FIRE on 4%?

[AdrianC]

Lots of people talk about it, but does anyone really do it?

Has anyone retired early intending to withdraw 4% of their portfolio annually, and has no other source of income or financial or medical benefit? No pension, no still working spouse , no part time gig as greeter at Wal Mart.

How is that working out for you?

EDIT: I don't mean retire and never earn another dollar for the rest of your lives. I mean rather has anyone retired early intending to withdraw 4% of their portfolio annually, and has no other *regular* source of income or financial or medical benefit? Expecting SS down the road is not counted since most of us will be getting some SS.

[Hank Sinatra]

Can't speak for the adrenaline freaks but the 4% rule is designed to cover a 30 yr retirement.  An early retirement would almost certainly run longer than that so if they're not using something less than  4% they really ought to.

[MrMoogle]

Why not use 4%?  Even for 60 years, you have an 83% chance to never have to work again.  And that remaining 17%, what's wrong with working a couple years after the market has tanked?  Even if it is a greeter at Wal-Mart? 

[BeanCounter]

following. I think we could be as close to five years from FIRE, and after watching the investments closely I just can't seem to get comfortable with it. I'm not sure our investments will ever earn enough, consistently, to do it.

[StetsTerhune]

I'm not sure our investments will ever earn enough, consistently, to do it.

It's not about consistently, some years they'll earn 30%, some year's they'll earn -30%.

Can't speak for the adrenaline freaks but the 4% rule is designed to cover a 30 yr retirement.  An early retirement would almost certainly run longer than that so if they're not using something less than  4% they really ought to.

Requisite madfientist link: http://www.madfientist.com/safe-withdrawal-rate/


The key to me is recognizing that you're taking a risk either way. You're either working now and risking that it'll turn out you didn't need to, or retiring now, and risking that you might need to go back to work for a while later. Obviously the math works out differently for all of us, but let's not say "adrenaline freaks," as if one choice is super risky and the other super safe.

[BeanCounter]

I'm not sure our investments will ever earn enough, consistently, to do it.

It's not about consistently, some years they'll earn 30%, some year's they'll earn -30%.

[

Well, that's my problem, I can't remember a year in the last 15 where my investments earned anywhere close to 30%. There were a couple years where I think we did 10%-14%. I fully admit that I could possibly have some losers. Although most of it is indexes. And there are probably years where I didn't pay close enough attention.
Obviously things I need to work on.
I know that history shows that the average is 4% earnings after inflation over a 30 year history. The data is there to prove it. But what if the times are changing and those returns that help smooth the average aren't going to be available?

[StetsTerhune]

I'm not sure our investments will ever earn enough, consistently, to do it.

It's not about consistently, some years they'll earn 30%, some year's they'll earn -30%.
[

Well, that's my problem, I can't remember a year in the last 15 where my investments earned anywhere close to 30%. There were a couple years where I think we did 10%-14%. I fully admit that I could possibly have some losers. Although most of it is indexes. And there are probably years where I didn't pay close enough attention.
Obviously things I need to work on.
I know that history shows that the average is 4% earnings after inflation over a 30 year history. The data is there to prove it. But what if the times are changing and those returns that help smooth the average aren't going to be available?

4% isn't the average market return after inflation. 4% is the amount you can take out and be very confident that you won't run out of money in a random 30 year period. The S&P 500 has average about 7% after inflation historically. The 4% has a huge safety margin built into that already.

And, yes, if your max in the last 15 years was 10%-14%, then you really need to start paying more attention. S&P 500 was up 33% in 2013, 26% in 2009, and 29% in 2003.

[AdrianC]

Requisite madfientist link: http://www.madfientist.com/safe-withdrawal-rate/

It's a good read...but he's another one who isn't FIRE on 4%.

Let's not make this about proving the 4% rule - there's lot's of threads for that. I was just interested in who has actually done it. Who FIRE'd on 4?

And if you're FIRE'd but not on 4%, please chime in too. Did you target less than 4%? Why?

[StetsTerhune]

Let's not make this about proving the 4% rule - there's lot's of threads for that. I was just interested in who has actually done it. Who FIRE'd on 4?

And if you're FIRE'd but not on 4%, please chime in too. Did you target less than 4%? Why?

