(*) In theory, anyway. I have the odd problem I've mentioned a few times where I don't spend enough in the first place. I'm 54, paid off house, paid of car, kids' college handled, and my last net withdrawal rate calculation was 1.36%.
I think of this issue from time to time. Spending money is easy. One can buy a nice house and spend all the savings fast -- but we know not to do that. Instead, since you have kids, you can set up trust for them and buy VTI for them to educate them about long term investing. That should up your spending closer to 3 or 4% easily and make it feel worthwhile :)
I'm doing things along those lines.
Educating them about finances has been an ongoing thing for the past 15 years and will continue for the next 15 to 30 years.
It actually sort of compounds the problem though in the end. Two of them (*) are already making good incomes and all three are saving and investing themselves.
I know my friend @Nords has a similar "problem" with his daughter due more or less to the same root causes.
(*) the third is in their senior year, so we'll have to see what happens with that one in the next year or so.
Did you post this in the mustachian problems thread? :)
I only drop in here once a week or so, but either I’m missing a lot of inside jokes or this thread needs more sarcasm tags.
@secondcor521 and I have been discussing the excess-wealth issue for years-- probably over a decade(!) when you add in our conversations at Early-Retirement .org.
First, let’s all remember that the 4% Safe Withdrawal Rate is just a computer study by Bengen and a few Trinity professors who observed that it had a high probability of succeeding for 30 years. We’ve all tinkered with those simulations over the last few decades to try to make it even more robust.
Believe it or not, I’ve seen
@bigote2032’s $7M scenario over at ESIMoney .com. ESI has published over 350 Millionaire Interviews, and a few of the people have had their wealth grow much faster than expected after they’ve already reached FI.
SecondCor reached his number and then did an even better job of dialing in his lifestyle expenses. If Sequence Of Returns Risk doesn’t happen during the first decade of FI then the other side of the 4% SWR is nearly guaranteed: you have way more money than you need. That other side happens over 80% of the time anyway, even with a nasty recession or two during the first decade.
In my family, we started our financial independence in 2002 with the 4% SWR and a whole bunch of unknowns. Most of the bad unknowns never happened and some of the good unknowns did happen. Our 4% SWR tactics to survive our first decade of FI (and two nasty recessions) set us up for tremendous growth during the second decade.
https://militaryfinancialindependence.com/2017/08/24/hey-nords-hows-net-worth/We didn’t set up a trust for our daughter. (We didn’t need to.) Instead she watched us start our FI lifestyle when she was nine years old, and we kept talking about it (in age-appropriate terms). She’s in her 30s now and we still talk about it.
During the Great Recession she also watched a few of her friends (and their families) lose their homes, and she saw lots of scary stories about graduating from high school during that job market. By the time she started college she’d internalized a burning desire to replicate our lifestyle for herself. She already had plenty of skills at maintaining a high savings rate-- both by growing her earnings and by cutting out her wasted spending.
I used to joke about passing the torch, but she lit her own bonfire. You can borrow a library copy of our Money-Savvy Family book (listed in my signature of this post) to read about how she felt while she was growing up in that environment and how it’s turned out.
Now that she’s launched, what else do you do when your wealth grows a lot faster than your lifestyle?
My spouse and I have completely shifted our mindset from scarcity to abundance. We’re now in our 60s and we’ve done the compounding math for our next 20 years. We’ve significantly ramped up our gifting and our philanthropy to give away the assets we won’t need. That’s totally discretionary spending, and it makes us feel good.
We’ve done the spreadsheet for the rest of our lives, and now we’re going to significantly reduce our wealth during the rest of this decade-- to get back to a 4% SWR.
Our gifting has a practical side for our self-interest: we’re passing our daughter and son-in-law a little of their inheritance now, while we’re all still around to talk about it. We want them to be comfortable with handling larger sums of money now, because in the next 20 years they’re going to take over managing our money. We don’t want them stressing over our eldercare the way I stressed about caring for my father’s finances-- and the way my teen daughter was stressing back then just by watching me deal with it.
