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-   -   "2.5% is all I need to live on" (https://www.early-retirement.org/forums/f28/2-5-is-all-i-need-to-live-on-32809.html)

utrecht 01-25-2008 06:53 AM

"2.5% is all I need to live on"
 
I just read a thread where a poster said something to the effect of "our pension meets most of our needs so we will only have a withdraw rate of 2.5% from our IRA".

Not to pick on him, as its his money to do with what he pleases, but Im just wondering why people think this way. Im dead center of the LBYM crowd and my savings rate during this accumulation phase is VERY large. It boggles my mind how much my wife and I are saving (while still not feeling like we are sacrificing much)....BUT...the whole point of this for me is to live much more comfortably in retirement.

I have a pension also, and if I retired in my current house, I could live with a zero % withdrawal rate and maintain my current lifestyle in retirement, but why would I want to do that? Initially , the whole point of saving was to make sure I could retire without having to eat dogfood. At this point, I want to live the best retirement possible. I want to move to a nicer more expensive area, travel extensively, have nicer cars, get a boat...ect..

I want to withdraw the maximum amount possible (as per firecalc) and let that determine my standard of living which will be extravagant compared to how we live now as oppossed to continuing to live like we do now and letting my assets grow to millions and millions for someone else to enjoy.

Sure I want to leave money for my son, but assumming that FireCalc is correct and withdrawing 4% will allow you to never run out of money, there will be plenty left for inheritance anyway.

As I said, I live well below my means now so I understand that mindset but I dont understand why people want to continue to do it after retirement.

Thoughts?

JohnDoe 01-25-2008 07:06 AM

I agree with you about living large in retirement. But how can you determine that person is or isn't living it up in retirement?

Maybe their pension is 50k and 2.5% of their IRA is 75k.

theHundt 01-25-2008 07:08 AM

I agree with you 100%. My intention is to live more richly in retirement, partly because I will have more free time to travel and enjoy life without work getting in the way. I imagine money will go a lot quicker without a job sucking up all of my time :-)

Perhaps there are other rewards for living on less. When something doesn't make sense financially, many times there are psychological rewards, or other intangibles. If the whole point is peace of mind and living on 2.5% gives someone more than living on 3.5-4%, then to them it makes sense. I don't get it myself though :-)

LOL! 01-25-2008 07:17 AM

I guess we won't extend the argument to ask why you aren't living larger now instead of waiting later when you retire.

megacorp-firee 01-25-2008 07:34 AM

I respect everyone to be able to decide what their own comfort level is. After years of LBYM and 6.75 months of retirement, I have been watching my DW. We are comfortably traveling right now, but she still has a hard sometimes 'treating' herself. It took a while for us to accumulate this nest egg and while I am in a hurry for some things, I am in no particular hurry to blow the whole wad. But for every time my DW balks at 'an extra', I sneak in a nice meal or side trip somewhere.

I suspect that with a pension and a dinosaur size nestegg, one could take less at the beginning and ease into the yacht and lear jet. :rolleyes:

...but I did celebrate my event with a bottle of dom ... and DW got me 2 bottles of Remy XO Grand Cru ... the only problem is you start to get used to that stuff ... ;D

W2R 01-25-2008 07:36 AM

Quote:

Originally Posted by utrecht (Post 605878)
I just read a thread where a poster said something to the effect of "our pension meets most of our needs so we will only have a withdraw rate of 2.5% from our IRA".

Not to pick on him, as its his money to do with what he pleases, but Im just wondering why people think this way. Im dead center of the LBYM crowd and my savings rate during this accumulation phase is VERY large. It boggles my mind how much my wife and I are saving (while still not feeling like we are sacrificing much)....BUT...the whole point of this for me is to live much more comfortably in retirement.

I have a pension also, and if I retired in my current house, I could live with a zero % withdrawal rate and maintain my current lifestyle in retirement, but why would I want to do that? Initially , the whole point of saving was to make sure I could retire without having to eat dogfood. At this point, I want to live the best retirement possible. I want to move to a nicer more expensive area, travel extensively, have nicer cars, get a boat...ect..

I want to withdraw the maximum amount possible (as per firecalc) and let that determine my standard of living which will be extravagant compared to how we live now as oppossed to continuing to live like we do now and letting my assets grow to millions and millions for someone else to enjoy.

Sure I want to leave money for my son, but assumming that FireCalc is correct and withdrawing 4% will allow you to never run out of money, there will be plenty left for inheritance anyway.

As I said, I live well below my means now so I understand that mindset but I dont understand why people want to continue to do it after retirement.

Thoughts?

Very thought provoking question. I think I my thoughts have been similar to those you describe. Due to a windfall that I did not expect and have not been counting on, it looks like I will be able to spend about 2-4 times as much in retirement as I have been spending in recent years. So, my withdrawal rate will probably be low?