Apologies for jumping on the derailment bandwagon. I think there's a huge selection bias on the internet. The people with blogs are the people who likely have a hard time earning nothing -- they're clearly people who enjoy being busy. Nothing wrong with that, but they're not the people who are going to earn nothing ever again and pull 4%. Even the people on the forum, I suspect many of them (like me) are posting here because they're "at work" and looking for a distraction. My guess is posting activity drops considerably at FIRE.

I too am very curious if anyone has actually followed the Trinity Study withdrawal algorithm to the letter. I wholly believe in 4% as a good guideline, but I think you'd have to be some kind of madman to check your total networth on day one of retirement, and withdraw 4% of that number, increasing for inflation, no matter what happens in the market for the rest of your life.

[thriftyc]

I think if you asked MMM himself - he would say 4% is really safe.  However, he would also say that you should probably have some "margins of safety" built in as well.  IE: Willing to go back to work at least part time in the future, social security, online fun income etc.   The thought is, if you have the work ethic and smarts to retire early on 4% of your assets, you should be able to adapt and pick up additional income down the road if needed or flex your mustachian muscles and cut your spending some more.

[Eric]

I wholly believe in 4% as a good guideline, but I think you'd have to be some kind of madman to check your total networth on day one of retirement, and withdraw 4% of that number, increasing for inflation, no matter what happens in the market for the rest of your life.

Well, that all depends on how it goes, right?  Historically, at the end of 30 years, the average balance is 2x your starting balance and the median is 1.5x.  (real dollars, not nominal)  Would you really consider someone a madman who did exactly that for 30 years and ended up with more money than they started with?

And to stay on topic (yeah!), I don't think it's possible for anyone to follow the Trinity Study exactly.  Most of us are going to collect SS at some point, right?

[Hank Sinatra]

Stets: let's not say "adrenaline freaks," as if one choice is super risky and the other super safe.

I didn't say it that way. The "As if" was your convention.

You're either working now and risking that it'll turn out you didn't need to, or retiring now, and risking that you might need to go back to work for a while later.

I said nothing of working longer. But since you brought it up. Working a wee bit extra and NOT retiring is not taking risk.  Retiring with 83% confidence is risk. Having to go back to work after 20 years is risk. Now, maybe somebody sees that as acceptable?   Have a nice day

[Hank Sinatra]

Why not use 4%?

Why not?

Even for 60 years, you have an 83% chance to never have to work again.  And that remaining 17%, what's wrong with working a couple years after the market has tanked?  Even if it is a greeter at Wal-Mart?

That's why. heh heh heh

[Matumba]

Posting to follow

[Financial.Velociraptor]

Requisite madfientist link: http://www.madfientist.com/safe-withdrawal-rate/

It's a good read...but he's another one who isn't FIRE on 4%.

Let's not make this about proving the 4% rule - there's lot's of threads for that. I was just interested in who has actually done it. Who FIRE'd on 4?

And if you're FIRE'd but not on 4%, please chime in too. Did you target less than 4%? Why?

I'm three years into FIRE on MORE than 4% WR.  If you have a high allocation to income, you can be much less worried about sequence of returns risk.  I currently pull 100.18% of my projected annual budget strictly from dividends, distributions, and interest.  The market can tank 80% for all I care so long as my investments keep making their cash payments.  I wait a *long* time for a rebound.  I also sell options around my existing holdings to supplement returns and reduce volatility. 

You 4% people seem overly cautious to me.

[Cap_Scarlet]

I suspect that anyone who relies on historical data is making a mistake.

[Mr. Green]

I think the OP may struggle to find a solid group of people who could speak to FIREing on 4% and never earning another dollar for the rest of their lives. My wife and I intend to FIRE on 4% very shortly here but I like work (meaning doing stuff). It will literally be impossible for me to live my life, doing stuff, without that somehow turning into a little money at various times.

[Eric]

I suspect that anyone who relies on historical data is making a mistake.

I also prefer future data

[steveo]

Why not use 4%?  Even for 60 years, you have an 83% chance to never have to work again.  And that remaining 17%, what's wrong with working a couple years after the market has tanked?  Even if it is a greeter at Wal-Mart?

I honestly intend to retire on a 5% wr because I don't include my house which can be downsized, pensions (only government) and inheritance. Mind you my wife wants something like a 3% WR so lets see what really happens.

[ShortInSeattle]

I suspect that anyone who relies on historical data is making a mistake.

