One big *Gulp*

[Berkshire Bull]

I'm reading a book about retirement demographics and whatnot and in the book it states that 80% of those who retire before the age of 50 will have their retirement plans fail, and 40% of those who retire before 60 will fail is it time to rethink this guys? because if you rationalize it, one more year of working is not only one more year of money, but one more year closer to being dead, when it's all FREEEEEEEE, haha these statistics are pretty sobering to me though.

 

[John Galt]

Hello BB! There are lies, damn lies and statistics.

When I left full time employment in 1993, my "plan"
was that my wife and I would both work part time
indefinitely, and that I would start drawing down
my IRA almost immediately. As it turned out, I haven't drawn a paycheck since June, 1998 and haven't touched the IRA either. I would like to say this is
due to my superior brain, but it was just luck in a lot of ways.
My point is that while I'm not sure about the retirement
"plan failure rate", I would bet it's a rare bird who plans
and successfully ERs without a lot of dodging and weaving along the way. In my case, I knew I was never
going back, short of being reduced to dumpster diving

John Galt

 

[bruce1]

Good Morning
Did the book say why the plans had fail and how did they define failure?

Were the failures due to unforseen major incidents such as illness accident ect?

Were the failures such that the retireee had to return to full time employment or face dumpster living or would a lifestyle adjustment have been sufficient? or maybe part time.

Were any of the failures due to boredom and consequently a desire to return to work? This may not be considered a failure but simply a change of direction. I can see myself doing this but part time.

Gosh this made me ask an inordinate amount of questions but you made me think as I am taking the big RE in the next year or year an a half and happen to be 50.

WHat is the name of the book/author

Have a good day everybody!!
Bruce

 

[unclemick]

Like the movie Apollo 13 - "Failure is not an option."

 

[wabmester]

Like the movie Apollo 13 - "Failure is not an option."

Ouch.   I'm not sure that NASA makes a good analogy for success these days.

My investment plan has three layers:

1) stocks for growth (and some income)
2) bonds for income (including TIPS for inflation protection)
3) real assets

If the stock market goes to zero, my plan survives.

If all of my bonds default, I'd have to cut back my spending, but my plan survives mostly intact.

If a giant sinkhole were to swallow all of my real estate, I'd be in trouble, but I'd still have enough gold coins to buy food, shelter, and guns for a year.   And then my fallback plan to rob banks would kick in  

 

[MJ]

And then my fallback plan to rob banks would kick in

Just stay out of the northeast territory. Them banks are mine, pardner!

MJ

 

[John Galt]

At one time I owned 2 islands (63 acres), mostly
just wild but very pretty. When I was younger
my "fallback plan" was to move onto the islands
and try the "Mother Earth News" lifestyle. I still owned them 3 years ago during the 9-11 attack. My spouse
(fiance then) suggested maybe that it was a good time to
make the move. No longer an option as I am too old
to be hauling logs and water (a large martini is about
my limit). Anyway, I have sold them since and bought other real estate with the proceeds. Kind of miss them though,
and it was a great conversation topic at cocktail
parties and other social events.

John Galt

 

[cute fuzzy bunny]

I think the reason why those retirees failed is because 90% of people are idiots

In fact, if you look at current info, most people have nearly nothing saved for retirement while an equally large majority feels they will retire to the same lifestyle they enjoy while working.

:

 

[John Galt]

Hey TH, are you trying to out-cynic the cynic?

A lot of people are just not deep thinkers.
Successful ERs have to be, unless they just happened to be sitting on a big pile of money. Anyway, I am
impressed at the brainpower found at this site,
and I am not easy to impress.

John Galt

 

[Cut-Throat]

I think the reason why those retirees failed is because 90% of people are idiots

Maybe it's correlated with 90% of the money managers cannot beat index funds.

 

[retire@40]

I'm reading a book about retirement demographics and whatnot and in the book it states that 80% of those who retire before the age of 50 will have their retirement plans fail, and 40% of those who retire before 60 will fail   is it time to rethink this guys? because if you rationalize it, one more year of working is not only one more year of money, but one more year closer to being dead, when it's all FREEEEEEEE, haha  these statistics are pretty sobering to me though.

In the short time I worked for a company, I never just complained about a problem in the company if I couldn't provide a reasonable way of correcting that problem. One reason I quit and started my own business is because for some reason unbeknown to me, the management of the company would not listen to solutions provided by me and other employees, but would only follow the direction of it's parent company which was 2 timezones away. The company is now out of business.

How does that personal story relate to that book you ask? Because it's the type of book I'm sure that tries to convince people that ER doesn't work no matter how hard you try and how many examples can be given as to how ER can be made to work. Did the author of the book suggest a solution to reverse those percentages? Did the author ever visit this website?

There are bad luck situations, but with proper planning I would say almost 100% of the population that has the drive to do so can retire early without failure. I have showed some teenagers how to do this and if I'm alive to see them when they are 35 I know they will have almost a 100% success rate if they follow the plan and can overcome the multitude of obstacles they will have along the way. I wish I had a mentor like me when I was 16!

