"Early" retirement and have a portfolio that last in perpetuity.

[PristineSound]

I am new here and would like to share my situation and goal to see who is already in this position that I aspire to be in and provide feedback, comments, caveats, etc.

47YO, wife is 46YO, have a 9th grader and a 6th grader. Living in a HCOL area of northeastern US. Have a robust portfolio that includes typical capital market, real estate and private equity fund.

Goal/Plan:

1. Retire when both kids are out of college in 11 years, I will be 58, wife will be 57.
2. Conservative SWR of 2% to 2.5% where the portfolio will grow in perpetuity; long after we are dead. My wife and I have financial anxiety, so this is very important for us to keep us sane, the goal must be an ever-growing portfolio until the end of time. Portfolio projection is conservative at bottom 75 percentile using 3.5% inflation rate.
3. Will likely hit up the ACA marketplace at retirement for health insurance, looking at around $20k-$30k/year for both my wife and I.
4. Retirement plan does not count on SS whatsoever, but in all likelihood, SS will be around for us, possibly with benefit cuts though. But as it stands today, wife and I are looking to collect $6,400/month (in today's dollar).
5. Currently have about $700k of equity in our home, with $200k mortgage left. We originally did a 20y mortgage, refinanced and are doing a 15y, with about 9 years left. Do not plan to pay off mortgage, as return on investment will hopefully be greater than mortgage rate, and take advantage of any tax benefits. In fact, will likely upgrade and upsize in the next few years because I like big homes to man spread bigly . When we do upgrade (looking at around $1.3m home, in today's dollar and assuming no crazy housing market inflation) I will not put any additional money down, I will transfer the equity from my current home and then do a 30y mortgage. The SWR of 2% to 2.5% when we retire will cover all of that plus all other expenses and luxury.
   
   If SS doesn't go insolvent or have significant benefit cuts, I will use that to pay for mortgage, property tax, utilities and upkeeping; money that was never ever counted on anyway.

Anyone here already in a similar position, please comment below.

 

[Dtail]

2 -2.5% should keep your portfolio growing in perpetuity. If you can keep that WR% assuming the potential what ifs, which it appears you are doing, you should be golden.

 

[Koolau]

Welcome to the Forum.

It appears you are in great shape for retirement at 58. Now, if you wanted to "push it" and retire at 55 or even earlier... You might be able to pull it off. Just depends what you want out of life. 2 - 2.5% WDR is great, but if you either cut expenses now (or later) and took a higher WDR, you might be able to retire sooner.

Again, it's all about what you want. You have options which is always a good thing.

 

[PristineSound]

Welcome to the Forum.

It appears you are in great shape for retirement at 58. Now, if you wanted to "push it" and retire at 55 or even earlier... You might be able to pull it off. Just depends what you want out of life. 2 - 2.5% WDR is great, but if you either cut expenses now (or later) and took a higher WDR, you might be able to retire sooner.

Again, it's all about what you want. You have options which is always a good thing.

I wouldn't be able to do a WDR that will prevent my portfolio from evergrowing. I grew up poor, so I've been scarred from financial insecurity. Having a portfolio that can sustain me forever even if I don't live forever is a must for me, the portfolio after we are gone will have a purpose anyway.

But currently, my portfolio is modeled based on a conservative bottom 75% performance. In all likelihood, I will be within the 50% performance I may be able to retire at 55, but I will then have another anxiety of not having wage income while the kids are still in college, despite our portfolio includes 529 that will cover both kids.

 

[Koolau]

I wouldn't be able to do a WDR that will prevent my portfolio from evergrowing. I grew up poor, so I've been scarred from financial insecurity. Having a portfolio that can sustain me forever even if I don't live forever is a must for me, the portfolio after we are gone will have a purpose anyway.

But currently, my portfolio is modeled based on a conservative bottom 75% performance. In all likelihood, I will be within the 50% performance I may be able to retire at 55, but I will then have another anxiety of not having wage income while the kids are still in college, despite our portfolio includes 529 that will cover both kids.

Something to w*rk on in the next 10 years. Increasing your confidence in your retirement plan.

I did it by figuring "work arounds" or as I call them "back-ups" (or, even "back-ups to my back-ups"). 20 years ago when I retired, I wasn't convinced my plan would w*rk either. But, it has and I haven't needed the back-ups.

Some back-ups I had "on the shelf" for "just in case": Move back to the midwest from our HCOL area to a LCOL area. Never eat out instead of eating one meal out every day as we did when we retired. Find a "j*b" (anything - Wallmart greater to landscaper). Cut charity giving. Keep cars to 200K miles (we pretty much do that anyway) , Let the kids get loans for university - you can borrow for university but you can't borrow for retirement), drop phone, cable and internet plans, etc., etc.

My plan was also conservative. It's much less so now - now that I have confidence and still have my back-ups on the shelf.

You will arrive at a confidence level needed to pull the plug at some point. It CAN be sooner if you so desire. All the best and keep us posted on your progress.

