Six Months Into a "Shoestring" Retirement

[ERD50]

Be that as it may, when you are looking at $800k NW verses what a lot of people on here discuss as their net worth, it is difficult to fathom RE. (Not saying that is my NW, just picking a lower $ to illustrate point).

So, maybe not a separate thread, but more posts from people that haven't been smarter than the average bear and created multi million $ portfolios to fund there RE?

That just might be more comforting to some who sit on the sidelines about their RE [-]experiment[/-] experience.

But I don't understand what's different in budgeting between someone with a plan for expenses of $40,000 a year who gets 80% of that from a COLA'd pension/SS and plans a 4% withdraw from a $200,000 portfolio, and a person with zero pension/SS who has expenses of $40,000 a year who plans a 4% withdraw from a $1,000,000 portfolio.

$40,000 may be looked at a 'shoestring' budget by some, and far more than adequate for others. It depends on circumstances.

I guess my point it that the individual issues should be discussed (pension /SS concerns, controlling X expenses, etc), rather than trying to fit them in a cubby labeled 'shoestring budget'. I think it just clouds the issues, or excludes people who think they don't fit that description, but still might have something to add. A multi-billionaire might have a good suggestion on how to save on car insurance that could apply to anyone, for example.

-ERD50

 

[Koogie]

You retired folks sure reply quickly. Thanks for the warm welcome!
Brewer, I did the "Down East Loop". Sorry to hear about your seasickness. We all get it you know, just have different thresholds.

Great trip report.. a very enjoyable read.

 

[CaptTom]

Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input.

I'm also glad I struck a chord with some other, less-well-capitalized retirees.

Imoldernu, thanks for the link to your sharing post. Adjusting expenditures to match income is such a simple concept, but so rare in this era of entitlement.

I still don't see myself as "FI". To me, that would mean being free from the influences of political and economic change. There have been a number of rumblings lately that bring into question how long medicare, SS, health insurance as we know it and even my own company's obligation to fund my pension might last. An economic downturn could wipe out my 401k. One major health setback could deplete my savings.

Very few have reached a level of independence from these factors. Good for them! But I don't count myself among them.

To my way of thinking, I did "RE" but I'm nowhere near "FI".

 

[Montecfo]

Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input.

I'm also glad I struck a chord with some other, less-well-capitalized retirees.

Welcome CapTom! Hey, after reading your post, I came away thinking you probably have more net worth than you even realize, if you consider as an asset the capitalized payment stream your pension represents. Most Americans do not have private pensions (meaning outside of SS). In fact, there was never a time when most did.

So it follows most people are retiring on savings and SS. You need a lot of savings to do that, as you have no pension.

Now, for fun you could multiply your annual pension by 25 (it is the inverse of the oft-cited 4% SWR) and add that the other elements of your net worth. That total would make it more of an "apples to apples" comparison of net worth with people who lack pensions.

And as others mentioned, it is the relationship of cash flow to your needs that is most important

In any event, congrats!

 

[Walt34]

Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club."

Oh, far from it! There are incomes ranging from ~$20k/year to $200k+ that I've seen posted. Many, like me, have pensions that do the bulk of the heavy lifting keeping us solvent and have a NW nowhere near a million. If one has a COLA'd well funded pension then you don't need anywhere near that much. Others have no pension but saved/invested early on and made it that way, and there's a mixture of everything in between.

 

[CaptTom]

Now, for fun you could multiply your annual pension by 25 (it is the inverse of the oft-cited 4% SWR) and add that the other elements of your net worth.

That WAS fun. If I do that, I become a member of the Millionaire's Club.

Someone pass the caviar, please.

Not sure I'm 100% on board with the math though. I guess if I collect for 25 years (I didn't take the time to look my life expectancy up in the actuarial tables) that would make sense. A million bucks sure doesn't go far these days, huh?

 

[Mdlerth]

Welcome Capt'n. Yours is a refreshing post. I think it gets back to the essence of what this forum is meant to be.

Sounds as though your decision is based on a number of pragmatic approaches...$, living within your means, an appreciation of what happiness means.

+1

To the OP: Welcome. You're doing it right. An optimum retirement is way different from the most lavish retirement.

 

[Montecfo]

That WAS fun. If I do that, I become a member of the Millionaire's Club.

Someone pass the caviar, please.

Not sure I'm 100% on board with the math though. I guess if I collect for 25 years (I didn't take the time to look my life expectancy up in the actuarial tables) that would make sense. A million bucks sure doesn't go far these days, huh?

Well, people that are living off savings have learned that spending 4% of your investible assets constitute a "safe withdrawal rate", which can last 30 years. Some adhere to lower percentages due to recent market conditions, longer expected retirements, on conservativity.

Thus to "safely" with draw $20K per year one would need $500K of investible assets. (500K times .04=$20K). So one who has a $20K pension has $500K of "implicit" investible assets (20K times 25 =500K) under this logic.

Another approach would be to go and see what an annuity in the amount of your pension for someone your age would cost. Add that to you net worth.

Just methods of measuring the value of a pension to make it comparable to savings.

Grey poupon?

 

[CaliKid]

Congrats!

