Author Topic: Early retired below 1 million $? - People living on 4% are wanted!!!  (Read 9100 times)

campaign

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Dear MMM fellows,


I would like to change toughts with those who had been early retired below 1 million $.

What is your experiences?

How do you manage the inflation issues and fears from loosing your wealth?

« Last Edit: July 16, 2014, 12:55:36 PM by campaign »

Khan

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Re: Early retired below 1 million $?
« Reply #1 on: July 16, 2014, 04:41:20 AM »
I'd also second this, with a specific spear of a question: Anyone FI'd on <500k(or spent years jobless on a SWR equivalent)? How do you manage?

Roland of Gilead

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Re: Early retired below 1 million $?
« Reply #2 on: July 16, 2014, 06:18:21 AM »
As a single person or a couple?  We are going to ER on about 1.4m which is only $700,000 each.

$500,000 at 4% SWR is $20,000 a year and has a good chance of lasting 40 years or more.

$20,000 is working 2000 hours at $10 an hour...plenty of people doing/living on that right now.

Northerly

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Re: Early retired below 1 million $?
« Reply #3 on: July 16, 2014, 09:26:44 AM »
Debt can be an excellent hedge, as long as it is producing income. I personally tend toward maintaining debt in real estate to allow greater participation in the stock market, along with providing that wonderful inflation hedge.

dragoncar

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Re: Early retired below 1 million $?
« Reply #4 on: July 16, 2014, 12:13:26 PM »
All the above is true, but I too am interested in hearing from people actually applying the math and living on $40k/year from $1 million, etc.  I do think we have some such people on this board and maybe their details are scattered all around.

campaign

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Re: Early retired below 1 million $?
« Reply #5 on: July 16, 2014, 12:54:57 PM »

Right, people living on 4% are wanted!

We are curious how you deal with it!

Melf

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #6 on: July 16, 2014, 01:36:33 PM »
Good topic question and I'm interested as well.  I'm new here and hoping to be FI and RE sometime within the next few years.  I just turned 48 and my net worth is somewhere just above $500K now with no debt.  My problem is that most of my net worth is not invested at the moment.  I think I'm headed in the right direction with Vanguard but the current market conditions are making me overcautious.   I think I'll be in good shape once I'm fully invested while considering a 4% SWR on my current net worth and also plan to continue saving and investing for the next few years.  I guess the ultimate success hinges on having a budget, controlling expenses and having an emergency fund and plan to deal with market conditions.  I've still got lots to consider but hope to see some posts here from folks who are actually making this work for them.  It doesn't seem like it should be so easy and makes me wish that I had started saving a long time ago.

Marlan

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Re: Early retired below 1 million $?
« Reply #7 on: July 16, 2014, 01:56:25 PM »
Its all about what your expenses are. If you can live on <$40K/year (which many people do) then you can live on $1M stashe ($1M x 4% = $40K). If you can live on <$20K/year then you only need ~$500K.

 
This! I have a stache of about $250K and could live on 4% ($10K/year) for all of my basic expenses. I also have a government pension of $1400/month that I live on easily without touching the $250K stash except for travel or emergency stuff. If one vanishes, I could live on the other (but together they are nice!). That is with a paid for house (co-owned with my sister and my share is worth approx. $250K), no debt, no kids, low expenses in the approx. $500 - $700/month range for basics (again, split with sister).

In addition, I plan to draw down on some (all?) of the principal over my life span since I have no one to leave anything too as well as sell my house and downsize dramatically freeing up some extra cash. This means I could have less in savings to live off of if I plan to use up the principal .

ETA: Changed my numbers above as I meant I had $500K in total assets (including house but not counting pension) not $500K in cash plus the house.

also ETA that I retired at 42 - over 10 years ago - and have never had any issues with COL or inflationary issues other then medical insurance cost increases. However, I only had a very inexpensive catastrophic plan (was cancelled in Jan due to the ACA) so never cost much and I also can get free or low cost medical thru the VA hospitals if needed.
« Last Edit: July 16, 2014, 11:17:52 PM by Spartana »

Cassie

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #8 on: July 16, 2014, 04:15:44 PM »
The first year we lived on $40,000 with a paid off house/cars & found that after the cost of health insurance (10,000/year) it just was not enough to let us live the lifestyle we wanted too. It was a pretty meager existence but it also depends what part of the country you live in & what you want to do.  We like to eat out weekly, take some weekend trips as well as a 2 week vacation/year.  We also have 4 dogs which is expensive & will downsize to 1 thru natural attrition because vet bills are high, etc and cost us a lot.  We found that as a couple we really need $60,000/year.  I would suggest living on the amount you think you will want in retirement for a year to see how it feels to you.  The amount of $ people on this site live on varies so much. 