 

[engineernerd]

[snip]
But currently, my portfolio is modeled based on a conservative bottom 75% performance. In all likelihood, I will be within the 50% performance I may be able to retire at 55, [snip]

Not sure what you mean here... have you run FIRECalc?

 

[imjustawarrior]

You should put you numbers in firecalc and see what the possible outcomes may be.

WR is one aspect of being conservative. What you are invested in also plays a major role. There are many ways to address risk. If you are happy with your solution, then enjoy.

I chose a higher WR so I could retire earlier. Our portfolio will still last.

 

[pb4uski]

Welcome to the Forum.

It appears you are in great shape for retirement at 58. Now, if you wanted to "push it" and retire at 55 or even earlier... You might be able to pull it off. Just depends what you want out of life. 2 - 2.5% WDR is great, but if you either cut expenses now (or later) and took a higher WDR, you might be able to retire sooner.

Again, it's all about what you want. You have options which is always a good thing.

We really have no idea what shape they are in. It all depends on what a "robust" portfolio means and whether they can live the lifestyle to which the have become accustomed on their 2-2.5% WR.

That said, as long as their portfolio return is more than the 2-2.5% withdawals then it will grow but I'm not sure that the goal for the portfolio to grow in perpetuity is wise unless one is a hoarder.

 

[Koolau]

You should put you numbers in firecalc and see what the possible outcomes may be.

WR is one aspect of being conservative. What you are invested in also plays a major role. There are many ways to address risk. If you are happy with your solution, then enjoy.

I chose a higher WR so I could retire earlier. Our portfolio will still last.

Yeah, FIRECalc is our "go to" retirement calculator. You may access it here:

FIRECalc: A different kind of retirement calculator

www.firecalc.com

 

[Original Wally]

Find a "j*b"

Let's not get CRAZY!!!!!

 

[PristineSound]

Currently, our portfolio projections is very healthy with the kids tuition accounted for and retiring for perpetuity in 11 years. And it is projected with very conservative factors. Let's hope I don't have to consider any of these back up plans.

Whether we can retire earlier or not, let's see what happens.

But I am more curious to know if there are others who has executed exactly (or close to) what my plan/goals are, with their portfolio lasting them in perpetuity as the key objective. I would love to here from these individuals.

 

[imjustawarrior]

I believe my portfolio will last in perpetuity even though I started with a 4.5% WR at age 55 (2.5 years ago). Once the kids are launched, the WR drops lower. If the markets get worse than they have ever in history, then we will cut back on our spending and still be fine. We have a lot of fluff in our expenses.

 

[PristineSound]

That said, as long as their portfolio return is more than the 2-2.5% withdawals then it will grow but I'm not sure that the goal for the portfolio to grow in perpetuity is wise unless one is a hoarder.

There was a member here who use the term "inter-generation retirement" or something like that. Whether you give that money away or not, it's a good feeling to have. Again, this is non-negotiable for me and no one, not even God, can change my mind about this. So let's just not further discuss if a portfolio lasting in perpetuity is a good or bad thing.

Question, who here is living this retirement plan where their portfolio can last them in perpetuity?

 

[PristineSound]

I believe my portfolio will last in perpetuity even though I started with a 4.5% WR at age 55 (2.5 years ago). Once the kids are launched, the WR drops lower. If the markets get worse than they have ever in history, then we will cut back on our spending and still be fine. We have a lot of fluff in our expenses.

Any caveats or gotchas you can share?

 

[Koolau]

Let's not get CRAZY!!!!!

Yeah, that one was actually pretty far down on my list (heh, heh, just below finding a j*b for DW).

 

[Koolau]

Any caveats or gotchas you can share?

Very much depends on what your mix of investments include. For instance, fixed income plays like CDs, MYGAs, Treasuries, etc. you could find yourself "stuck" earning 3.5% when inflation spikes to 9%. Or, equities tend to bubble and then crash every few years. Bonds are vulnerable to interest rate changes by the FED and the credit markets. Etc.

Look at the Callen Periodic Table of Investments.

https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns

The winners and losers exchange places often so the takeaway (that I take away) is that you need to be diversified.

My guess is if you are vulnerable, it would be because you might be TOO conservative (and not sufficiently diversified). But I don't know your actual investments so YMMV.

 

[imjustawarrior]

Any caveats or gotchas you can share?

We are 58 and 51 years old. We have a 75/25 boglehead 3 fund portfolio. We have no debt. Our current WR is probably a little over 3%. We still have 3 kids to launch.

We have a very large discretionary budget. I think we could live on half of what we spend and still enjoy life. So maybe our basics are a 1.5-2% WR.

We will use an informal variable withdrawal rate at time goes on. Just withdrawing 2% leaves too much on the table for us, especially while we are younger.

 

[flyingaway]

My experience is that, for this kind of plans to work, your children must be interested in financial planning and learning personal finance. Unfortunately, my children is not interested. Another condition is the financial world and market should behave like the history, which is not under our control.

