4% of what?

[cute fuzzy bunny]

Okey dokey Petey. Thanks for your opinion and your respect of others differing opinions.

Have a nice day.
:

In case anyone is worried, firecalc includes periods of time where valuations were similar to what they are today, even for the S&P 500. The usual 60/40 portfolio survived a 30 year period following those times of high valuations just fine. Of course, that depends on what you mean by 'valuations' and which of the 42000 incompatible means of calculating them you use.

By the way, its my opinion that stocks are overvalued today and that it does matter, but since I dont have or know of any foolproof way to determine 'correct' valuations or what to do exactly that will make a big difference, I just use good asset allocation and stick with it. You might refer to Peteys crystal ball for further instruction, however.

I also wouldnt worry much about 140 year old bond defaults that happened during a civil war in choosing your current day bonds. Unless you think the red states and blue states are about to have at each other

 

[RockMiner]

Should retirees kid themselves about what is possible on the traditional 60/40 S&P 500/US bond index mix? Just retire anyway? Surely it is better to understand the situation ahead of time, consider saving more and work longer? Better that than suffering crushing portfolio losses from a revision to the mean and be forced back to the workforce at reduced pay having left your job before you could really afford it.

No problems here, just tired of seeing rear-view mirror people posting that 4% is safe when it ain't. It seems people are happy to use past returns as an indicator for the future, but not past valuations that went with past returns as an indicator of anything. This is a rather selective & blinkered view, and unrealistic.

Petey,

Your points are well taken. Future market returns may, or may not look much like the past. This view is not overly popular here because it rains on many of the people lining up to march in the ER parade..my self included

As TH says, every one is entitled to their own opinion.

Most posters here are well informed and able to make thoughtful decisions. My concern applies mainly to young ER's with marginal resources. IMO It's a disservice to encourage such individuals to "pull the plug" as soon as FIRECalc says they are 95% safe or whatever...unless they fully appreciate the risks. After that, It's every man for himself

 

[haha]

Let's get real for a moment.

Lucky for these young'uns that there are a few of us grizzled vets around.  

There have always been guys who refused to work- call 'em hippies, bohemians, artistes, back-to- the- landers. But most of these people had pretty small requirements for comfort and material security. If their GF got pregnant they might go right on working as leather craftsmen every other Friday, figuring someone else would provide. And usually someone else did, in that the woman at least came to her senses and found a guy with real job.

What seems to be new is that a lot of obviously middle class people with good careers and families or hopes of families are fed up, and think that they can make a permanent exit. Well, maybe so, but I tend to follow Jarhead and see this as a consequence of the roaring 90's. A consequence that has yet to be played out.

Military retirees especially O's have no worries. With healthcare, bx etc, then can always throttle back and still have baseline security. Same with retired civil servants, teachers, cops. Single men have no real worries- they can always learn to repair surfboards and live in the back of the shop.

I know 2 women who have done very well marrying widowers. One woman in her 40s married an 80 yo guy who owns a ton of beach property. Possible downside to this strategy is illustrated by the fact theat he is now 90

Mainly it comes down to flexibility. If not-working for the man is more important than almost anything else, and you deeply understand the implications of this, I think maybe what other choice do you have?

For the ordinary young family man who thinks work is too repetitive-try to have at least $2,000,000; and if you can hang on, get more.

IMO,some SWR discussions are being held by people who are already in the belly of the whale but just don't know it yet.

Mikey

 

[preben]

Petey; I already stated my alternative. Will do it again just for you: "A better way is to diversify much more and be prepared to reduce spending (sensible w/r) if nest egg takes a hit. "

I would also not go for a SP500/US bond mix today - but subject to my 2 points up in the first paragraph I think starting with a w/r of 4% is still ok from a well diversified portfolio and with some budget flexibility in bad times.

CHeers!

Hmmm.. what is the alternative, Ben? Ignore valuations, cross our collective fingers and hope? Year 2000 retirees did just this, ignored P/E over 40 and look how that turned out! Ignorance is not bliss when it comes to market values.

Should retirees kid themselves about what is possible on the traditional 60/40 S&P 500/US bond index mix? Just retire anyway? Surely it is better to understand the situation ahead of time, consider saving more and work longer? Better that than suffering crushing portfolio losses from a revision to the mean and be forced back to the workforce at reduced pay having left your job before you could really afford it.

No problems here, just tired of seeing rear-view mirror people posting that 4% is safe when it ain't. It seems people are happy to use past returns as an indicator for the future, but not past valuations that went with past returns as an indicator of anything. This is a rather selective & blinkered view, and unrealistic.

Petey

 

[Jarhead*]

Lucky for these young'uns that there are a few of us grizzled vets around.