Roland of Gilead

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #9 on: July 16, 2014, 05:31:38 PM »
Cassie would your numbers change now with ACA (if you are in the USA)?

Living on $40k as a couple would mean you are getting fairly heavy subsidies.  I can't see health insurance costing $10k a year at that income level (25% of income)...certainly ACA doesn't want you to pay that much of your income.

We are looking at insurance costs of about $1200 a year for a silver plan and cost sharing of the copay bringing the total yearly maximum out of pocket to about $3000 to $4000.

mxt0133

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #10 on: July 16, 2014, 05:41:49 PM »
Living on $40k as a couple would mean you are getting fairly heavy subsidies.  I can't see health insurance costing $10k a year at that income level (25% of income)...certainly ACA doesn't want you to pay that much of your income.

There are actually people that make too much to qualify for ACA subsidies, below a certain income level you qualify for Medicaid and are expected to go on that instead of the health exchanges and get subsidies.

Cassie

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #11 on: July 16, 2014, 05:44:23 PM »
We are state retirees so have our insurance through them. I looked at the ACA but to benefit we would have to make less $ & we each really love what we are doing p.t.  I spent tons of time researching last year.  If we wanted to just live on $40,000 we could reduce it with the ACA but again we love our side gigs.

neophyte

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #12 on: July 16, 2014, 08:09:51 PM »
No way am I retired and living on withdrawals from a $500k stash, but my take home pay is just a little more than 20k.  I'm not worried about inflation or market swings much at this point, but I can say living on $20K is totally do-able. Maybe not a lot of fun, but I can be pretty happy with my lifestyle spending $20k.

I am trying to live on under $1000 /month and stash as much as I can.  So far, most months I'm hovering a bit over $800, and most of that is for rent+utilities.  I'm not sure I'll be under $12k spending for the year due to emergencies.  Would I like to keep living this way?  No.  It's ok for now, but I wouldn't like to keep it up for more than a couple of years.

campaign

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #13 on: July 21, 2014, 02:44:10 AM »

It seems there are not much people is living on 4%...
Come on!

No way am I retired and living on withdrawals from a $500k stash, but my take home pay is just a little more than 20k.
Maybe not a lot of fun, but I can be pretty happy with my lifestyle spending $20k.

Fine, that's great, if you live on $500k stash!.-)
How old are you? And in which country you can do this?

EricL

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #14 on: July 21, 2014, 04:23:23 AM »
Quote
Broke is a temporary, poor is a mentality.

Awesome!

Check out Jacob at: http://earlyretirementextreme.com

Jacob lives off of $10k income from his $300k 'stache, hence the "extreme" bit.


neophyte

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #15 on: July 21, 2014, 06:43:07 AM »
Fine, that's great, if you live on $500k stash!.-)
How old are you? And in which country you can do this?

I'm 27 and I live in a big eastern US city with a pretty high cost of living, so it should be possible most places for a single person.  I'm able to walk almost everywhere, so that keeps my transportation costs very low.  My ~$800 per month budget includes rent in a shared apartment (Disclaimer: it's kinda on the edge of the 'hood), a generous grocery budget, and about $75 dollars a month 'fun' money for restaurants or extras. Health insurance isn't factored into that though.  On $20k /year I found I could take at least one, maybe a couple international backpacking trips and spend more on restaurants and clothes. That's on the back-burner for now until I build my stash up a bit more and find a more lucrative job though :)
« Last Edit: July 21, 2014, 07:12:37 AM by neophyte »

Thegoblinchief

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #16 on: July 21, 2014, 06:50:09 AM »
I run a family of 5 at just around the federal poverty line ($27K) including a high interest mortgage and it's totally doable. Our FI budget is a bit higher per year to allow for travel, but still well under $1 million.

So, no, we're not FI yet, but I don't see any issue with it at all based on the past 10 years of my life.

matchewed

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #17 on: July 21, 2014, 06:56:31 AM »
I'm confused by the premise of this topic. You want to know about peoples fears of inflation or wealth loss, specifically for those who have "low" portfolio values. However those two things (inflation and wealth loss) are more of a function of how adjusted you are to your expenses. Or rather there is almost always room to cut adjust and regardless of the size of your portfolio those two things are a factor for anyone (although you may want to define what you mean by wealth loss).