 

[Koolau]

We are 58 and 51 years old. We have a 75/25 boglehead 3 fund portfolio. We have no debt. Our current WR is probably a little over 3%. We still have 3 kids to launch.

We have a very large discretionary budget. I think we could live on half of what we spend and still enjoy life. So maybe our basics are a 1.5-2% WR.

We will use an informal variable withdrawal rate at time goes on. Just withdrawing 2% leaves too much on the table for us, especially while we are younger.

Yeah, I never said "I want my WDR to be 4% (or whatever) and so I can spend XXXXXX this year." Instead, I spent pretty much what I wanted, within the bounds of my frugal nature and THEN at the end of the year, I calculated my actual WDR and IF it was too high, I cut back the next year.

 

[audreyh1]

So this perpetuity goal means that you want to pass down your retirement fund to your children, and that it will have grown during your retirement, and then you expect your children to do the same and pass it on to the next generation?

And how does that relate to financial anxiety? Unless end of time actually means end of your joint married couple lifetimes? In which case I guess you don’t care what your heirs do as long as your portfolio doesn’t shrink during your lifetimes?

 

[Koolau]

So this perpetuity goal means that you want to pass down your retirement fund to your children, and that it will have grown during your retirement, and then you expect your children to do the same and pass it on to the next generation?

If so, then "good luck." All our kids have differing investing/spending habits. We tried to influence them for the "good" but they do what they think is right. None does it "our way" though we're pretty happy with all of them, financially speaking.

 

[engineernerd]

There was a member here who use the term "inter-generation retirement" or something like that. Whether you give that money away or not, it's a good feeling to have. Again, this is non-negotiable for me and no one, not even God, can change my mind about this. So let's just not further discuss if a portfolio lasting in perpetuity is a good or bad thing.

Question, who here is living this retirement plan where their portfolio can last them in perpetuity?

This is not explicitly the way those of us trained on FIRECalc think. We all have an appreciation for the fact that we are playing the odds.

Those who fear poverty in our old age the most will do these kinds of things:

(1) Set our target odds of success to 100%. Knowing of course that this only means no series of retirement years in the FIRECalc database (1871-2024) would have resulted in our running out of money before we died, NOT that the future will be no worse than anything in the past. Nobody knows what the future will bring.

(2) Assume we will live to an age that longevity calculators show we have a small chance of attaining.

(3) Assume that Social Security benefits will be less than currently promised, perhaps reduced by 23% from 2033 on, per the 2025 Trustees' Report (https://www.ssa.gov/oact/trsum/).

(4) Make conservative assumptions about future spending needs.

Hope that helps!

 

[PristineSound]

We are 58 and 51 years old. We have a 75/25 boglehead 3 fund portfolio. We have no debt. Our current WR is probably a little over 3%. We still have 3 kids to launch.

We have a very large discretionary budget. I think we could live on half of what we spend and still enjoy life. So maybe our basics are a 1.5-2% WR.

We will use an informal variable withdrawal rate at time goes on. Just withdrawing 2% leaves too much on the table for us, especially while we are younger.

I don't know if your goal is for your portfolio to last you in perpetuity, but if it is, there is a belt curve at a certain withdrawal rate. Meaning, once you retire, the first x number of years at a certain WR, your portfolio will continue to grow, but at a certain point with that same WR, it will begin to decline, but still likely to last you for your lifetime. But I do believe up to 3% is still stainable for your portfolio to last you in perpetuity, depending on portfolio return, if that is your goal. But sounds like you are in great shape. Congrats, I aspire to be in your position one day!

 

[Lewis Clark]

Question, who here is living this retirement plan where their portfolio can last them in perpetuity?

My plan is not exactly like yours but I do expect my portfolio to grow in perpetuity.

My AA is about 75% stocks and 25% fixed income. Our withdrawal rate since retiring in 2020 has always been under 3%. This WR is not a goal, but is a result of spending as we wish.

Backtesting against history, a WR of about 3.25% has always resulted in a portfolio that maintains at least its initial value on an inflation adjusted basis.

And we have social security still to come.

 

[imjustawarrior]

I don't know if your goal is for your portfolio to last you in perpetuity, but if it is, there is a belt curve at a certain withdrawal rate. Meaning, once you retire, the first x number of years at a certain WR, your portfolio will continue to grow, but at a certain point with that same WR, it will begin to decline, but still likely to last you for your lifetime. But I do believe up to 3% is still stainable for your portfolio to last you in perpetuity, depending on portfolio return, if that is your goal. But sounds like you are in great shape. Congrats, I aspire to be in your position one day!

I have been on bogleheads for 14 years or so. Over there, I frequently hear that 3-3.3% WR is the perpetual WR. That probably assumes a 60/40 portfolio.

I have no desire for our portfolio to last in perpetuity. We will up our spending. I would love to give away gobs of money to our favorite charities and spoil our future grandkids.