 

[IMATERP]

Thanks again for all the replies. I must admit, when I first reviewed this site I came away thinking it was a "Millionaire's Club." But it's just as easy to learn from someone who's been financially successful as anyone else, so I appreciate the input.

I'm also glad I struck a chord with some other, less-well-capitalized retirees.

Imoldernu, thanks for the link to your sharing post. Adjusting expenditures to match income is such a simple concept, but so rare in this era of entitlement.

I still don't see myself as "FI". To me, that would mean being free from the influences of political and economic change. There have been a number of rumblings lately that bring into question how long medicare, SS, health insurance as we know it and even my own company's obligation to fund my pension might last. An economic downturn could wipe out my 401k. One major health setback could deplete my savings.

Very few have reached a level of independence from these factors. Good for them! But I don't count myself among them.

To my way of thinking, I did "RE" but I'm nowhere near "FI".

Great Read, Capt. Tom...

I've just started my last year of work and am in a very similar position as you. A paid off house, a nice little Pension at age 60, and enough $$ to get me to age 60, + healthcare at age 60.

You talk about "living on a shoe-string" well I wouldn't know how to live any other way as I have always had the same spending patterns. It would actually upset "my apple cart" if I tried to squander monies on things that didn't provide me enjoyment. I guess that is just how I was raised.

Anyway, my ship comes in on December 16th as I (along with my wife) will be passengers on a retirement cruise just before the end of the year. I can't wait and am feeling better about this decision every day.

Be Free and Be Happy!

Michael

 

[Teacher Terry]

We don't have as much $ as some others. Mid life divorce for me where ex hid most of our $, had full control of finances etc even though I worked. Anyways my dh and I each have 20k pensions , retiree health insurance that costs 10k/year, paid for house and small savings. We love to travel and have not done much until the past 3 years. We are spending between 10-14k/year on vacations. We have had many friends die in 50's and 60's, cancer scare for dh at 49, etc so intend to travel while we can. I work teaching an online college class by choice past 4 years and my dh was laid-off at age 53 and sometimes he works and sometimes he doesn't. At ages 62 and 58 we are happy with our lives. WE could always take $ out of our house, sell and buy condo, etc in the future. Welcome!

 

[ttvjef]

Welcome! Refreshing thread. Sounds like you are prepared and have put a reasonable amount of thought into your plans. We are in the red zone for ER and struggle with just what should be the final number for us. We do have a FA and a plan laid out but the medical wild card is a concern. We're currently w*rking good paying jobs and are a bit shy to pull the trigger just yet.
Looking forward to the day when we take our retirement cruise! In our case we're planning a cross country trek

 

[Pilot2013]

We do have a FA and a plan laid out but the medical wild card is a concern.

I think this is the primary driver/concern for me (us). That, and wanting to be able to leave at least a small legacy for DD's.

 

[Pilot2013]

Mid life divorce for me where ex hid most of our $

Similar story here, except my ex did not work, and hid numerous CC's acquired during the tumultuous time and proceeded to max out. Couple that with tens of thousands of $'s for custody attempts (the South is very far behind in Father custody) and you have some financial challenges to overcome. Luckily, I had the income to mostly and recover.

 

[Fermion]

No pensions, a relatively small nest egg of $1.4m and we are making it work by keeping spending at about $35k per year plus whatever healthcare is each year (about $2800 a year under ACA, #willmissthat)

Helps a ton not having to pay property tax or income tax.

 

[Pilot2013]

No pensions, a relatively small nest egg of $1.4m...

That's what I was referring too. On this site, I would bet the majority consider this ($1.4MM) a small nest egg. I would retire immediately with that nest egg.

 

[Fermion]

That's what I was referring too. On this site, I would bet the majority consider this ($1.4MM) a small nest egg. I would retire immediately with that nest egg.

I would not take the other side of that bet. Most on here seem to have six government pensions, 401K, 403b, IRA, retirement healthcare AND two homes. I don't know how they did all of that and still retired early but whatever.

 

[larrytbm]

Your situation sounds close to mine, but 14 yrs ago. Retired at 55 with pension and natural gas royalty checks paying the bills. Then SS kicked in as the royalty income declined. My investment assets were well below the recommended level in the beginning and my very tight financial plan had them going to almost zero at life expectancy. But rather than shift assets into bonds/cash I left them in stocks. Over the 14 yrs I have liquidated about $200k based on needs and confidence, never to cover monthly expenses. Assets have increased about 2.5X and roughly 50% is now in Roth IRAs thru smart conversions. Now pretty good chance the estate will have plenty of money, hence the Roth conversions. I was nervous in the beginning and there were some tight times, but things are fine.

Anyway, with a reasonable plan that you understand and pay attention to, your situation should be fine.

 

[Nodak]

Welcome, I am another without a huge bank account but my pension, small SS payment, and a small 401k payout more than cover my expenses. It's worked well for almost 10 years.

 

[seabourne]

Welcome aboard Capt! You're a few years ahead of me (I'm <40), but I won't have the patience to work for more than a "shoestring" retirement (though I've had enough friends retire before 40 and play on boats that I'm not that concerned). Congratulations on your accomplishments and having reached a new and freer stage in your life!