The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: mgardner88 on January 18, 2024, 12:35:54 PM
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So tell me what I'm missing here, our goal for FIRE is 8 years out. I have a governmental 457b, a pension (1100 a month at 62 for life) and a 401k. In 2032 our numbers (assumed 8% return and continuing our current contributions) would be:
457b- $377k
401k- $437k
I can start withdrawing the 457b whenever I separate from my job, as there is no age requirement. In 8 years ill be 44 years old. What would be the issue with drawing down my 457b for 15 years, $40,000 a year. At that point my 457 would be depleted, and I would be 59 1/2. I would then have access to the 1.3 million 401k (again assuming 8% growth). And in 3 years my pension and eventually SS (hopefully). Our house would be paid off before we FIRE.
Maybe the 8% return is to optimistic? I can tweak the dates if so. Or there's something I'm not thinking about completely?? Let me know what I'm not thinking about!! TIA
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What's your annual spend? Is ($40k - taxes) enough?
Assuming an 8% return does seem optimistic.
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Wade Pfau has done useful extensions of the Trinity Study, which might be interesting for your case. In particular, he has taken projections for success other then 30 year intervals. You are proposing a 10.6% withdrawal from your 457 for the first 15 years. Even at high levels of stock holdings, the chance of success is not good.
https://retirementresearcher.com/safe-withdrawal-rates-for-retirement-and-the-trinity-study/
You can explore different scenarios. Certainly, your later years benefit from your pension. I also think of my first years as a bucket of cash+taxable (as I don't have a 457) so I do think the method is sound. It's a matter of how much risk you think you will take. For example, what would your withdrawal do if you began in 2020, with an early withdrawal before the market recovery? And again in 2022, with markets down? Reaching for return is good in the long term, but can expose you to more SORR if you can't avoid withdrawals in down markets. I have a barbell strategy: 100% equities, but 12 months+ in cash, so I don't care, quarter to quarter.
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Our annual spend now is about 60k, 20k of that is mortgage, we also have three children that will be young adults at the time we FIRE. So some of this will depend on their needs at the time, in an ideal world where they are all launched successfully is what I am basing this off of. The house we may keep or may sell, worth about 400k right now. Who knows where the real estate market will head though. 6% return seems more realistic?
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Wade Pfau has done useful extensions of the Trinity Study, which might be interesting for your case. In particular, he has taken projections for success other then 30 year intervals. You are proposing a 10.6% withdrawal from your 457 for the first 15 years. Even at high levels of stock holdings, the chance of success is not good.
https://retirementresearcher.com/safe-withdrawal-rates-for-retirement-and-the-trinity-study/
You can explore different scenarios. Certainly, your later years benefit from your pension. I also think of my first years as a bucket of cash+taxable (as I don't have a 457) so I do think the method is sound. It's a matter of how much risk you think you will take. For example, what would your withdrawal do if you began in 2020, with an early withdrawal before the market recovery? And again in 2022, with markets down? Reaching for return is good in the long term, but can expose you to more SORR if you can't avoid withdrawals in down markets. I have a barbell strategy: 100% equities, but 12 months+ in cash, so I don't care, quarter to quarter.
Thank you! I'm going to look at the extensions. Also barbell strategy, that is the first time I have heard that term. We do have a small brokerage but its been last on my list of buckets to fill because of the 457b. I like the idea of having cash to avoid withdrawal in particularly down markets. Gives me alot to think about. Exactly what i was looking for! :)