Part of the disconnect is that I have never lived on that much. I am having a hard time imagining that I would want to spend that much time shopping when I could be doing more meaningful things. I have no desire to travel, and I do not want a McMansion because I live alone. Most expensive cars like Jaguars and such have terrible reliability ratings. My ex and I had a boat and I am familiar with what that entails, and don't want one.

What I would really like is to spend my final years in a top quality continuous care facility like my mother did. We never had to worry about her being abused or mistreated when she was old and helpless. I think that is wonderful. She had wonderful, healthy food available, beautiful surroundings, concerts and lectures, an exercise facility with a trainer who was used to dealing with the elderly in wheelchairs and so on, access to helpers who would do her shopping for her, dress her, and so on, and a skilled nursing floor when she needed that (and another Alzheimers' floor though she never needed that one). Such continuous care facilities are going to cost an arm and a leg by the time we boomers get really old. So, why not let some money grow in preparation for that, and if I don't live that long then the money will go to my daughter.

utrecht 01-25-2008 07:43 AM

Quote:

Originally Posted by LOL! (Post 605888)
I guess we won't extend the argument to ask why you aren't living larger now instead of waiting later when you retire.

I think thats obvious isnt it?

I have XXXX amount of money coming in right now. But I have to work to get that amount and I need to save for the future.

Retirement is different. I dont need to save for the future because I have enough money and 45 withdrawal will never run out. Why not spend my full 4% even though its much more than im used to spending?

If you want to compare that to now, you would have to make give me a job I loved, make it a job that I would always love and pay me an amount of money that would always stay constant (with raises for inflation) and guarantee me that the money would never stop. Then I could spend it all and not worry about saving.

So if I was a pro baseball player
loved playing baseball and would always love playing baseball until I died
and was guaranteed to be paid xxxx amount for eternity (plus cost of living raises)

then I would live large now and not have to worry about the future. Until that happens, I need to save for retirement.

utrecht 01-25-2008 07:46 AM

Quote:

Originally Posted by JohnDoe (Post 605881)
I agree with you about living large in retirement. But how can you determine that person is or isn't living it up in retirement?

Maybe their pension is 50k and 2.5% of their IRA is 75k.

So? Thats $125K which may be much more than they are used to living on, but why not make it $50K pension and $120K from IRA (4%) for a total of $170K. The money wont run out and you will still leave millions to your hiers.

I do agree that it will probably be hard for me to flip a switch from saver to spender, but im going to do my damndest.

Culture 01-25-2008 07:56 AM

Quote:

Originally Posted by LOL! (Post 605888)
I guess we won't extend the argument to ask why you aren't living larger now instead of waiting later when you retire.

As has already been discussed, reasons vary. For me, I do not have time to enjoy spending money. What is the point of having a bunch of toys I cannot enjoy? The reason that today is my last day at work is not because I hate my job. It is the best place I have every worked, and I am treated like a king (I guess in a sense I am one of the kings there). I am quiting because I have no free time. By saving while we worked, we are now able to start our own business (i.e. because I do not need to work, there is no risk for me in starting my business). Hopefully we will make 50-75% of what we made before, and gain 50 hours/week of time. If we don't we will gain even more free time. Win-Win.

Anyway, that is why I do not spend now, but intend to spend in the future.

theHundt 01-25-2008 08:22 AM

Quote:

Originally Posted by Culture (Post 605912)
As has already been discussed, reasons vary. For me, I do not have time to enjoy spending money. What is the point of having a bunch of toys I cannot enjoy?

There have already been some good answers that I am in agreement with, especially the one quoted above. On top of those, my reason is pretty simple, flexibility and compounding interest, the future is uncertain. I have 20 years give or take until retirement and I have enough for the necessities and some perks as well as adding a decent chunk to savings. For now, this is what makes the most sense to me.

Walt34 01-25-2008 08:35 AM

Interesting how people are all over the map on this. We're sort of "middle of the road" on it, our current income is about what we were living on when working. Neither of us has much interest in extensive travel although day trips or one-to-two day trips are fun. I have a small 10-foot boat for fishing that stays in the garage.

We value the free time and no work pressures. My ex was one who had to spend every dime immediately and the marriage ended when I refused to take a loan for a trip when we were already flat broke.