Are there any specific questions you would like to ask? That might get you some direct answers.

That being said my plan is to FIRE on $500k to $600k. My concerns with inflation are mitigated with a high percentage in equities, an ability to work if need be, and probably a mortgage right before I FIRE. As for wealth loss... well that's just a nebulous term that I'm not sure what you mean.

Roland of Gilead

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #18 on: July 21, 2014, 07:41:04 AM »
Quote
Broke is a temporary, poor is a mentality.

Awesome!

Check out Jacob at: http://earlyretirementextreme.com

Jacob lives off of $10k income from his $300k 'stache, hence the "extreme" bit.

No he doesn't.  He did for a short while but not now.

RetireAbroadAt35

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #19 on: July 21, 2014, 08:49:24 AM »
I too am very interested in hearing about some success stories of people who are FIRE on a 3 or 4% SWR. 

Did you adjust your asset allocation as you approached FIRE?  Are you confident of the sustainability your SWR strategy?

frugalnacho

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #20 on: July 21, 2014, 09:27:34 AM »
I'm confused by the premise of this topic. You want to know about peoples fears of inflation or wealth loss, specifically for those who have "low" portfolio values. However those two things (inflation and wealth loss) are more of a function of how adjusted you are to your expenses. Or rather there is almost always room to cut adjust and regardless of the size of your portfolio those two things are a factor for anyone (although you may want to define what you mean by wealth loss).

Are there any specific questions you would like to ask? That might get you some direct answers.

That being said my plan is to FIRE on $500k to $600k. My concerns with inflation are mitigated with a high percentage in equities, an ability to work if need be, and probably a mortgage right before I FIRE. As for wealth loss... well that's just a nebulous term that I'm not sure what you mean.

I think he is looking for real world examples.  A lot of people here say they can FIRE at 500k and be perfectly happy, but I think the op wanted some anecdotal evidence from people that are currently doing it.

smalllife

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #21 on: July 21, 2014, 09:39:40 AM »
How is retiring with $1 million and $40k in expenses any different than retiring with $2 million and $80k expenses?  I'm trying to figure out why asking about the less than a million is any different than asking for anyone who is living on 4% in general . . it's the same math, just at a different price point.

matchewed

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #22 on: July 21, 2014, 09:46:56 AM »
I'm confused by the premise of this topic. You want to know about peoples fears of inflation or wealth loss, specifically for those who have "low" portfolio values. However those two things (inflation and wealth loss) are more of a function of how adjusted you are to your expenses. Or rather there is almost always room to cut adjust and regardless of the size of your portfolio those two things are a factor for anyone (although you may want to define what you mean by wealth loss).

Are there any specific questions you would like to ask? That might get you some direct answers.

That being said my plan is to FIRE on $500k to $600k. My concerns with inflation are mitigated with a high percentage in equities, an ability to work if need be, and probably a mortgage right before I FIRE. As for wealth loss... well that's just a nebulous term that I'm not sure what you mean.

I think he is looking for real world examples.  A lot of people here say they can FIRE at 500k and be perfectly happy, but I think the op wanted some anecdotal evidence from people that are currently doing it.

How is retiring with $1 million and $40k in expenses any different than retiring with $2 million and $80k expenses?  I'm trying to figure out why asking about the less than a million is any different than asking for anyone who is living on 4% in general . . it's the same math, just at a different price point.

This. It's the same as any other type of retirement expense point. Those higher in expenses may not be able to see the flexibility in lower expenses but there is flexibility. Those lower in expenses than that may shake their head at the waste or extravagance (they also just might not care). I get what you're saying about real world examples but the specific questions were tacked on the end there indicating some concern that I don't think is fleshed out very well.

RetireAbroadAt35

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #23 on: July 21, 2014, 10:14:10 AM »
The math is the same, but the experience/standard-of-living is different.  I get the math.  What I haven't heard is very many FIRE stories.  The one I have seen often involve rental income, part-time work, going back to work or having a working spouse.  I haven't seen too many stories based on the pure SWR of bonds & equities.

frugalnacho

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #24 on: July 21, 2014, 10:35:17 AM »
I'm confused by the premise of this topic. You want to know about peoples fears of inflation or wealth loss, specifically for those who have "low" portfolio values. However those two things (inflation and wealth loss) are more of a function of how adjusted you are to your expenses. Or rather there is almost always room to cut adjust and regardless of the size of your portfolio those two things are a factor for anyone (although you may want to define what you mean by wealth loss).