I also prefer future data

LOL. I love it.

OP, we are ER'ing very soon on 4% but I feel comfortable doing so only because of certain caveats:

We will be eligible for social security but didn't account for it in our calculations.
We're likely to pick up some project work from time to time.
Our budget at 4% isn't super lean and includes optional expenses like travel that can be pared back if necessary.

This is pretty close to how MMM described his rationale for the 4% rule. And it works for me. In fact the only reason I want these extra layers of safety is because we are young. If we were 55 I'd use 4% without losing any sleep. But our money needs to last a very long time.

If I wanted to feel *super super safe* I'd save until we were at a 3% WR but at a certain point I'm just giving up years of my life for extra safety blanket. And those are years of my life I won't get back. So 4% (with caveats) is where we landed.

SIS

[Bateaux]

4% is safe if you have done your homework.  If you have zero debt, if you have saved for education, healthcare, home repairs, etc.  Have all your ducks in a row before retirement.  The 4% will handle day to day expenses.  I'd hate to pay a mortage or car loan out of that 4%.

[Sweet freedom]

We are withdrawing 2.5% excluding the house and the college fund. We are still in our 40s. We just completed our first year of FIRE. We have little kids so our activities and our spending is somewhat limited to their school schedule.

[Arktinkerer]

I said nothing of working longer. But since you brought it up. Working a wee bit extra and NOT retiring is not taking risk.  Retiring with 83% confidence is risk. Having to go back to work after 20 years is risk. Now, maybe somebody sees that as acceptable?   

Risk is unavoidable--Risk of working is that you may die tomorrow and have spent your life doing what you don't enjoy or at least not doing what you would most enjoy.  The other side is you wind up on public assistance.  Which is the worse outcome depends on the person.

[redcedar]

Dividends. Part of your 4% or in addition to?

[AdrianC]

I think the OP may struggle to find a solid group of people who could speak to FIREing on 4% and never earning another dollar for the rest of their lives. My wife and I intend to FIRE on 4% very shortly here but I like work (meaning doing stuff). It will literally be impossible for me to live my life, doing stuff, without that somehow turning into a little money at various times.

I don't mean retire and never earn another dollar for the rest of your lives. I mean rather has anyone retired early intending to withdraw 4% of their portfolio annually, and has no other *regular* source of income or financial or medical benefit?

Let's ignore social security because none of us retiring early are getting it for a decade or two or three. I don't factor it in at all.

So, for example, if you retire early on 4%, but your spouse still works and you get your families medical coverage from her employer, that doesn't count. (Medical insurance is our second largest expense, after groceries).

It occurs to me too that a single person with no dependents or a young couple can take more risk and have more budget flexibility than those of us with mouths to feed. For them a 4% or more WR could make perfect sense.

[AdrianC]

I'm three years into FIRE on MORE than 4% WR.  If you have a high allocation to income, you can be much less worried about sequence of returns risk.  I currently pull 100.18% of my projected annual budget strictly from dividends, distributions, and interest.  The market can tank 80% for all I care so long as my investments keep making their cash payments.  I wait a *long* time for a rebound.  I also sell options around my existing holdings to supplement returns and reduce volatility. 

You 4% people seem overly cautious to me.

Might well turn out to be :-)

I'm surprised that dividends, distributions and interest are giving you >4%. Do you mind sharing a bit about your investments?

[AdrianC]

I honestly intend to retire on a 5% wr because I don't include my house which can be downsized, pensions (only government) and inheritance. Mind you my wife wants something like a 3% WR so lets see what really happens.

Let us know how that battle goes. Similar problem here :-)

[Financial.Velociraptor]

Might well turn out to be :-)

I'm surprised that dividends, distributions and interest are giving you >4%. Do you mind sharing a bit about your investments?

My fixed income all pays more than 4%.  My equities are largely REIT, BDC, and MLP.  Also some hybrid preferreds and equity funds that are invested in global debt paying more than 4%.  It isn't hard to find sectors that pay more than 4% as income.  It's usually at the expense of some growth.  I have an allocation to insurance to manage my inflation risk.  My written puts usually pay in excess of 12% as well.  Options are a different asset class and have a different risk/reward profile...

[AdrianC]

We are withdrawing 2.5% excluding the house and the college fund. We are still in our 40s. We just completed our first year of FIRE. We have little kids so our activities and our spending is somewhat limited to their school schedule.

