Author Topic: How much would you need to be FI if you kept working (for fun) and only lived off of that income?  (Read 5467 times)

bhleigh

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Along this same line of thinking, does anyone know how to calculate the IRS Life Expectancy payout for 401K/TSPs?

I am a US federal employee, age 36, will have 20 years of service at 43, and currently have $266k in the TSP. At current contribution rates and 7% return, at 43, I will have $636k in my TSP. If I "retire" from the government at 43, I can elect to have a monthly payment according to the IRS LIfe Expectancy tables. I just can't figure out that payment amount.

I used this (platform.grbinc.com) which tells me that based on a current $209k balance my annuity would be $242/month or $2,904 per year, which is 1.4% of the balance. I assume this has to be based on an immediate annuity at my age of 31 and not what I'd get if I were 57 or 62, but I highly doubt an annuity is the way you want to go.

Thanks for the help!
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rubybeth

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I think this is basically my plan, to be able to go to part-time work in my same field (either negotiate for fewer hours or just move to a different job), or allow my husband to go part-time, or both of us go part time and not need to stash during that time as our stash grows on its own without additional contributions while also keeping our tax bracket lower.

I think somewhere between $500-$800k would do it, if we were able to not touch the stash. There are a lot of unknowns at this point. One thing that would help is if one of our jobs would cover medical for both of us--that would be worth a heck of a lot more than the actual paycheck.
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trollwithamustache

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500k in the bag by age 40 was my number for working until 62 but not needing to save  any more after that point. I kept savings because I would like that number much higher to pull in FI to 55 and with kids the wife and I aren't 100% sure of that number. 

part time/selective contracting employment can be a lot more enjoyable and enjoying life is the point isn't it?  I won't go back to full time salaried ever ever again.

boarder42

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I can retire comfortably on a million.

500 grand invested over a 20 year period should yield returns of about 1.1 million inflation adjusted . . . So, my number would be about 500 k to retire while working fun jobs.

what return are you using b/c over 20 years that should be closer to 2MM inflation adjusted at 7%.  in 10 years you'd hit your 1MM number
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arebelspy

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Interesting questions. 

Regarding the initial one "how much do you need saved to supplement fun gigs w/ a 4% WR" (I'm summarizing), I think we could semi-ER with only fun gigs and live just off that, so $0 saved first?

As far as the second question (how much saved to let compound over 20 years so you can work just enough to cover expenses and let the stache compound to full FI in 20 years), hmmm.

Let's say 1MM in today's dollars, 7% inflation adjusted return.  If we had $0 to start out with, side gigs would need to earn us a $24.4k/yr surplus. If side gigs gave us no surplus, we'd need about 258k right now.

So somewhere between those numbers, likely.  Maybe 100k saved first?

Shockingly low numbers either way. Somewhere between $0 and $200k would be plenty to semi-ER.

...yes, we really should have ER'd sooner.  :)
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nereo

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yes, we really should have ER'd sooner.  :)

A fascinating statement from a couple that ERed in their early 30s...

Also feeling more confident about our own "glide into FI" plan now.
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GuitarStv

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I can retire comfortably on a million.

500 grand invested over a 20 year period should yield returns of about 1.1 million inflation adjusted . . . So, my number would be about 500 k to retire while working fun jobs.

what return are you using b/c over 20 years that should be closer to 2MM inflation adjusted at 7%.  in 10 years you'd hit your 1MM number

4%

trollwithamustache

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Regarding the initial one "how much do you need saved to supplement fun gigs w/ a 4% WR" (I'm summarizing), I think we could semi-ER with only fun gigs and live just off that, so $0 saved first?

That would be the dirty secret of a little frugality. You can't share that on the internet!

2Birds1Stone

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I recently made a post about this in my journal here.

My current stash covers about $1100/month, so I would need another $900/month after taxes to maintain current lifestyle.

$207/week after taxes can easily be earned averaging 2-3 days a week at a store like Trader Joe's, where the hours are flexible (first shift is 4AM-Noon, last is 4 PM to midnight)

They also offer a $.60/hr raise every 6 months if you are a good employee.

If I didn't want to tap into my nest egg and let it grow in the background, I would need to earn $2k/month after taxes. Which would require full time low skilled work.
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arebelspy

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Regarding the initial one "how much do you need saved to supplement fun gigs w/ a 4% WR" (I'm summarizing), I think we could semi-ER with only fun gigs and live just off that, so $0 saved first?

That would be the dirty secret of a little frugality. You can't share that on the internet!

Haha, totally!
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neo von retorch

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But is Trader Joe's a "fun job?"

Seriously, while I was mildly happy to work at a gas station in my teens, how would I feel making well under $20/hr now to do something like that, after experiencing the corporate fire hose of cash flow?

StarBright

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I've thought about this. Currently I'm 30 and my wife is 28. If my wife and I were to try this approach, and planned to work only at jobs that we enjoyed for a period of 20 years, that take us to 50years old, and our future kids would be 18+.

I'd like to start the adventure with $300k in investments. Such that it has time to compound. In 20 years at 7% interest, our "Stache" would reach 1.2m, and we'd still be much younger than the average retiree.


Our current plan is to do something like this (we are in our mid 30s). DH is a swami that never wants to retire and I am in a great, flexible job but they've burned me out and I want to make a change. We are getting our investments to 300k and then I'll switch to part-time, or SAHM, or make a career change. DH has a mandatory retirement contribution as well so our stache will continue to grow until whenever.

I'm feeling pretty good about this plan right now.

matchewed

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My GF and I are suddenly very high earners (IMO) within the last year with a three family rental property (2 rents covering all expenses while we live in there). I've been guiding her into the concept of FIRE since I started dating her so that she'd know more about one of my goals.