Are there any specific questions you would like to ask? That might get you some direct answers.

That being said my plan is to FIRE on $500k to $600k. My concerns with inflation are mitigated with a high percentage in equities, an ability to work if need be, and probably a mortgage right before I FIRE. As for wealth loss... well that's just a nebulous term that I'm not sure what you mean.

I think he is looking for real world examples.  A lot of people here say they can FIRE at 500k and be perfectly happy, but I think the op wanted some anecdotal evidence from people that are currently doing it.

How is retiring with $1 million and $40k in expenses any different than retiring with $2 million and $80k expenses?  I'm trying to figure out why asking about the less than a million is any different than asking for anyone who is living on 4% in general . . it's the same math, just at a different price point.

This. It's the same as any other type of retirement expense point. Those higher in expenses may not be able to see the flexibility in lower expenses but there is flexibility. Those lower in expenses than that may shake their head at the waste or extravagance (they also just might not care). I get what you're saying about real world examples but the specific questions were tacked on the end there indicating some concern that I don't think is fleshed out very well.

I think there tends to be much more fat in your budget the higher you go.  If you live on 100k a year there is plenty of room to down size and cut back.  You may not like it or want to, but it is always an option if the shit hits the fan so I think you are automatically better off.  If you are already optimized and living on a greatly reduced budget there is no flexibility though.

dude

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #25 on: July 21, 2014, 11:02:21 AM »
Pretty sure Retired Syd over at Retirement: A Full-Time Job is doing it, though I believe she subscribes to the 3% SWR for early retirees.

PDX Citizen

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #26 on: July 21, 2014, 11:11:42 AM »
Could be that most of the people who are actually retired, no longer spend that much time on internet forums (they're off having fun!)

matchewed

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Re: Early retired below 1 million $? - People living on 4% are wanted!!!
« Reply #27 on: July 21, 2014, 11:21:33 AM »
I'm confused by the premise of this topic. You want to know about peoples fears of inflation or wealth loss, specifically for those who have "low" portfolio values. However those two things (inflation and wealth loss) are more of a function of how adjusted you are to your expenses. Or rather there is almost always room to cut adjust and regardless of the size of your portfolio those two things are a factor for anyone (although you may want to define what you mean by wealth loss).

Are there any specific questions you would like to ask? That might get you some direct answers.

That being said my plan is to FIRE on $500k to $600k. My concerns with inflation are mitigated with a high percentage in equities, an ability to work if need be, and probably a mortgage right before I FIRE. As for wealth loss... well that's just a nebulous term that I'm not sure what you mean.

I think he is looking for real world examples.  A lot of people here say they can FIRE at 500k and be perfectly happy, but I think the op wanted some anecdotal evidence from people that are currently doing it.

How is retiring with $1 million and $40k in expenses any different than retiring with $2 million and $80k expenses?  I'm trying to figure out why asking about the less than a million is any different than asking for anyone who is living on 4% in general . . it's the same math, just at a different price point.

This. It's the same as any other type of retirement expense point. Those higher in expenses may not be able to see the flexibility in lower expenses but there is flexibility. Those lower in expenses than that may shake their head at the waste or extravagance (they also just might not care). I get what you're saying about real world examples but the specific questions were tacked on the end there indicating some concern that I don't think is fleshed out very well.

I think there tends to be much more fat in your budget the higher you go.  If you live on 100k a year there is plenty of room to down size and cut back.  You may not like it or want to, but it is always an option if the shit hits the fan so I think you are automatically better off.  If you are already optimized and living on a greatly reduced budget there is no flexibility though.

I can see that but I also see where the concepts of the wheaton eco scale and hedonistic adaptation come in to play. Remember that there are other downsides of hedonistic adaptation beyond the upward in that anytime you go below what you are comfortable with you are experiencing a perceived loss, note the response of individuals who have come on the board to complain about how hard it is to let go of the private schools, $1mil houses, housekeepers, and dog walkers. My point being that it is actually all relative to your position and that everyone probably feels the same regardless of exact location on the spectrum (extreme cases probably break this point easily but they are extreme cases).

So asking for sub $1mil experiences isn't really necessarily gaining any knowledge. The same lessons can be learned through others that don't fit that narrow criteria just by listening and applying. But whatevs. :)