We have 3 kids. As they get older the expenses go up. Gymnastics, martial arts, after school activities, orthodontics, medical ailments and so on really eat into the budget.

Looks like you have a great safety margin at 2.5%.

[steveo]

I honestly intend to retire on a 5% wr because I don't include my house which can be downsized, pensions (only government) and inheritance. Mind you my wife wants something like a 3% WR so lets see what really happens.

Let us know how that battle goes. Similar problem here :-)

This is a tough one isn't it. My wife is also just starting part time work so its easy for her to say it. To be fair to her she does most of the work around the house and taking care of the kids.

[steveo]

We are withdrawing 2.5% excluding the house and the college fund. We are still in our 40s. We just completed our first year of FIRE. We have little kids so our activities and our spending is somewhat limited to their school schedule.

We have 3 kids. As they get older the expenses go up. Gymnastics, martial arts, after school activities, orthodontics, medical ailments and so on really eat into the budget.

Looks like you have a great safety margin at 2.5%.

There are all sorts of costs aren't there. I think we have just spent probably about $2000 sending the 3 kids off to school this year. Admittedly it's a big expense year as 2 kids start at a new school and require school uniforms and one requires a laptop.

My daughter has braces - that costs $5000 over 2 years. She is the oldest kid. Hopefully the other kids don't need them but typically the dentist/orthodontist will tell you they do.

[thriftyc]

We are withdrawing 2.5% excluding the house and the college fund. We are still in our 40s. We just completed our first year of FIRE. We have little kids so our activities and our spending is somewhat limited to their school schedule.

We have 3 kids. As they get older the expenses go up. Gymnastics, martial arts, after school activities, orthodontics, medical ailments and so on really eat into the budget.

Looks like you have a great safety margin at 2.5%.

There are all sorts of costs aren't there. I think we have just spent probably about $2000 sending the 3 kids off to school this year. Admittedly it's a big expense year as 2 kids start at a new school and require school uniforms and one requires a laptop.

My daughter has braces - that costs $5000 over 2 years. She is the oldest kid. Hopefully the other kids don't need them but typically the dentist/orthodontist will tell you they do.

Can relate to concerns about extra costs when it come to kids.  I am on the cusp of FI with a SWR of just at 4% - but have 3 kids.  I am laid off, but will probably only go back to a PT job to cover the extras.

[avrex]

... but I like work (meaning doing stuff). It will literally be impossible for me to live my life, doing stuff, without that somehow turning into a little money at various times.

There's lot of stuff that I like doing. 
However, that stuff, wouldn't pay me a salary. :)

I need to make sure that I have enough money....because once I FIRE.... there's no going back.

[tj]

I think the OP may struggle to find a solid group of people who could speak to FIREing on 4% and never earning another dollar for the rest of their lives. My wife and I intend to FIRE on 4% very shortly here but I like work (meaning doing stuff). It will literally be impossible for me to live my life, doing stuff, without that somehow turning into a little money at various times.

I don't mean retire and never earn another dollar for the rest of your lives. I mean rather has anyone retired early intending to withdraw 4% of their portfolio annually, and has no other *regular* source of income or financial or medical benefit?

Let's ignore social security because none of us retiring early are getting it for a decade or two or three. I don't factor it in at all.

So, for example, if you retire early on 4%, but your spouse still works and you get your families medical coverage from her employer, that doesn't count. (Medical insurance is our second largest expense, after groceries).

It occurs to me too that a single person with no dependents or a young couple can take more risk and have more budget flexibility than those of us with mouths to feed. For them a 4% or more WR could make perfect sense.

The issue is that you are choosing to overlook social security which is going to be an important part of any frugal person's retirement. What I try to do for "FIRE" is to bridge the gap to social security age which is also around the time that I would start tapping into tax advantaged accounts. There are ways to access the IRA early, but it's easier for me to just look at it saving X amount to fund pre-IRA/Social Security and let the "true retirement" take care of itself with social security and my 401k/ira contributions. If I were to say, stop working at 40, it's hard for me to believe that there would be no income from whatever I happen to be doing with my time from that age to "true retirement age", so there is no worry that the 4% rule won't work over the 22 year period from 40 to 62 when I would then have access to social security, (and shortly after that,) medicare, IRA's etc, is just not something that ever comes to mind because it's not realistic.  I'm not sure 4% is the right number for this purpose for myself.