Mikey: I probably have no reason to continue following this board, with the exception of the entertainment value.
Where else are you going to hear advice like John Galt, proudly proclaiming that "I retired on less than $250,000, and if worst comes to worst, we can live quite comfortably on Soc. Sec. alone. Priceless!
My two kids are age 38, and 32, and from time to time, they've asked my advice on a variety of different subjects, but I'm thankful they have never asked me about my opinion of "retiring early".
INMHO opinion, in the next 5 years or so, this board will be replaced by helpful hints on keeping your job.
Meanwhile, I plan to stay tuned, because it can't be beat for pure entertainment value.
Regards, Jarhead

 

[Jarhead*]

Excellent comments ex-Jarhead!

As a frequent reader of, but rare contributor to, this forum, I've learned to skim strings quickly for useful, worthwhile information.  Key to this is understanding who looks at things analytically and who is influenced by their own personal circumstances.  Your comments always seem to be directed towards facts we all have in common such as historical and forecasted market returns, interest rates, inflation rates, etc.  That's really appreciated.  All the banter from others  regarding their still employed spouses, free lifetime medical coverage, expected multi-million dollar inheritances, etc., are interesting but not very useful as I try to determine when and how I'll step out of the harness and let someone else pull my employer's plow.

Youbet: Thanks for you compliments. I came from a very humble background, so I have no problem relating to "everyman". (On top of that, I am a lot older than most posters on this board, so my "ego" has been toned down a bit over the years, and I find it very easy to be empathetic to younger posters. My kids are 38 and 32. (Their situation is always on my mind when commenting on like aged posters).
Regards, Jarhead

 

[cute fuzzy bunny]

BTW - I never stored food and water in my Basement for the year 2000 either

I filled my tub up with water just before we went out to the New Years Eve Party.

But it was a big tub!!!

 

[unclemick]

Not to date myself - too much, heh, heh - did anyone's parents have a well stocked bomb shelter in the Cold War Days? I remember some of the old B movies - can't remember 'duck and cover' from school though.

I use a quasi 73-74 back of the envelope calculation for my portfolio as a worst case.

 

[Cut-Throat]

Not to date myself - too much, heh, heh - did anyone's parents have a well stocked bomb shelter in the Cold War Days? I remember some of the old B movies - can't remember 'duck and cover' from school though.

My parents did not have a bomb shelter, but the next door neighbors did. It was kind of a status symbol in the 50's. They were always proclaiming a tornado warning so they could use it.

I even remember getting under my desk at school back in the 3rd grade. Yup! - We were prepared all right. Those desks were 3/4 inch solid oak back then and we weren't afraid of those atom Bombs! 8)

 

[cute fuzzy bunny]

Thats right! Putting your head between your knees provides excellent protection from thermonuclear blasts!

Jarhead...your points are well taken. I dont worry about running out of money because I've got what I think is a good asset allocation, I dont panic when the market goes down and I probably wont be selling any shares for some time. Dividends and interest are our friends (hey unclemick...(whisper) welllesleyyyyy)

In fact, I was ER'ed for a couple of years before I even heard of a "SWR" or thought much about it. I just spent 5 minutes seeing if my average gains would outrun my spending and inflation. Looked likely. I figured if I turned upside down and started eating principal at an alarming rate, I'd just go back to work.

I dont know how I got by without knowing all this stuff about valuations, eating your principal, safe vs surviving, magic tools, historic vs future, 5 year studies that produce no useful information and so forth...just lucky I guess

In truth, I have no problem with Petey's opinions. I even agree with some of them. I just wanted to point out that they're not facts, not based in fact, need a knowledge of the future, and that neither I nor my fellow discussion mates are ignorant, wrong or un-sensible as he suggests. We're simply expressing our opinions as part of an ongoing discussion...

 

[haha]

In my neighborhood the standard response to the Russian menace was to pray for Joe McCarthy and make a Novena.

I think my lifelong contrary nature was cemented when I finally saw old Joe on TV, and figured out what a rat he was.

Mikey

 

[bruce1]

I filled my tub up with water just before we went out to the New Years Eve Party.

But it was a big tub!!!

I filled mine with Ice and Beer and had a new years party.

We had the under the desk bomb alerts in Canada in 63 and 64. Actual bomb shelters were rare but not unheard of. Being on a farm with parents and grandparents that put food up for the winter and who were on the farm in the 30's we had six months of food at all times.

Bruce

 

[eridanus]

It's odd that there is more concern about others' FIRE plans then (your) own personal situation. Even odder, this concern seems to be concentrated on the pre-50yo FIRE planners/actual FIRE people.

I can't speak for everyone but your concern is noted and filed. Thanks.