When we were talking one time about such things I was running her through various scenarios. She'd rattle off variable changes and I'd give her what our success rate was given the variables.

She asked what if we made $30k/yr for the rest of time? I told her we wouldn't have to save a dime at that point. All our savings would be pure excess. This blew her mind. It further blew her mind that all we'd need is to each have a $10k a year job with our current stache and passive income in order to stop.

If I understand the question I guess that answers it for me. We're at that point now where we could work some fun little jobs, my GF already has one on the weekends. So $250k in the bank does it for me.

Maybe I'm looking at it with some particularly rosy glasses but I think I did like those lower responsibility jobs. They lent a greater amount of chatting with coworkers and customers. The stress was a great deal less I believe.

arebelspy

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But is Trader Joe's a "fun job?"

Seriously, while I was mildly happy to work at a gas station in my teens, how would I feel making well under $20/hr now to do something like that, after experiencing the corporate fire hose of cash flow?

Definitely. I can't imagine going into a job like that right now and dealing with customers.  I feel like within a short amount of time I'd be going "I'm FI! I don't need this!" (Though I guess in this scenario I would, which would suck. But picturing it now, in my current situation.. ugh. :P)

But some might enjoy it, and more power to them. We all have different things we enjoy.

More impotantly, are there any hobbies you might explore that would be fun and could earn money.
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moonpalace

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Definitely. I can't imagine going into a job like that right now and dealing with customers.  I feel like within a short amount of time I'd be going "I'm FI! I don't need this!" (Though I guess in this scenario I would, which would suck. But picturing it now, in my current situation.. ugh. :P)

But some might enjoy it, and more power to them. We all have different things we enjoy.

More impotantly, are there any hobbies you might explore that would be fun and could earn money.

I can't imagine going back to working retail, either, but I can *definitely* imagine just cutting back my existing job to (very) part-time and having that be pretty darn amazing.

Or starting a little climbing gym and maybe clearing $20k/year . . . or something else like that. Or work full-time, but only in odd-numbered years!

To me, the power of this line of thinking is not that you get to go pump gas, but that you have a tremendous array of options once you only have to earn a little bit.

nereo

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Just a thought:  I've found that I enjoy a job far more when I really don't need it.   Several times in my life I've had jobs that I "needed" to make ends meet. It was a huge drag.  But once my situation changed I liked the job a lot more.  For example, I picked up a job in college at a seafood wholesaler to pay my tuition.  It was awful.  But then I got a scholarship but kept the job - within a few weeks my opinion of the job changed dramatically.  I also worked retail when I needed extra money and hated it.  Then I was begged back by my former manager for the holiday season and had a really fun time, in part because I didn't give a damn if I was meeting my 'metrics' or not and everything i earned was going straight to savings.  Ironically - I was a better employee the second time (though whether that's due to experience or attitude I can't say).
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trollwithamustache

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But is Trader Joe's a "fun job?"

Seriously, while I was mildly happy to work at a gas station in my teens, how would I feel making well under $20/hr now to do something like that, after experiencing the corporate fire hose of cash flow?

More impotantly, are there any hobbies you might explore that would be fun and could earn money.

Not TJs, but step into any WestMarine store and a very happy semi-retired clerk will chat boating with you for far longer than you probably have time for.

Finances_With_Purpose

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Interesting questions. 

Regarding the initial one "how much do you need saved to supplement fun gigs w/ a 4% WR" (I'm summarizing), I think we could semi-ER with only fun gigs and live just off that, so $0 saved first?

As far as the second question (how much saved to let compound over 20 years so you can work just enough to cover expenses and let the stache compound to full FI in 20 years), hmmm.

Let's say 1MM in today's dollars, 7% inflation adjusted return.  If we had $0 to start out with, side gigs would need to earn us a $24.4k/yr surplus. If side gigs gave us no surplus, we'd need about 258k right now.

So somewhere between those numbers, likely.  Maybe 100k saved first?

Shockingly low numbers either way. Somewhere between $0 and $200k would be plenty to semi-ER.

...yes, we really should have ER'd sooner.  :)

You're inspiring me to do it sooner.  Though I really wonder how I could lower housing costs by enough to make that leap.  We, too, could be semi-ER with side biz income that would continue supporting us - and absolutely love life.  I'm constantly debating how much we'd need to have saved in order to pull the trigger. 

But for now, we are doing higher-risk things, like taking lower-paying gigs that are fun, starting our own businesses, and the like - and I'm confident that one of these areas will pan out enough that the problems will probably solve themselves.  Meanwhile, we're finding more ways to make money by doing what we love. 

Plus, this community is amazing: constantly learning more.  (You tipped us off to tradelines, for instance, and I signed up yesterday.)  And constantly adding value to our lives as well as others' lives.  I use a good chunk of what I learn here (where appropriate) in my financial planning meetings. 

tj

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It doesn't take much if your expenses are low. According to my dashboard, I'm there (see "retire on current NW" ; annual expenses of ~19k, NW of ~160k).
https://www.dropbox.com/s/y3v1iwj78d7auiz/dashboard.png?dl=0

That's over a 10% SWR. Is that something you'd actually do?

MaaS

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Cool thread, this is basically my plan as well.  I'm already self-employed as a consultant, so ramping up and down is pretty straight-forward.

A big factor for me is a more favorable take home pay percentage.  It's absolutely a whiny "first world problem," but the reality is that with a strong income, two days of your life each week go towards taxes.  With the wealth creation happening in the background and simply working to pay bills, you suddenly keep almost everything.  Also, health insurance is dirt cheap with an income of under 50k.

It's a very compelling life model if you have the fortune and focus to sock money away early!