Moemg 01-25-2008 08:45 AM

I really tried to spend 4% the first year and even with the travel and paying for my Mom's health aide plus outfitting a nursery for my daughter I failed miserably .I'll try harder this year .

megacorp-firee 01-25-2008 09:02 AM

This is a real interesting post to me, because, in my w*rk career, I was a planner. I would recognize that there were unknowns, but you had to make decisions as best you could anyways.
Now that I am recently retired, I have a plan, but I am back to square one as it relates to this retirement stuff. Oh, I'm doing GREAT so far, but there are the unknowns that one has to 'plan' for also (aka plan b, c, d, ...etc.). So while I have planned for a 4% swr, in actuality, so far, some of it (maybe 1% of it, ytd) is still sitting in the money market account. I think that if it is still 'stuck' there at the end of 1 year, maybe I'll spend some of it on wine and women, ... and then squander the rest.
As in my w*rk life, I always made my quota, goals, objectives, ...etc. Habits being what they are, I will do my best to make my 4% plan. ;D
...where's that travel brochure?

Dawg52 01-25-2008 09:41 AM

I think some who post a small % may be referring to their basic budget without all the extras. I'm sure I will splurge some years. Might take a trip to NZ someday. That would certainly knock a hole in the 2.5% budget. :p

Abreutime 01-25-2008 10:08 AM

It's reasonable for someone newly retired to spend more conservatively at first, especially if 2.5% is still more than their spending pre-retirement. It's easy to expand your spending when you see the nest-egg expanding too quickly!

megacorp-firee 01-25-2008 10:12 AM

Quote:

Originally Posted by Abreutime (Post 605991)
It's easy to expand your spending when you see the nest-egg expanding too quickly!

... from your lips to god ...

Animorph 01-25-2008 10:34 AM

I have run projections that say I could spend an extra $100k per year if I work another 10 years (I'm 53). But that isn't worth it to me. My FIRE is at roughly the equivalent of 4%, and I can spend a little less or more as circumstances dictate. I probably won't be going as low as 2.5%. I'd try to spend more if tht happened.

My goal has been to maintain essentially a constant spending level (plus inflation) from work through retirement.

Dan

donheff 01-25-2008 10:52 AM

I generally agree with the OP's sentiments. But I understand dialing it back a bit - at least in the early years of ER. When DW retires next year we are planning to start pulling at a fair amount less than 4% (although we will still be livin pretty large). We still have 30 years ahead of us and want to be sure it lasts. If all goes well with the market we will probably kick it up to 4% a few years later by tipping the trips up a notch on the luxury scale.

Still Joad 01-25-2008 11:08 AM

Newly signed on and this caught my eye quickly.

I'm at an age where the idea of spending large is not as attractive as 15 years ago and now it's obvious I could have spent more then. But I looked for the 2.5% post and if it's the one on living off fixed income, that person seemed to be saying 2.5% of an IRA. So I suspect they were still worried about outliving the funds.

I think living large is relative and if it's something that bring joy, I'm all for it.

And believe it or not , folks in nursing homes still have the "keep up with the Jonses" urge. So save some funds for that.

REWahoo 01-25-2008 11:12 AM

Quote:

Originally Posted by Still Joad (Post 606027)
And believe it or not , folks in nursing homes still have the "keep up with the Jonses" urge. So save some funds for that.

Yep. No doubt I'll be wanting a set of oversize chrome rims for my wheelchair. ;)

W2R 01-25-2008 11:20 AM

Quote:

Originally Posted by REWahoo (Post 606029)
Yep. No doubt I'll be wanting a set of oversize chrome rims for my wheelchair. ;)

Hey, my mother was pretty smug about having the niftiest walker in her continual care facility. She showed me all the features that made it cooler than everybody elses, like I would care! :2funny: And all the other seniors would stop her so they could drool over it.

Shawn 01-25-2008 11:37 AM

My SWR, including pension, will be about 100K if I retire in 2 years and 150K if I retire in 5 years (I could retire today at 48 but I'm hanging on for lifetime medical). Not including my mortgage, which I may or may not pay off when I retire, my current expenses are about 18K/yr (this includes about 5K in charity/gifts). Hence, my expected withdraw rate at my current standard of living will be about 1% or less. I see no reason for this to significantly change, except for possibly 1 or 2 one-time high cost activities (e.g., Everest summit). OK. Maybe it will bump up to 25K. I can't fathom spending more than 30K. But it's still at the 1% level.

For me, like many others, the point of retirement is to spend my time, not specifically my money. The way I currently enjoy my time is through activities that are either free or inexpensive (running, bicycling, hiking, reading, puzzles, etc). I'd much rather go to fast food restaurants than expensive restaurants. My idea of heavy drinking is orange and grape soda. If I had the choice of a free car, I'd still go with a Corolla or Civic. The reliability, gas mileage, and ease of getting around make them ideal. I'm still driving my 1980 Corolla. It gets me to where I want to go. I don't need anything different. I live alone, not counting pets. My house is already big enough for one person. The one thing that the money will provide is the priceless feeling that it is there should I ever need it (e.g., take care of parents or myself in very old age).