 

[laurence]

All this talk of the risk of retiring early, I think the greater risk is chaining yourself to a cube until you are too old to enjoy life. Life is risk. Hopefully, Social Security will still be around when I turn 62. My simple plan is to have my bare neccesities down so low (by doing things like paying off the house) that SS will cover them if all else fails. SS's web site says if I stop work at 45, I can collect that amount at 62. So my portfolio's must survive timeline is really only 17 years. At that point I can supplement the SS check with a reverse mortgage or just sell and get a condo. Now there are many things left out of this, like health care, getting bored watching regular t.v. because I can't afford $25 movie tickets etc....but at least kayaking is free!

 

[Michael]

Now there are many things left out of this, like health care...

That's an important one. If you get sick before you turn 62, your portfolio is toast.

 

[Hyperborea]

Early retirement was generally defined at age 62 at any period up to the early 80"s.

To a close approximation I think it still is in most circles (perhaps 55) but this "community" skews ones perspective.

The twenty year run-up in both stock and bond mkts. has led to a proliferation of early retirement boards, and unlimited arguments and theories about your money lasting as long as you do. (Retiring in your 30"s and 40's).
There are special circumstances, I suppose, that make the discussions worthwhile for a small percentage of people.  (Being single, large inheritence, trust-fund recepient, stock options millionaire, etc. etc.).
Most people do not fall into that category, but never-the-less, continue to try and squeeze that round peg into a square whole.

I agree to a degree with this. There are very few people who have a hope of really retiring early. For the bulk of the population much below 55 is a pipe dream. If you have the right combination of high income, low expenses, and an early start on the plan then it is possible for a small percentage. What cuts that number even more is that very few people earning multiple $100Ks per year want to give that up and all the consumer toys to live on $40K to $60K per year (e.g. the somewhat recent Azanon thread).

Not to speak ill of the banned but one of the other views of h@cus that was incomprehensible was that everybody should be able to FIRE and that if they only were told about it they would rise up and quit their jobs.

My two kids are age 38, and 32, and from time to time, they've asked my advice on a variety of different subjects, but I'm thankful they have never asked me about my opinion of "retiring early".

Why? Because you don't think it would be safe to do so? Or becaue you don't think it would be a good thing to do? Money or the "soul"?

P.S. Didn't you mention that one of your "kids" has a restaurant in Berkeley? Willing to divulge the name? I go up there on a semi-regular basis (some good music venues and an interesting guitar shop) and am always interested in trying a new restaurant. Thanks.

 

[preben]

Hyperborea! I would love to join you for dinner! Always wanted to sit and chat with you. Dinner on me! Cheers!

 

[Bookm]

Greetings th:

I just wanted to point out that they're not facts, not based in fact, need a knowledge of the future, and that neither I nor my fellow discussion mates are ignorant, wrong or un-sensible as he suggests.

And I thought it was only the indexers who he accorded those honors to. Considering current company, perhaps it's a compliment. Could it be that a 130-plus IQ don't buy what it us'ta.

Bookm

 

[Mr._johngalt]

Hello Bookm (why do I want to say "Danno" whenever
I see "Bookm"?)

A "130 plus IQ" may not buy what it usta, but it still
can't hurt.

JG

 

[unclemick]

Aluded to by many several posters in their own way.

It's not so much the 4% but more the 'what' -aka what do you own to fund your ER.

 

[Bookm]

Hello Bookm (why do I want to say "Danno" whenever
I see "Bookm"?)  

JG

If you can still hum the melody to that theme song (as I can), I know why. Some might use the term old, I pefer vintage.

Bookm

 

[laurence]

Michael, to clarify, I meant I left it out of this thread, not out of my plan!

Keeping the money you must use, your minimum expenses, as low as possible is my idea of risk mitigation. Travel is the only luxury my wife and I are addicted to. We can stick to camping (California is great for that) for a year to keep the portfolio solvent if it comes to that.

 

[Mr._johngalt]

Yeah, I have "cutting back" plans aplenty if everything
goes in the crapper financially. Thought them all through
pretty carefully, but we all know you can still be
blindsided. For us, camping is out though

JG

 

[treypar]

Atl; you might be right - make us an example with some $ nos and what you would invest in. Cheers!

Ben
I would put 70% in bonds generating the 5% return which would cover annual expenses. Then the balance would be in the stock market for growth probably a slice and dice portfolio.

 

[peteyperson]

Petey,

Your points are well taken.  Future market returns may, or may not look much like the past.  This view is not overly popular here because it rains on many of the people lining up to march in the ER parade..my self included  

As TH says, every one is entitled to their own opinion.
 
Most posters here are well informed and able to make thoughtful decisions.  My concern applies mainly to young ER's with marginal resources. IMO It's a disservice to encourage such individuals to "pull the plug" as soon as FIRECalc says they are 95% safe or whatever...unless they fully appreciate the risks.  After that, It's every man for himself  

Hi Rok,

Thanks for your more balanced reply!

I can see that anything that goes against the 4% w/r mantra gets immediately attacked. Sorry state of affairs for what is supposed to be an open discussion with all views able to be challenged.

Petey