 

[trumpeting_angel]

John Galt wrote:

A lot of people are just not deep thinkers.
Successful ERs have to be, unless they just happened to be sitting on a big pile of money. Anyway, I am
impressed at the brainpower found at this site,
and I am not easy to impress.

I agree.

I have been frequenting a site dedicated to informing and educating landlords (www.mrlandlord.com), and it is, indeed, quite informative. But there are a remarkable number of weak brains in the real estate business! Either that, or there's something in the software over there that blows peoples' spelling, syntax, grammar, and content up when they hit the "post" button.

Although I'm soaking up the information over there, I prefer to come here for some decent reading!

Anne

 

[Nords]

Undercapitalized retirement portfolios

Berkshire, you're a finance major. Look at your expenses, fund your critical liabilities, analyze the gaps, and plan for it all. You know how to do this stuff, you'll do it well, and you'll do fine. You have far more years to execute your plan than most of us ever did.

The failures are probably rooted in undercapitalization... failure to have enough money, failure to have a low withdrawal rate, and failure to account for capital expenses like a new roof.

Read Bloomberg's "Wealth" magazine for the analysis details and then daydream over Robb Report's "Worth". Or just stick with a frugal lifestyle & enjoy the outdoors.

Other failures like "boredom" and "nothing to do" (foreign concepts to me) indicate a lack of lifestyle planning. Since you're reading this board at your age, you'll never encounter these problems either.

Besides, that author's analysis was based on a study. Th has absolutely destroyed the credibility of the "studies show" article in anything less than a highly-respected peer-reviewed publication. If it's not in JFP then its claims are suspect.

While I respect the analysis & writing skills of guys like Bernstein, I believe that working (paid) writers have as much credibility writing about retirement as eunuchs have writing about sex. Just about any ER'd poster on this board knows more about ER than 90% of the retirement authors, no matter how much those authors impress th with their smarts.

 

[Roger_R]

I would suspect that if you subtract those with early retirement benefits that come from the military, government jobs, or generous early pension plans, allowing one a partial or full income from previous employment, that those figures might very well be close. Given one has to manage their own money for primary income, people just do not know or do not take the time to learn about managing money (personal observation).

I would even be so bold as to speculate the reasons for failure. Over-estimates of returns based on a current good market or advice from an over-optimistic money advisor, underestimation of health care expenses, and a non-sustainable high withdrawal rate.. To be followed by low diversity in investments (commonly all equities or all fixed), ignorance about inflation, and poor estimates of future spending. I am in my early fifties and many of my peers are starting to talk ER. I’d bet that 90% of them fail in decent knowledge of 4 or 5 of those 6 items.

You guys (or should I say us guys) have some tools that most retirees do not use. Had I not bumbled onto the Retire Early Homepage and branched out my homework from there I can see bad mistakes I could make in my own planning. What is it, something like 5 % of investors that are heavy index fund investors compared to traditional brokerage investors. I’m still several months away from ER, so have not had the test of fire yet.

If I recall my business classes, something like 4 of 5 small businesses fail in the first five years. The main reasons being under-capitalization and poor management of cash flow.

 

[Lili]

trumpeting_ angel

A good website for investing in real estate and being a landlord is thecreativeinvestor.com Lots of useful information!

 

[trumpeting_angel]

Thanks, Lili!

I've visited over at The Creative Investor and receive their newsletter. I'm sure it was at the recommendation of someone here!

Anne

 

[John Galt]

Just a quick note about Rpger R's comment on "4 out of 5 small businesses fail in the first 5 years."
I have no reason to think this is not true. So, if you want to go into business for yourself, buy an existing
business. Even a business in trouble often has opportunities which a start-up could never offer.
(in-place customers, inventory, NOL, or other
assets). Sometimes you can buy at fire sale prices
for lots of reasons (owner's age, health, partners
fighting, divorce, etc). I have known guys who did this for a
living (bought companies on the cheap) and then either
liquidated, resold, or held and ran them as circumstances
dictated. The same principle applies to real estate.
Don't build a new 5 family apartment. Find a "don't-wanter"
seller. The upside opportunities make it a true "no-brainer" decision for a small operator.

John Galt

 

[retire@40]

So, if you want to go into business for yourself, buy an existing
business.  Even a business in trouble often has opportunities which a start-up could never offer.
(in-place customers, inventory, NOL, or other
assets).

I don't think I totally agree with you here. A business in trouble usually has bad management, but many times also has negative goodwill, a bad location, and sometimes hidden leins and undisclosed legal problems. But I do like the idea of buying customers if those customers can be serviced better and retained.

By the way, you can't buy or use an NOL from a prior business.

I like the do-it-yourself starter uppers. If you are good at what you do and understand that you have to wear all the hats (at least initially), and have a good attorney and CPA to keep you on the right path, you will have an excellent chance of success.