Many people say that they want to die broke, meaning that they want to spend down their retirement assets as they age. Not me. I want to die filthy rich. The more the better. I'll be quite happy after I die knowing that my money has gone to the charities that I support. I don't see the problem.

aenlighten 01-25-2008 11:38 AM

There are many reasons
 
Uncertainty about expenses and returns early in retirement (inflation equities), the length of the retirement, the lumpiness of assets and when they become accessible (real estate appreciation and sales, pensions, iras, social security), the lumpiness and uncertainty of expenses and when you incur them (capital expenses, future medical costs) and whether you want a constant standard of living (inflation), a constant position in society (inflation+1%), or a rising position in society (inflation + 2+%). One's personal inflation rate may be higher or lower than average. Even a constant standard of living doesn't maintain one's position in society which is growing richer; if you want to afford tomorrow's technology and medical treatments you should plan on more than inflation. If you retired earlier than you would have preferred, having more to look forward to in the future may be satisfying. You can make a lot of assumptions and level everything over your expected lifespan, accounting for more uncertainty, or you can adopt a more incremental approach and only spend it when it comes it in.

Nords 01-25-2008 12:08 PM

Quote:

Originally Posted by utrecht (Post 605878)
I just read a thread where a poster said something to the effect of "our pension meets most of our needs so we will only have a withdraw rate of 2.5% from our IRA".
Not to pick on him, as its his money to do with what he pleases, but Im just wondering why people think this way. Im dead center of the LBYM crowd and my savings rate during this accumulation phase is VERY large. It boggles my mind how much my wife and I are saving (while still not feeling like we are sacrificing much)....BUT...the whole point of this for me is to live much more comfortably in retirement.

Hey, I resemble that remark.

There's frugality, and then there's deprivation. Working life sucks badly enough without crossing the line in your non-working life too. Spouse and I don't feel that we sacrificed anything while we were working except for our free time-- we were too busy working (or deploying) and parenting to be able to think of creative ways to spend it. We'd spend most of our family time at the beach, the park, the library, or working on the house-- again hardly expensive activities, and we certainly didn't feel we were sacrificing anything but our time and our sleep.

By the time we retired we were already living in a great house, near a good school, with all the amenities and lifestyle we could want. When we retired we got our time back and could take naps pretty much whenever.

What more could we want in our retirement? I equate "living more comfortably" with "having control over my time", not "spending more money".

Another issue is the timing of retirement. A military retirement doesn't normally vest until a minimum of 20 years. Other retirees have saved plenty but continued to put their time in to be able to have (let alone to afford) medical insurance. Still others invested during the world's greatest bull market and their returns far outstripped their realistic expectations (oh well).

More importantly, is there something you could do now and enjoy/value more highly by doing it now than by waiting until you're retired? For example, many retirees advise not saving sex travel for retirement... and Ty Bernicke has observed that retiree spending generally drops every decade in retirement.

Finally, I'm no Chicken Little, but FIRECalc's fundamental assumption is that past is prologue. 4% is the best number we have, and it's good enough for me, but I sure hope it turns out to be right. I'll get back to you on that in six or seven decades.

HFWR 01-25-2008 12:33 PM

Quote:

Originally Posted by REWahoo (Post 606029)
Yep. No doubt I'll be wanting a set of oversize chrome rims for my wheelchair. ;)

Chromed, high-lift, supercharged, NOx-injected bedpan...

SecondCor521 01-25-2008 12:49 PM

Quote:

Originally Posted by utrecht (Post 605878)
I want to withdraw the maximum amount possible (as per firecalc) and let that determine my standard of living which will be extravagant compared to how we live now as opposed to continuing to live like we do now and letting my assets grow to millions and millions for someone else to enjoy.

...

As I said, I live well below my means now so I understand that mindset but I dont understand why people want to continue to do it after retirement.

Thoughts?

My approach is to take my current living expenses, my FIRE stash, and the 4% rule, and FIRE when those three variables line up. Depending on how accurate my assumptions and spreadsheets turn out to be, that's around age 49, or about 10 years from now.

There is the possibility of me inheriting something from my parents. It could be anywhere from $0 to about 15x my current FIRE stash, sometime between now and 20 years from now. If it is sooner and on the larger side, then I would end up in a situation where I would probably be FI immediately and be facing a 1% withdrawal rate. In that case I would probably still live way below my means. I will cross that bridge when I come to it.

I personally am planning on following, as best I can, the model where I rerun FIREcalc every year with my new portfolio balance and reduced life expectancy, and raise my spending accordingly. But beyond a nice standard of living, I'll probably start feathering my children's retirement, or becoming more involved in charities or something.

