Author Topic: Ramping up spending after FIRE  (Read 9634 times)

DollarBill

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Ramping up spending after FIRE
« on: September 22, 2015, 01:15:56 PM »
For those who have spent many years of socking away money and being frugal then you finally decide to retire. You spend the first year not making any big changes in your spending and then you realize that you planned too well (I'm sure it does happen lol) and that you have more coming in than you spend...Would you ramp up your spending? Or would you continue to watch it grow?

I'm sure most of us would do a combination of both...maybe keep the same lifestyle but travel more or make a few more mid range purchases or donate more. I really got to wondering about what I would do if I suddenly figured out that I could ramp up my spending. In some ways I wonder if I would stay the same frugal me or would I have lifestyle creep.

What kind of boundaries would you put on yourself to keep lifestyle creep away? I also wouldn't want people to know that I had a lot of money because this just seems like a way to put a huge target on your back.

Moustachienne

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Re: Ramping up spending after FIRE
« Reply #1 on: September 22, 2015, 02:21:33 PM »
I posted my question about switching from a saving to spending mind set before I saw your question.   I'm more worried about spending too little, though, not about spending too much.  :)

Hope we get some answers!

Gone Fishing

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Re: Ramping up spending after FIRE
« Reply #2 on: September 22, 2015, 03:34:08 PM »
Not quite FIRE, yet but I have hopefully built some annual creep into my withdrawal strategy above and beyond inflationary raises by using a lower than 4% withdrawal rate.  Shouldn't amount to a whole lot, but I like the idea of looking forward to being able to afford a little more as time passes.  I have left part time work down the road open as an option as well, but I have put a rule in place that earnings will be added to the stache and spending will only increase by the 3-4% of the additional funds.  I don't want to expose myself or the family to a income/spending roller coaster as it can be difficult to wind things back down should I decide to change course.

terran

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Re: Ramping up spending after FIRE
« Reply #3 on: September 22, 2015, 08:27:29 PM »
You might take a look at the Variable Percentage Withdrawal (VPW) method: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal -- I think it's intended to help adjust to both increasing and decreasing portfolio sizes.

Something I might consider is a kind of modified 4% rule where the retirement year creates a floor based on whatever percent seems prudent (probably somewhere between 3-4%). This is then inflation adjusted going forward, but every year is also reevaluated at the same initial percent and if it's higher than the initial withdrawal after inflation adjustment, then just restart the cycle with the new withdrawal amount. It would be essentially like starting retirement over, so the 4% rule should still hold (it should in fact be even more certain since total duration is now less).

DollarBill

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Re: Ramping up spending after FIRE
« Reply #4 on: September 24, 2015, 11:06:47 PM »
If you're content with your spending level, why bother increasing it?

Here's the thing, I have been mostly content with my spending. At times I feel like I would like to splurge and participate with the normal crowd. Over the years it became normal to save and now I've figured out that I'm sitting 10X better than most...so do I spend more or just relaxe?

Exflyboy

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Re: Ramping up spending after FIRE
« Reply #5 on: September 26, 2015, 11:38:59 AM »
Lets see last years spending was $29k for everything.. We lived a very comfortable liftestyle.. Never felt we went short but then we don't go blowing money on luxuries like business class travel either. We get pretty good low cost healthcare.

So we have $15k rent coming in, I can draw my pension next year at 55, another $15k. My Wife is still working (probably for another year) $30k, in 8 years her pension.. you guessed it another $15k. We also have a liquid NW of $1.5M before the recent pullback

Do you think we have over-saved?..:)

I also work part time cus its fun.. Well recently work has been going nuts (I went back as a contractor cus it was a "fun" job).. I will probably make $80 to 100k.

On the face of it this is pure insanity! I did firesim models that showed we could spend about $120k annually before we saw any portfolio failures.

The obvious "solution" is to start spending more money.

Let me tell you after a lifetime of frugality this is harder to do than earning it in the first place!

aj_yooper

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Re: Ramping up spending after FIRE
« Reply #6 on: September 26, 2015, 01:35:08 PM »
We have been retired for 4 years.  The first 3 years we traveled a lot and spent a lot, but now we are banking a lot of cash and feeling very comfortable.  We will probably downsize from our larger home in Chicagoland and go to a Florida winter/spring condo and summer/fall condo in Chicago.  So, in the end we will be spending about the same on housing, but enjoying ourselves way more. 