For the 4% rule to work, it doesn't matter how small your family is, it's a very simple mathematical equation and works off your available capital and expenses. I don't know that single person would be able to cut their expenses any easier than a family -a single person already has a smaller budget than a family, so their 25x goal is probably a much smaller number to begin with.

Sometimes I wonder if the 4% is too conservative for my purposes, when we are expecting to do some sort of paid work in 'early retirement'

[BTDretire]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

[tj]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

[dude]

This guy has been living on the 4% rule for 20 years (actually, because of the growth in his account, he's down to living on 1%):

http://www.retireearlyhomepage.com/20year.html

Also, he just published a short little piece on Wade Pfau's recent proclamation regarding current retirees' need to withdraw only 1.7%.

http://www.retireearlyhomepage.com/wadepfau_2016.html

[thriftyc]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

[tj]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

Not a really good example. Because MMM easily earns six figures from this blog and has plenty of "business expenses" that don't get reported on the "annual family expenses".

[Dicey]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

Not a really good example. Because MMM easily earns six figures from this blog and has plenty of "business expenses" that don't get reported on the "annual family expenses".

IDK what his blog generates, but he clearly states that his house is paid for. Not being critical, just reporting the facts. It makes a big difference, as does COL. My house is paid for, too, but the property taxes alone here are nearly 12k per year. Oh, hell yes, location matters.

[arebelspy]

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

Not a really good example. Because MMM easily earns six figures from this blog

Irrelevant to his spending.  His blog could earn him 1MM/yr, and it doesn't change the fact that his family's core spending has been ~25k/yr for years and years.  Not counting housing.  The imputed value of his paid off house is ~15k, IMO (based on previous calculations), so he's living a 40k lifestyle, or so, and it's quite luxurious, yes.

[AdrianC]

The issue is that you are choosing to overlook social security which is going to be an important part of any frugal person's retirement.

Can we estimate the expected social security benefit for an early retiree? My wife and I have both worked enough years to qualify, but not enough to get the full amount (I think).

Whatever estimate I can get, I'm still going to cut some from it. Social security is underfunded. Cuts in benefits are likely.

For the 4% rule to work, it doesn't matter how small your family is, it's a very simple mathematical equation and works off your available capital and expenses. I don't know that single person would be able to cut their expenses any easier than a family -a single person already has a smaller budget than a family, so their 25x goal is probably a much smaller number to begin with.

Kids come with unpredictable expenses, and we don't want our kids to have to suffer, so we feel like we should have a larger safety margin.

[soccerluvof4]

The ? that gets me somewhat confused is people always say save 25% of your needs so 25x80k = 2 million saved for being fire'd BUT thats not true on a 4% withdrawal is it if you need to figure in taxes on your withdrawal. You need more like 2.5 million saved to net 80k. so your really saving 31x's. this is at least where i got confused.

[tj]

The issue is that you are choosing to overlook social security which is going to be an important part of any frugal person's retirement.

Can we estimate the expected social security benefit for an early retiree? My wife and I have both worked enough years to qualify, but not enough to get the full amount (I think).

Whatever estimate I can get, I'm still going to cut some from it. Social security is underfunded. Cuts in benefits are likely.

For the 4% rule to work, it doesn't matter how small your family is, it's a very simple mathematical equation and works off your available capital and expenses. I don't know that single person would be able to cut their expenses any easier than a family -a single person already has a smaller budget than a family, so their 25x goal is probably a much smaller number to begin with.

Kids come with unpredictable expenses, and we don't want our kids to have to suffer, so we feel like we should have a larger safety margin.

People have been calling for social security cuts for decades, even on Mr. Collins' blog, they were saying that a few decades ago. I can't say with confidence what I'm going to get 3-4 decades from now from Social Security, but I am fairly confident that those who have a smaller lifetime earnings (such as early retirees) will continue receive a higher proportion of their career earned income than someone who retires at 65-70 where the continued work doesn't lead to much additional benefits. In regards to unexpected expenses, I think you have to do your best to budget. Early retiring with kids is probably more difficult than without kids, but there are plenty here who have done it and figured out how to do it.

[dude]

The issue is that you are choosing to overlook social security which is going to be an important part of any frugal person's retirement.