2Cor521

Bestwifeever 01-25-2008 01:01 PM

Not to mention the effect on the nest egg of a possible bear market when one first retires, correct? Someone whose expenses are well below the 4% swr may be sleeping a little better these days (even though their nest egg presumably would still be okay with Firecalc's computations for the 4% swd).

TeeRuh 01-25-2008 01:01 PM

What Nords said. My excitement about my pending retirement is time related. Wow, get up when I wake up, do what I want, when I want without w*rk getting in the way!! My belief is I'll be spending significantly less than now if I consider the reduction in savings and taxes.

t.r.

ERD50 01-25-2008 03:36 PM

Quote:

Originally Posted by utrecht (Post 605878)
... but assumming that FireCalc is correct and withdrawing 4% will allow you to never run out of money, there will be plenty left for inheritance anyway.

Big assumptions, and some errors.

4% gives a 95% success rate for 30 years. 30 years is not forever. 5% failure is not 'never'. And it is a guide based on history - who knows what the future will bring?

If the ER is age 50, and wants a good confidence that they will not financially burden their children if they make it to age 95, 4% is too high. That's 45 years. People are living well past 100 today - it may be much more common 40-50 years from now.

And if you try to do FireCalc runs for 50 years, it cannot include the most recent 50 years in the analysis, and there were some bad times in there.

-ERD50

lazygood4nothinbum 01-25-2008 04:04 PM

with luck of the womb, and having very fun parents, i've lived pretty well all my life. raised in new jersey with big boat in marina for weekend cruising the hudson or a week out off long island. i lived in a condo on a beach in the usvi with a boat in a marina. i had friends with boats. everyday after school we were waterskiiing and splashing tourists for fun. i lived on the water in florida with a big boat in the backyard. heck, i've even lived on the boat.

through friends i've flown in private planes and cruised on large yachts (100 footers) and enjoyed a life i could never afford on my own, allowing me to be pretty frugal with my own money while living the so-called good life.

now that i'm financially independent i'm considering downscaling by a longshot my lifestyle and living for a few years in third world and developing countries. maybe after that i'll live on a sailboat in guatamala. you don't have to spend a lot of money to enjoy a fulfilling life. i think i would be happier pulling into $250/month dock on the rio dolce than i would paying $1500/month for a slip in fort lauderdale.

not being able to buy what you need would sure suck. but happiness doesn't come from spending money, not for me anyway. i've always had just as much fun without it.

RunningBum 01-25-2008 05:34 PM

Quote:

Originally Posted by ERD50 (Post 606172)
Big assumptions, and some errors.

4% gives a 95% success rate for 30 years. 30 years is not forever. 5% failure is not 'never'. And it is a guide based on history - who knows what the future will bring?

If the ER is age 50, and wants a good confidence that they will not financially burden their children if they make it to age 95, 4% is too high. That's 45 years. People are living well past 100 today - it may be much more common 40-50 years from now.

And if you try to do FireCalc runs for 50 years, it cannot include the most recent 50 years in the analysis, and there were some bad times in there.

-ERD50

Yeah, what he said. And I don't know how acurate my budget is to guarantee I won't blow past 4% by accident.

youbet 01-25-2008 06:09 PM

Quote:

Originally Posted by utrecht (Post 605878)
Sure I want to leave money for my son, but assumming that FireCalc is correct and withdrawing 4% will allow you to never run out of money, there will be plenty left for inheritance anyway.

ERD50 already said it, but I'll reiterate.......

You need to look carefully at the output of FireCalc and make sure you understand the results. A 4% WR and 30 year span, with the usual AA, depletes your portfolio completely in about 5% of the trials. And an additional percentage of trials leaves the portfolio well below it's starting point.

If you want to assume "there will be plenty left for inheritance anyway," be sure to use the option where you call out the minimum amount you want left at the end and FireCalc will use that number instead of zero in defining a failure.

It's all very interesting and a bit of a crap shoot! One person can withdraw at a 5% rate for 30 years and make it OK with money left over. Another can withdraw at 4% rate for 30 years and go broke before the grim reaper arrives on the scene. All depends on investment return and inflation during their 30 year period.

I do agree with you that some folks do seem to use excesively conservative WR's. I just wanted to point out that your statement seemed to be unrealistically optimistic.

Nords 01-25-2008 06:19 PM

https://www.early-retirement.org/foru...les-32828.html

kumquat 01-25-2008 06:30 PM

Quote:

Originally Posted by youbet (Post 606233)
ERD50 already said it, but I'll reiterate.......

You need to look carefully at the output of FireCalc and make sure you understand the results. A 4% WR and 30 year span, with the usual AA, depletes your portfolio completely in about 5% of the trials. ...

WADR, that's 1 time in 20. Would you bet $1,000,000 on a coin toss if you won, 19 times out of 20?