Cassie

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Re: Ramping up spending after FIRE
« Reply #7 on: September 27, 2015, 12:03:57 PM »
Three years in we are spending more $ then the first year. WE want to travel & enjoy things while we can at ages 61 & 56. Hubby had cancer scare 6 years ago.  Spartana, we have 4 of those flea attracting things you speak of:)) They are ages 10-18 so will naturally downsize to 1.  The vet bills are horrible.  But we sure love our babies.  Also I only think it is fair to have 1 so if something happens not to burden our kids with our animals.

Daisy

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Re: Ramping up spending after FIRE
« Reply #8 on: September 27, 2015, 12:34:10 PM »
Not FIRE yet, but if I found myself in these circumstances I would probably be a little looser on the spending for certain things such as travel, visiting family and friends that may not live close by, etc. But I think my ingrained optimize-to-try-and-get-the-best-deal-while-maximing-adventure-and-fun would still exist and it may not cost all that much more. Really most of the time my desire to find the best deal stems from the little high I get when I find a slightly cheaper way to do the same thing others are doing. That little optimizing game I am always playing is also a form of entertainment. I don't see that going away.

Like someone else sort of said above, the prime years of retirement are the 50s and 60s (and 40s for the really early folks). I suspect my 70s and 80s will not be as adventurous, but who knows. If I had a large chunk of cash then due to under-spending or super-investing gains, I'd probably up my charitable contributions either to official charities or people I know in my local area. I don't think such large sums of money will be of much use to me in my 70s and 80s, other than as a source of funds to be invested and live from.

Miss Prim

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Re: Ramping up spending after FIRE
« Reply #9 on: October 20, 2015, 07:43:08 AM »
I seem to be ramping up spending in the 6 months we have been retired!  But, most of it has been for some extended travel which we never had time to do when working.  Also, we have been doing some work around the house that we had put off for years because we were in saving mode. 

Still, with all of this, I have only pulled out less than 2% of our stache so I am not worried, yet!

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RetiredAt63

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Re: Ramping up spending after FIRE
« Reply #10 on: November 14, 2015, 06:46:16 AM »
I think that what happens is that we have optimized our spending while we were working, so in retirement we still have those habits - we analyse and go "do I need this? Will it give me long-term satisfaction or only momentary pleasure?"  So our spending may shift but we are still not exploding volcanoes of wastefulness.  If there is too much money, well that is what charitable spending and thoughtful wills are for.

aj_yooper

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Re: Ramping up spending after FIRE
« Reply #11 on: November 14, 2015, 05:05:48 PM »
We are feeling our spending is what we want to enjoy life, not wasteful.  Feeling happy and grateful that the plan worked.

DollarBill

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Re: Ramping up spending after FIRE
« Reply #12 on: November 15, 2015, 07:44:27 PM »
Tonight I was updating my spread sheets for my yearly spending since it's been a full year into being FIRE'd. I figured out that I still have a 57% savings rate...that's ridiculous lol. 

arebelspy

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Re: Ramping up spending after FIRE
« Reply #13 on: November 16, 2015, 02:09:36 AM »
I wouldn't spend any more than I was planning on just because my portfolio increased.

I would spend more if that's what I wanted to do, and was part of my plan.

For example, I am ramping up spending after FIRE, and anticipate a FIRE budget of approximately double my pre-FIRE budget (due to switching to full time, around the world travel, and due to having a kid).  But our optimum spend level is determined by our wants and needs, and we'll spend that, regardless of our portfolio.

If that means our WR drops as our portfolio grows, great. If it means we need to earn some more money, okay.

But our spending and our portfolio size are COMPLETELY decoupled.
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DollarBill

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Re: Ramping up spending after FIRE
« Reply #14 on: November 16, 2015, 08:50:29 AM »
I wouldn't spend any more than I was planning on just because my portfolio increased.

I would spend more if that's what I wanted to do, and was part of my plan.

For example, I am ramping up spending after FIRE, and anticipate a FIRE budget of approximately double my pre-FIRE budget (due to switching to full time, around the world travel, and due to having a kid).  But our optimum spend level is determined by our wants and needs, and we'll spend that, regardless of our portfolio.

If that means our WR drops as our portfolio grows, great. If it means we need to earn some more money, okay.

But our spending and our portfolio size are COMPLETELY decoupled.

