Fudge Factor

[NW-Bound]

Oh and dare I add…a bit of humor from time to time.

Oh, thank you my dear. I have tried to do my part from time to time.

 

[misty57]

We aren't yet retired, but the plan is as follows:

X = yearly basic living expenses (i.e. - no vacation, but otherwise same as now minus mortgage P&I)

Pensions = x
4% withdrawal from portfolio = 2x
Social Security = .5x
Sell house, invest proceeds and draw 4% = .6x (more if the RE market should recover)

I like the way you laid things out and helped me put things into perspective. Thanks!!

For us, if "x" = yearly basic living expenses:

Annual Pension = 1.39x
4% withdrawal from 401K = 1x (based on estimated balance at retirement)
Social Security = Not counting on it so I never put it in the equation; if we get it, it's a bonus
Retirement EF: 5x (based on estimated balance at retirement)
Value of IRA: 2x (based on estimated balance at retirement)
Other investments that we may or may not see a payout on: 6x

 

[ItDontMeanAThing]

My fudging is based on retiring in a low cost country with unpredictable currency exchange and inflation risks.

My original fudge factor was 28% over what would have been a comfortably fat filled budget. Then I delayed retirement for 2 years because I fell in love with an expensive sport. As soon as I started planning for that last day of work I stopped sleeping and my GI track became creative in it's multitude of complaints. Two years later, after getting REALLY lucky in the stock market, I had an estimated fudge factor of 57% and I FIREd.

After one year in retirement the actual fudge factor has worked out to 50%

I have a built in fudge factor. When running my numbers I assume I'll only get 50% of my estimated SS amount. I'm 55 so it seems too pessimistic to assume zero.

 

[teejayevans]

I have a built in fudge factor. When running my numbers I assume I'll only get 50% of my estimated SS amount. I'm 55 so it seems too pessimistic to assume zero.

Since I don't think SS will ever be cut directly, if Washington does anything,
they will simply adjust the taxes paid on SS. ie 85%->100%.
Medicare will take a bigger chunk of SS as well...
50% is probably a good guess of what you will net, and would add another
fudge factor. Maybe a big fat Miscellaneous category in your budget.

TJ

 

[mmcc]

My fudge factor is outside the investment box....part-time work, spending less, selling all or part of our home place (30-40% of my net worth is in the "farm"). As far as finances are concerned, my approach is not at all prudent, given I'm in the prime of my earning power and I'm calling it quits short of my retirement number. Still, I feel great each night I go to bed and each morning I wake up. I didn't want to wait another 5 or 10 years because I'm greatly enjoying raising kids in my 50s (with my feet a little firmer on the ground) and the time is passing quickly -- I consider myself extremely lucky to have this choice.

That said, I suppose age is one of my fudge factors. If I was 65 I'd have to think long and hard on making the same choice.