Spanky 01-25-2008 07:01 PM

Quote:

Originally Posted by kumquat (Post 606249)
WADR, that's 1 time in 20. Would you bet $1,000,000 on a coin toss if you won, 19 times out of 20?

may be a smaller amount -- say 100,000.

Spanky 01-25-2008 07:03 PM

Quote:

People are living well past 100 today - it may be much more common 40-50 years from now.
The probability is pretty small, however. For planning purpose, I use 90.

youbet 01-25-2008 07:30 PM

Quote:

Originally Posted by kumquat (Post 606249)
WADR, that's 1 time in 20. Would you bet $1,000,000 on a coin toss if you won, 19 times out of 20?

Hi kumquat.....

I don't get your point or understand the bet. That is, I don't understand your bet in regards to my post. Please clarify.

Khan 01-25-2008 07:32 PM

Quote:

Originally Posted by Shawn (Post 606046)
My SWR, including pension, will be about 100K if I retire in 2 years and 150K if I retire in 5 years (I could retire today at 48 but I'm hanging on for lifetime medical). Not including my mortgage, which I may or may not pay off when I retire, my current expenses are about 18K/yr (this includes about 5K in charity/gifts). Hence, my expected withdraw rate at my current standard of living will be about 1% or less. I see no reason for this to significantly change, except for possibly 1 or 2 one-time high cost activities (e.g., Everest summit). OK. Maybe it will bump up to 25K. I can't fathom spending more than 30K. But it's still at the 1% level.

For me, like many others, the point of retirement is to spend my time, not specifically my money. The way I currently enjoy my time is through activities that are either free or inexpensive (running, bicycling, hiking, reading, puzzles, etc). I'd much rather go to fast food restaurants than expensive restaurants. My idea of heavy drinking is orange and grape soda. If I had the choice of a free car, I'd still go with a Corolla or Civic. The reliability, gas mileage, and ease of getting around make them ideal. I'm still driving my 1980 Corolla. It gets me to where I want to go. I don't need anything different. I live alone, not counting pets. My house is already big enough for one person. The one thing that the money will provide is the priceless feeling that it is there should I ever need it (e.g., take care of parents or myself in very old age).

Many people say that they want to die broke, meaning that they want to spend down their retirement assets as they age. Not me. I want to die filthy rich. The more the better. I'll be quite happy after I die knowing that my money has gone to the charities that I support. I don't see the problem.

I am much the same.

Minus taxes and saving for retirement, for several years I spent $15k-$20k, and that includes $2k to charity.

My spending hasn't increased much, and it's still less than my pension. My withdrawal rate is still 0%.

I have everything I need.

House, paid for, ~1000sf, more than needed for one person (and one cat). Replaced 1989 car (with a 2005) this summer, don't want to go to restaurants, don't want to travel.

It's good to know the money is there if I need it.

Several charities will be enriched when I die.

megacorp-firee 01-25-2008 08:33 PM

Quote:

Originally Posted by HFWR (Post 606079)
Chromed, high-lift, supercharged, NOx-injected bedpan...

be sure to get the chrome dual 'exhaust' ...
sorry >:D

LRS 01-25-2008 10:10 PM

Why is the choice always yachts or dogfood? We're aiming to replace our middle-class lifestyle, not create a new jet-set one. If we continued working to 65 we'd really have it made ... until our health failed. No amount of money could replace freedom from the workplace for me. Just my opinion.

ERD50 01-25-2008 10:42 PM

Quote:

Originally Posted by Spanky (Post 606268)
The probability is pretty small, however. For planning purpose, I use 90.

OK, but according to this calculator:

https://personal.vanguard.com/us/pla...ireContent.jsp

18% of the current 55 YO Males will make age 90. (35 years of SWR)

And in terms of the OP -

38% of the current 55 YO Males will make age 85. (30 years of SWR)

So a 30 year time span for most 'early' retirees seems a bit short-sighted.

And I don't consider an 18% occurrence to be something I can ignore. Many of us insure against much lower rates of risk than that.

I don't want to be 90 YO and say to my kids " You know, when your Dad decided to retire, he knew there was about a 1 in 5 chance that he'd live to 90 and run out of money, and guess what.....".

Add a spouse to the mix: there is a 5% of one reaching 100 (45 year span), a 17% of one reaching 95 (40 year span).

I'm assuming these calculators are based on current actuary tables. I don't think they try to project increased life spans into the future, so things could be 'worse' than that.

-ERD50

ERD50 01-25-2008 11:00 PM

Quote:

Originally Posted by Nords (Post 606239)

Specifically:
Quote:

The Retirement Calculator from Hell, Part III, including the quote "Thus, any estimate of long-term financial success greater than about 80% is meaningless."
On one hand, since we cannot predict the future, it is ALL pretty meaningless.