I agree and I'm pretty content with my spending. I've had passing thoughts about upgrading my car but it's a 2012 and I can't think of any good reasons to do it because it runs great and it's good on gas (It's only a want not a need). I'd also be traveling more or full time but I have an older dog and have a hard time leaving him behind. So we only take road trips to see friends/family who don't mind pets.

I have eased up on the spending reins a little but I still get a kick out of finding ways to save. 


Fishingmn

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Re: Ramping up spending after FIRE
« Reply #15 on: November 20, 2015, 02:06:53 PM »
Yes - we definitely would.

Current plan is to use something called Variable Percentage Withdrawal. The idea is that we will adjust the amount we spend each year with a plan to totally spend everything we have. We'd rather spend it on ourselves and children while we are living then leave a pile at the end. You can read all about it and download a spreadsheet on Bogleheads.

Obviously, the challenge is picking your end date and having chosen 95 for the time being means we will still probably have extra at the end. You also need the ability to adjust your spending downward if your portfolio takes a hit which we should be able to do as there's a large allocation to travel each year and the percentage you spend increases each year.

DollarBill

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Re: Ramping up spending after FIRE
« Reply #16 on: December 02, 2015, 09:42:11 AM »
I wouldn't spend any more than I was planning on just because my portfolio increased.

I would spend more if that's what I wanted to do, and was part of my plan.

For example, I am ramping up spending after FIRE, and anticipate a FIRE budget of approximately double my pre-FIRE budget (due to switching to full time, around the world travel, and due to having a kid).  But our optimum spend level is determined by our wants and needs, and we'll spend that, regardless of our portfolio.

If that means our WR drops as our portfolio grows, great. If it means we need to earn some more money, okay.

But our spending and our portfolio size are COMPLETELY decoupled.
Since you wrote "But our spending and our portfolio size are COMPLETELY decoupled." I keep thinking about it. Even when I was working and received a pay raise I didn't think about it in this way. I would think this is great now I can save more. I never thought this is great because I'm satisfied with my spending. I always felt like I wanted to spend more but didn't because that would derail my FIRE plans. I think after a few years of being on this site I have a deeper understanding about the level of spending I'm comfortable with and if I did spend more it wouldn't increase my level of happiness.

I wish I could have felt this way more earlier in life but I think this is not something you can just change. It's the journey that changes you along the way and everyone will take a different path.


arebelspy

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Re: Ramping up spending after FIRE
« Reply #17 on: December 02, 2015, 11:12:08 AM »
Neat. I don't think I've ever written something someone thought about two weeks later. Thanks for the compliment!  :)

It absolutely doesn't matter what your path was--if you can make it to the peak happiness and optimization that satisfies you, that's all you can ask for, IMO. :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

EscapeVelocity2020

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Re: Ramping up spending after FIRE
« Reply #18 on: December 02, 2015, 02:08:59 PM »
If that means our WR drops as our portfolio grows, great. If it means we need to earn some more money, okay.

But our spending and our portfolio size are COMPLETELY decoupled.

Does this mean that you wouldn't spend less if your portfolio had a bad sequence of returns?  Not trying to antagonize you, just curious how you might handle this - some people really do intend to keep spending since the 4% rule says they can. 

As for me, there's been a streak on longevity on my Dads side (healthy enough to continue to travel the world, and 90's for his Dad), so I don't anticipate intentionally ramping up spending (or charitable donation) until into old age.  I'll probably follow in my Dad's footsteps and opportunistically splurge here and there along the way though.  I need to foster that adventurous spirit and not let an aversion to part with money (or over-analyze every spending decision) to prevent me from trying new things, even if they turn out to be disappointing.

I will also spend less time on internet forums and blogs.  Too many opportunities to compare and second-guess as opposed to just living my life.  I'm not out to impress anybody and I don't want anyone else's impressive (trip, car purchase, saving rate) to influence me :)

arebelspy

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Re: Ramping up spending after FIRE
« Reply #19 on: December 02, 2015, 03:33:22 PM »
If that means our WR drops as our portfolio grows, great. If it means we need to earn some more money, okay.

But our spending and our portfolio size are COMPLETELY decoupled.

Does this mean that you wouldn't spend less if your portfolio had a bad sequence of returns?  Not trying to antagonize you, just curious how you might handle this - some people really do intend to keep spending since the 4% rule says they can. 

Most likely not.  We'd weigh cutting spending versus making money and see which we'd prefer, but it's easy to make money, and cutting past optimization into deprivation can affect happiness, so I wouldn't say never, but it seems unlikely we'd not spend whatever we wanted to.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.