Can we estimate the expected social security benefit for an early retiree? My wife and I have both worked enough years to qualify, but not enough to get the full amount (I think).

Whatever estimate I can get, I'm still going to cut some from it. Social security is underfunded. Cuts in benefits are likely.

For the 4% rule to work, it doesn't matter how small your family is, it's a very simple mathematical equation and works off your available capital and expenses. I don't know that single person would be able to cut their expenses any easier than a family -a single person already has a smaller budget than a family, so their 25x goal is probably a much smaller number to begin with.

Kids come with unpredictable expenses, and we don't want our kids to have to suffer, so we feel like we should have a larger safety margin.

Yes, you can get an estimate of your Social Security benefits if you go to the Social Security webpage and sign up for an online account.  The projected amount that appears on your annual statement assumes (a) that you will continue to earn your current salary into the future, and (b) that you will work until the age at which you collect (62, FRA, 70).  For early retirees, that means the estimate is wildly off.  So there's a tool on the website that lets you enter in your actual projected salary year by year, and lets you pick the age at which you plan to stop working.

Once you have that figure, if you're pessimistic, then lop 23% off the top of it (i.e., to get 77% of your expected benefit, which is what current fund projections show SS can continue to provide for a very long time.

[StetsTerhune]

so he's living a 40k lifestyle, or so, and it's quite luxurious, yes.

My back of the envelope estimation is that 40k a year puts a family better off than ~99.7% of human beings that have ever existed. I'd call that luxurious. Peer group comparison and hedonic adaptation are such a funny thing though -- I don't know how else I can rationalize people breaking out the word "suffering" to describe what would happen to their children if they're denied something only .3% of humans have ever had.

[Mr. Green]

Kids come with unpredictable expenses, and we don't want our kids to have to suffer, so we feel like we should have a larger safety margin.

I've thought about this as well since we're planning to FIRE before having kids but everything I've read on this forum( (from people who have kids) leads me to believe much of this depends on what you feel obligated to do for your kids. I consider my upbringing to be a fairly poor one but I never felt like we suffered, truly suffered. Sure other kids had expensive clothes and there were times I wanted a Columbia jacket but that was more about being cool and fitting in than actually having said item. I think a lot of that has to do with how parents act. My parents never complained about what they didn't have so we never had those thoughts instilled in us. In college my parents couldn't afford to pay for anything but I believe that helped make me the responsible person I am today because I had to earn it on my own. My wife was the same, had to earn her own way and she's just like me with respect to money. For these reasons I feel confident that we can handle whatever needs come along without breaking the bank. If we have a special needs child that requires spending a lot of money that's a different story but I'm going to play the odds there; I think they're in my favor.

[arebelspy]

The ? that gets me somewhat confused is people always say save 25% of your needs so 25x80k = 2 million saved for being fire'd BUT thats not true on a 4% withdrawal is it if you need to figure in taxes on your withdrawal. You need more like 2.5 million saved to net 80k. so your really saving 31x's. this is at least where i got confused.

You need to save 25x your expenses.

Your expenses include taxes, insurance, etc.

Any money you have to pay is an expense.

Save 25x that number.

[tj]

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

Not a really good example. Because MMM easily earns six figures from this blog

Irrelevant to his spending.  His blog could earn him 1MM/yr, and it doesn't change the fact that his family's core spending has been ~25k/yr for years and years.  Not counting housing.  The imputed value of his paid off house is ~15k, IMO (based on previous calculations), so he's living a 40k lifestyle, or so, and it's quite luxurious, yes.

To some extent, yes it is irrelevant in terms that he is not going to inflate his lifestyle, but knowing that one is receiving far more than your expenses in blog income is absolutely going to be psychologically comforting to anyone trying to live off a nest egg for a very long time.

[soccerluvof4]

The ? that gets me somewhat confused is people always say save 25% of your needs so 25x80k = 2 million saved for being fire'd BUT thats not true on a 4% withdrawal is it if you need to figure in taxes on your withdrawal. You need more like 2.5 million saved to net 80k. so your really saving 31x's. this is at least where i got confused.

You need to save 25x your expenses.

Your expenses include taxes, insurance, etc.

Any money you have to pay is an expense.

Save 25x that number.

Had it all but the taxes figured...guess that was a pretty obvious oops! But thanks!