OTOH, FireCalc does not 'predict' anything. It is actual historic data. And since the future could be worse than the past, I see no reason to accept a 95% success rate as 'good enough'. The data really says 'we KNOW this WILL FAIL in 5% of the previous sequences'.

It's a baseline. I feel more secure knowing that an X% SWR actually survived 100% of the historical sequences. That still leaves lots of unknowns - my spending could increase, the future could be worse than the past, and I or my spouse might live to an old age.

I'd need to check my notes, but IIRC going down to 3.7-3.5% SWR adds a lot of margin to the plan. 3.25% seemed to be getting into the 'forever' range.

-ERD50

RunningBum 01-25-2008 11:23 PM

Quote:

Originally Posted by kumquat (Post 606249)
WADR, that's 1 time in 20. Would you bet $1,000,000 on a coin toss if you won, 19 times out of 20?

But it's not an even bet, so that question makes no sense at all.

If I win, I got to spend a bit more each year. If I lose, I'm out of money and out on the street at age 90. I don't like the losing bet at all. The winning bet isn't big enough to be worth the risk of losing, even if it was a small chance.

I don't see why it's anyone else's concern if I chose to be cautious with my SWR.

Spanky 01-26-2008 12:00 AM

Here is the Actuarial Life Table
Actuarial Life Table

Life expectancy for a man of 50 year of age is 28.09, and 31.91 for a woman. I guess it does not hurt to plan for a higher number (just in case).

ladelfina 01-26-2008 04:45 AM

I second Want2Retire...

as to "why stick to 4%" aenlighten has a good response.
Things will go up and down. While our basic living costs are under 4%.. we did spend almost 2x that last year due to some major home expenses. So this year we will try and tighten our belts some. It also doesn't help that for us "4% is the new 3%"!! ;)

utrecht 01-26-2008 10:36 AM

If you could comfortably live on 2.5% but withdraw and spend 4% anyway because you deserve and can afford to live better in retirement than you did in your saving years.....and then the market starts tanking 10 years later or whatever, you can always pull back to 2.5% with no problems.

Not too mention the fact that if the reason you want to spend more at the beginning is to travel extensively, you will probably naturally spend less when you hit 80 than when youre 55 anyway because you probably will cut way back on travel at that point due to declining health and energy levels.

So even if the 95% survival rate of 4% withdrawals worries you, I still dont see a problem.

megacorp-firee 01-26-2008 11:13 AM

Quote:

Originally Posted by utrecht (Post 606469)
Not too mention the fact that if the reason you want to spend more at the beginning is to travel extensively, you will probably naturally spend less when you hit 80 than when youre 55 anyway because you probably will cut way back on travel at that point due to declining health and energy levels.

Not me ... I'm going to have 'one of dem' body parts transplants....
I got dibs on Brad Pitts! :2funny::2funny::2funny:
Sorry ..l getting punchy again .. It's 1:15am here.

ERD50 01-26-2008 11:37 AM

Quote:

Originally Posted by Spanky (Post 606348)
Here is the Actuarial Life Table
Actuarial Life Table

Life expectancy for a man of 50 year of age is 28.09, and 31.91 for a woman. I guess it does not hurt to plan for a higher number (just in case).

I think that many people misinterpret that number. A dangerous thing to do, IMO.

Please do not forget - that is a MEDIAN life expectancy! Half of the people live longer. So don't plan on a higher number 'just in case' - plan on a higher number because there is a 50-50 chance that you WILL exceed the number.

Even 'worse' when you factor in a spouse'. The vanguard calculator is much better for this - it shows the % chances of hitting any age you enter, and will factor for the 'last surviving'.

A better than 50-50 chance that a 50 year old couple will have one person exceeding a 38 year span. That's 8 years of eating dog food, and maybe many more years ahead - no thanks!

https://personal.vanguard.com/us/pla...ireContent.jsp

-ERD50

growing_older 01-26-2008 11:50 AM

Okay, I'm going to plan a comfortable retirement with a LBYM lifestlye that I enjoy and feel fortunate to have. I may spend less than I could, but it's a choice not a deprivation. In fact, I'm planning on living on less than 4% SWR and here's why:

1. I don't believe in the goal of maintaining a given standard of living accounting for inflation. I want to fund a slowly rising standard of lving even into my very old age. I've read the studies that older folks spend less and I believe there are factors overlooked in the research and don't believe the conclusions. I watched my parents and grandparents become progressively more dependent on others for help as they aged. If I can afford to retire to a small cabin on a lake when I FIRE, I want to be able to afford to stay there even when I'm so old I need to hire a handyman or housekeeper to stop in and do stuff I used to take care of myself. Likewise if I want to travel a bit in FIRE, I may enjoy cheap off the beaten path adventures when I'm younger, but I'm expecting I'll be more inclined to pricey comfortable accomodations when I'm older. Should I live so long, I want to have the option of the nicest possible care facility if I need one. I'd like to plan to have the means to take care of myself as these kinds of expenses increase later in life.

