give you someone to hate or love, depending on who was throwing.

I'm going with 2. I'd say the answer depends on your current assets and what you are living on now. The duration of 40 years is nice to have nailed down. If you started with assets that supported $25k/yr spending vs assets that supported $100k/yr the answer would be different.

One thing I wouldn't do is get into the "lottery winner track" of buying stuff that costs a lot to keep, and is hard to get out of, like a mansion on the coast. But I picked 2 to buy awesome experiences, but with the idea of not having my day to day life change too much. I certainly would plan to spend more now, in my fifties, than later. So maybe theres another numbered answer that fits for me.

 

[MuirWannabe]

It's fun to play hypotheticals.


I'd choose option 2. But as several others have said I'd blow it with much less than 25% of my overall stash. Still, 5% of $4 million could deliver a pretty memorable time. And I'd blow it on experiences. Not stuff.


Muir

 

[truenorth418]

I'm planning on 40 more years to live, but I don't have $4 million. If I did I would consider buying a nicer, larger residence than the one I have now for $500k to $750k and live of the rest.

I guess that's 2 to start with, followed by 4.


Sent from my iPhone using Early Retirement Forum

 

[karluk]

I would most likely buy a vacation home, either in a warm location for winter getaways or in Europe for a base of operations for our vacations there. Perhaps I'd have enough to buy both. That puts me closest to your option 2, but I don't really think it fits very well. Your description of makes it sound as if I would be blowing $1 million on frivilous spending, but vacation homes should retain their value and even have potential to appreciate.

 

[MBAustin]

#3

 

[younginvestor2013]

Since I (could) live another 65 or more years, I would splurge on very little and withdraw a conservative 2.5-3% every year. I would find meaningful activities for my day-to-day schedule, and I would not focus on earning money. Even if I only withdrew 2.5% a year ($100K), I could live extremely comfortably. If I were able to supplement it with say $20-30k of income from work I enjoy or am passionate about, I could even live more comfortably and not touch my nest egg.

At the end of the day, I would be able to focus on every other goal in life besides accumulating money and paying for my day-to-day life, which largely takes up most of my time in life right now.

 

[LitGal]

#4.

My estate is already set up so that at least 40% goes to charity, the rest to DS and his family.

With the windfall you describe, I might raise that to 50-60% charity. Figure that's my chance to fund some improvements on the world, with the satisfaction of knowing I get to pick some charities who have proven just how much "bang they can get for their buck."

A great feeling---- knowing that some of my choices can benefit others, without me even having to show up to ensure that it happens!

 

[timemoveson]

If you had $4,000,000 and 40 years to live would you:
1. Plan to spend about the same per year
2. Spend a $1,000,000 on your wildest dreams and then go with 75% of option 1.
3. Spend variably based on your energy/desires at the time (knowing the decision changes future spending).
4. Stick with a safe spending level. Maybe spend more later or give it away.
5. Another plan. This is the dumbest question ever posed.
I have always planned for option 1 but am now thinking 2 or 3 makes more sense.

Great hypothetical. Except it isn't. That's me, very shortly, at about $6.5mm and early 50's. So how to answer on a whimsical Saturday afternoon before going out tonight with DW and friends?

I have to say I am planning carefully for #4 of around 4% and not touching the capital, which should continue to grow nicely over time and not concern me with respect to yearly market ups and downs. About $2mm of it is already invested in the homes we want and there is really nothing else we want that we don't have.

Good problems to have I'm sure you'd agree.

But, as I've told interested people in recent years, in general terms, you still need to have a plan and discipline to ensure you keep what you earned for your lifetime, and meet your intent to pass it on, gift it, or whatever. The amount doesn't really matter past a point, you can easily still blow it on "red" if you aren't careful. I've seen it. It isn't pretty.

 

[MooreBonds]

This is a very interesting question (to me, at least).

In all honesty, before I read this thread, I would assume that I would stick to #1 or #4 - a WR of about 2.75%-3% on the full portfolio (assuming retiring at 45 +/-). My projected portfolio would hopefully be a little north of $3, assuming nothing about the unknown future Mrs.

But reading the other responses and the OP's question, it's funny how my view is starting to lean more towards a modified #2, with a bigass splurge (or much higher annual spend) over the first few years of retirement, then a 'safe' 2.75%-3% on the smaller portfolio amount, as it would give me a huge amount of amazing experiences, and still allow me to plan tons of more fun activities on a budget that would fit in my smaller annual spend level. (and since I know how to shop around for good bargains, my bigass splurge would contain a long list of amazing activities.)

 

[audreyh1]

A variant of #2 could be to set 1/4 aside for splurges to be spent down over the first 10 years.

I guess that is really the same.

Just be careful about blowing a large chunk of it on something that adds a lot to annual expenses for upkeep and maintenance. Some things that cost a lot up front are also expensive to own.

 

[NYEXPAT]

If I had 4 million and ONLY 40 years left to live?
1. Dump the wife (check)
2. Now I got 2 million (Check)
3. Move to SA (check)
4. Marry a beautiful young girl (check)
5. Invest in RE (check)
6. Got my 4 million again (check)
7. Have a few Son's and enjoy life (check)
8. Apparently the doctors were wrong as i feel great.
9. Crack open another bottle of Jack Daniels and thank the "Whiskey Gods"!