Generic ER: Any takers?

[RockMiner]

This is a composite version of some prior topics but here goes anyway...

Generic situation:

A couple, 50 years of age. "Average" house and cars paid for. No debt. A million bucks in cash (50/50 pre and post tax). Average health. No pensions other than SS.

Would you ER?

 

[eridanus]

Re: Generic ER:  Any takers?

Definitely.

 

[rapoole]

Re: Generic ER:  Any takers?

Greetings-

Comes close to describing our situation. The answer is no. First reason - 11 year old son. Second reason - you don't say anything about health insurance. I am hoping for some solutions to those problems, but as a generic proposition, I would not take that ER without health insurance.

rapoole

 

[unclemick]

The answer is no.

We retired in 1993(age 49) - 300k financial assets plus 50k duplex giving 6k/rent. No health insurance for me then or now. She has union coverage health insurance.

History and the roll of the dice has been good - so far.

If you have to ask - the answer is no.

The stretch was messy - but we made it work, sold the duplex, 2 years temp work between us, pensions at 55 , etc., etc - plus loss of house roof and contents(no insurance on fish camps) due to a tornado and three moderately chewy hurricane hits - temp work paid for a lot of it.

Now - I understand if you are willing to go ex-pat, the life of Riley awaits.

To repeat - if you have to ask, the answer is no.

On the other hand - no guts, no glory. Warning! This poster is a left handed INTJ and lives in the Louisiane swamp - by choice! Bon Temps Rolliere - let the good times roll.

BTY - my all time best personal 'cheap SOB' budget for one year was 12k back in the 90's.

 

[preben]

Guessing that is around 1.3M+ - I would FIRE on the spot! Cheers!

 

[Roger_R]

Re: Generic ER:  Any takers?

I'm pretty much Mr. Generic and won't be much help with a split vote, as I'm undecided right now.

I can recall a wiser and younger time when beyond the basics, incremental costs were translated into six packs of beer and pairs of jeans as the basic units of value. At the generic level of my older age my current basic incremental units are health insurance and travel. By my best estimates the generic ER includes spartan health insurance with moderate deductable, probably no LTC insurance, and modest but some travel. The longer I work and save, the more or better these basic exchange units become. And how much that is worth in terms of years worked. I think at the generic you're on the edge of saying yes, but with a gamble on your health and also with a satisfaction of a stay at home or frugal travel and car budget. These are the incremental jeans and six packs of my Mr. Generic.

At a 4% withdrawal rate everything seems ducky, but I'm starting to feel a bit more comfort with a 3% or less rate. That part for me is still an issue of consideration and study.

 

[uncledrz]

FI yes. Of course, it depends on expenditures. I know people with 7 figure assets who do not consider themselves FI because of their "must cover" expenses. I feel comfortable that 1 mil could result in 40 g's, inflation adjusted, withdrawl, and that amount could be sufficient for FI. Not risk free, but no amount is.

RE don't know. Are many other factors to consider. Kids, college, other family obligations are one. Another is the extras that you want. Most important is the relation with work. The nonsense that Brewer12345 wrote about recently with the evaluation process would cause me the scoot in a second. OTOH if work is enjoyable, maybe not.

 

[azanon]

I would not. Your best earnings years are usually in your 50s. Re: compounded growth, the most powerful factor is time. It takes exponentially more money to retire for every year you chop off the end. cutting out 50-60 cuts out where the real growth occurs.

Every person is different, but i'm looking for a happy medium. My target age is a health 58. You can wait too long and end up working till you die. But you can also stop too soon and never really see the real power of compounded growth.

Azanon

 

[preben]

Azanon have a good point but on the other hand one might not live to see 58...

I chose the middle of the road; by having an initial w/r of only 2% I will STILL see compounded growth + a potential parttime hobby might also add a bit.

For the mentioned generic couple it depends on many variables but if one has a net worth of 1.3M and STILL fear not being able to FIRE then it is time to look at ones expenditures... (disclaimer; since we do not know what country couple LIVE I could imagine that health care if in the USA is the biggest shaddow...).

Cheers!

I would not.  Your best earnings years are usually in your 50s.  Re: compounded growth, the most powerful factor is time.   It takes exponentially more money to retire for every year you chop off the end.  cutting out 50-60 cuts out where the real growth occurs.

Every person is different, but i'm looking for a happy medium.  My target age is a health 58.  You can wait too long and end up working till you die.  But you can also stop too soon and never really see the real power of compounded growth.

Azanon

 

[laurence]

Re: Generic ER:  Any takers?

The thing is you could FIRE, pero por que? If it's just to say, "hey, I'm retired!" well, if that's good enough for you, great! But what do you want to do that you can't do while working a job? Have you mentally prepared yourself for the change, have you cultivated some hobbies/passions? This board tends to focus on the money side of the equation, which is great, but it's only part of what's needed to retire successfully. So I understand it's a hypothetical, but unless you have a plan, a vision, I say keep working at least a couple more years and make that plan, maybe a slow transition to retirement, meanwhile keep raking in that dough. But if you have something you really want to do, don't hesitate, like it's been said, you'll regret more of what you didn't do than what you did.

Health care, big variable there that's left out.

 

[playaman]

Rok -- I was in your generic situation at 50 and chose to not retire.

My wife and I perceived the need to enrichen the savings (the future is too uncertain), plus get some kids through college. That ends in two years (when I will be 60). In the meantime, I've cut the stress level dramatically by leaving corporate America for the nonprofit world (although I still dabble in corporate stuff).

Cutting stress goes a long way toward mitigating having to continue working.

 

[Eagle43]

Re: Generic ER:  Any takers?