2. Freedom. I've done a lot of planning, but no matter how much I do I cannot include all future optoins. I may develop a new hobby or interest and wish I had means to enjoy it. My family circumstances coud change and I need money I didn't expect to need. New technology could be developed that I want to use to change my life, health, lifestyle or who knows what. I want to have choices, more than I want to have maximum current spending power.

3. Contingencies. Markets may not behave as they have historically. Over the 50 years or more I hope to be retired there could be all sorts of social changes, wars, diseases, tax laws, flood, earthquake, whatever. With excess capacity in my savings and SWR comes safety in that I should be able to adapt and accomodate whatever might happen, or not. I want to have security more than I want to make maximum use of my savings. If some is leftover because I was buying safety with it, then I will be happy to pass it on to family and charities when I no longer need it.

old woman 01-26-2008 05:42 PM

I will move when I retire and have not a perfect idea what it will cost me. So I plan to have way too much money. I will build or buy a nice home in the country on acreage. The first year I will have a start up budget to build sheds, fences and get it to my comfort level. Then I will hope it doesn't cost more than a little bit to live so I can live on a small percentage of my assets. Then after I see what it actually cost will adjust to spending more on things I don't need like a new boat. I will spend a little less the first few years because I will have roommate income so won't need as much. If I outlive my roommate that income will be gone. Then I would need to no only draw out more but replace his labor, hire someone to things I don't know how to do. Also in my elderly years being in the country I may have to start paying for things like someone to drive me places if I lose my license or don't feel safe driving. I can always ramp up spending but it is harder to reduce things you are used to.

kumquat 01-26-2008 05:54 PM

Quote:

Originally Posted by youbet (Post 606279)
Hi kumquat.....

I don't get your point or understand the bet. That is, I don't understand your bet in regards to my post. Please clarify.

I guess I didn't phrase it so well. 95% success still fails one time in 20. I'm a big chicken and like higher success rates.

unclemick 01-26-2008 07:26 PM

;D;D;D One more time.

Pssst - Wellesley! Current yield: 4.31% as of Friday.

Now in 1993 - never heard of 4%, SWR or anything like that - didn't even have a webtv. Paperback Vanguard booklet and thought's of 6- 8%.

Actually a hand grenade SWAG - over 14 years - maybe 2% to 8.9% due to those silly little events called life.

Now that I've upgraded, become an ER, can use FireCalc and ORP planner and others, I can stay awake long winter nights worrying - or not. I was an avid reader of Efficient Frontier before he went over to the dark side and started writing - BOOKS!

Also had an :rolleyes: ultra thrifty period and there was the Market of the 90's.

heh heh heh - RMD in 6 years so I 'will' get an offer I can't refuse - even if I don't spend it. Plus looking over my shoulder - I'm not getting younger. Party on the best you can.:coolsmiley:

Spanky 01-26-2008 10:31 PM

Quote:

I was an avid reader of Efficient Frontier before he went over to the dark side and started writing - BOOKS!
I kind of miss that site and the 'coffee house pondering' site also. I guess it is more lucrative to write books than to publish articles on a site.

youbet 01-27-2008 09:01 PM

Quote:

Originally Posted by kumquat (Post 606631)
I guess I didn't phrase it so well. 95% success still fails one time in 20. I'm a big chicken and like higher success rates.

Well, I certainly agree with you in that I also prefer a conservative approach to RE planning.

I'd add that not only does 95% mean that one in twenty fails, but that you also need to remember there will be others that will have close calls. FireCalc defines a close call (nearly running out of money) as a success. But some of us might get a little stressed if our net worth takes a huge plunge midstream, even if, unbeknownst to us at the time since we couldn't look into the future, our net worth was destined to pull out of the tail spin and survive!

None of the FireCalc successes, by definition, run completely out of money. But some will have a wild ride with net worth crashing towards zero at breath taking speed! A later recovery will do little to heal heart attack or stress attack victims! I think it's a really exciting adventure to be on and 19 months into RE, I'm getting one hell of a kick out of it!

Marquette 01-27-2008 09:11 PM

My planning numbers are a 3% SWR, 2% return over inflation (personal inflation, not CPI-U), and likely some part-time consulting work here and there after I "retire". We envision some years off to work the "farm" and get things going and then some.

I suppose it's conservative, but what let's us each sleep at night is going to be different for everyone. Someone might have no problem with 4%, others might thing 2.5% is too risky.


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