I retired from military at 38; retired from Mega-Corp at 60. I would never have retired in 40s or 50s. I've been poor, and don't wanna go there, anymore. Now, with the pensions, social security for DW and me, IRAs, and most importantly, TRICARE for health, being poor should be out of the question. If it all vanishes tomorrow, however, I'll just go back to work.

Recommendation: Retire TO something, not FROM something. If you can't define the TO, then keep working until you can.

 

[laurence]

Re: Generic ER:  Any takers?

Eagle, you said it much more succinctly than I ever could have.

 

[RockMiner]

Re: Generic ER:  Any takers?

There are lots of interesting responses here. This generic situation was intended to be somewhat "edgy". Also, I didn't want any variables like kid's education cost to complicate the decision process (should have said so).

The consensus answer looks to be NO, but with consideration given to intangibles such as work stress, and reasons for retirement.

Lack of paid health care is by far the biggest issue, no shock there. Oddly, no one attempted to factor in eventual Social Security benefits. Does that mean they are discounted as being too uncertain to rely upon? Finally, the obvious question: if a million isn't enough, what is?

Rok

 

[laurence]

Re: Generic ER:  Any takers?

Well, actually my plan is to retire between 45 and 48 with what will be about a million dollars in today's dollars, and house paid off. So I would say that it can be enough, depending on the circumstance. The x factor is health insurance, we plan on high deductible insurance, self insure the little things - we are active and in good health, I run 15 miles a week, my wife did a half marathon while pregnant. As far as SS, I went to their website and caclulated the difference in payments for me if I retired at 45 and 62, and the difference was not enough to make an impact, not even close.

 

[dm]

Insurance is the kicker. The wife and I will have more because of her pension, and can continue with her health plan at the going group rate. My wife has some existing conditions, heart and back, that would not enable her to get insurance at a resonable price.

If health care was included I'd be out with a million and no debt in a heartbeat. But without health care Id be afraid of losing everything when I wouldn't be able to recoup.

 

[rapoole]

"Finally, the obvious question: if a million isn't enough, what is?"

My personal answer is I could see living on 4% of $1 million, and future Social Security benefits would help when they kick in 12 to 17 years hence. However, without insurance, you risk having medical costs take it all away. So to me, $1 million + health benefits makes ER conceivable at 50.

rapoole

 

[Sheryl]

One question: How did some posters get from "million in cash" to assumptions of $1.3 million?

I can certainly see it's feasible, but not my choice. I'm 44, and my S.O. is 49. We've set our FIRE goal at $1.5M.

We will have to fund our own catastrophic health care policy out of that. One house will be paid for and lived in, the other may be rented out or sold to get to the $1.5.

For us it's a matter of balancing:

(a) not wanting to miss out on peak earnings
("Golden Handcuffs")

(b) being young enough to enjoy the travel and active sports we love, and

(c) being comfortable that we won't have to scrimp. Plus,

(d) getting his son thru trade school, out of the house and self-supporting.

We've just recently started outlining what we would actually DO during a typical year of ER - how much travel, at what cost, etc., in order to feel comfortable with our target budget.

 

[preben]

Sheryl was the 1M liquid + house+cars paid that led to the 1.3M+ estimate of total net worth. One could sell and rent/travel and live of the 1.3M. Cheers!

 

[gayl]

Walked out at 52 with a hell of alot less than you have, but I have HC insurance. 51 yo sister just bought it for her family for 200 / m. So it depends on what you want to do in retirement.

BTW: my investments [not inc paid off house] are worth more now than when I retired in Feb 2004, and my debts are lower [just have 1 kid's college bills to go and he is paying those off]

 

[Sparky]

That's just about where we are. DH and I retired at 44 and 45 last year with $1M plus paid off house and car.

So far, we're at 1.3% SWR, generating about $21,000 from interest and dividends and taking 1.3% more - last year averaged about $34,000.

We have catastrophic health insurance for $193 per month for both ($5,000 deductible), pay outright for high blood pressure and high cholesterol meds. We're generally healthy and not overweight.

I've known several folks who've retired (at 62 or 65) only to have their spouse drop dead 2 weeks later.

At least we know that's not going to happen to us.

 

[Traveler]

Sparky:

Who's insuring you and where are you? I'm searching for a similar health insurance plan when I RE.

Thanks.

 

[Hyperborea]

So far, we're at 1.3% SWR, generating about $21,000 from interest and dividends and taking 1.3% more - last year averaged about $34,000.

That's actually a withdrawal rate of 3.4%. You need to include all withdrawals including interest and dividends.

As for the original question I might very well take the ~1.3M (after selling the house and cars) and retire. However, my expenses in the early years will be highly adjustable (I'll be a perpetual traveller - if the portfolio does poorly it means more time in cheaper countries) and as a fallback for medical issues I have access to the national health care of 3 different countries.

 

[Sheryl]

Sheryl was the 1M liquid + house+cars paid that led to the 1.3M+ estimate of total net worth. One could sell and rent/travel and live of the 1.3M. Cheers!

Thanks for the clarification, Ben. I guess I always think in terms of "usable" assets, and since I plan to keep my house at this point, I don't add it into the mix. Same with car, not an asset I can use to generate income so I don't consider it part of the "stash."

I am very interested and encouraged by this thread. It's good to hear the different opinions on "enough."

 

[Sheryl]

(I'll be a perpetual traveller - if the portfolio does poorly it means more time in cheaper countries).

This decision really intersts me. I've thought about it but don't think I'd be content with that lifestyle long-term. Have you thought much about what it will be like on a day-to-day basis? Every time I visit a new place, I contemplate what I would "do all day" there.

I think I'm too hung up on my house and "stuff." My vision of ER involves lots of puttering around the house and garden, working on hobbies and projects, working with local charities, etc. But I do envision extended traveling at least 3-4 mos. total out of the year.