50 years

[SugarMountain]

I've been playing some with firecalc and my own models lately.  This has made me think some about longevity and what the world will be like.  My family has pretty long lived genes.  Two of my grandparents made it to their mid-nighties, as did two of my great grandparents.  Even my two grandparents made mid-eighties, despite some health issues.

So, I'm planning to live another 50 years (I'm 47).  Which quite frankly freaks me out a bit about FIRE and will likely lead to OMY syndrome.  I mean, how much have things changed since 1965?  At the beginning of 1965 not everyone could even vote.  Since then we've fought 5 wars (depending on how you count), ended the cold war, put a man on the moon, introduced medicare (and now Obamacare), rung up $17 trillion in national debt, invented the internet, revolutionized the economy through automation, outsourcing and globalization, etc, etc.  Throughout it all, the US economy has continued to thrive.

But, what will the next 50 years bring socially, economically, and globally?  You've got things like climate change and a still unstable banking system that could lead to major disruptions, baby boomers hurtling head long into retirement which will surely have an impact on the stock and real estate markets, continued widening of the gulf between rich and poor, and the first generation who expects to make less than the previous generation.  Will the 4% SWR continue to hold true? 

Interestingly, when I was playing with firecalc, I had more failures with my current stache when I used 48 years as my lifespan instead of 50.  I think that's simply due to the larger data set.  The more years, the fewer data points exist to compare to.

I love reading some of the optimism on here, but I can't help but wonder if we're not all a bit naive.

[ZiziPB]

I agree with a lot of your sentiments and am personally planning on 3% WR.  Having said that, I remember reading a blog or forum post somewhere where the author went through the economics of FIRE (or "independently wealthy" as it was known then) in Jane Austen's times.  Jane Austen included a surprising number of very specific references to financial aspects of life in her books.  The rate of return on investments was about the same then as it is now.  So despite all the changes, some things remain the same ;-)

[SugarMountain]

Well, if you FIREd in Japan in the mid-80s, you're now 30 years into it and pretty screwed if your money was in the Nikkei.

[ysette9]

Well, if you FIREd in Japan in the mid-80s, you're now 30 years into it and pretty screwed if your money was in the Nikkei.

Diversify, diversify, diversify!

[CowboyAndIndian]

Well, if you FIREd in Japan in the mid-80s, you're now 30 years into it and pretty screwed if your money was in the Nikkei.

Even the old-timers had a quote for this one. Don't keep all your eggs in one basket.

The trick is to have a well diversified porfolio. Different asset classes (Large/Mid/Small), Different security types (Bonds/Equities/REITS), Global investing, not investing in just one country like the US (or Japan).

[Eric]

Those cFIREsim calculations cover many 50 year periods where lots of crazy shit happened.  It's not like there weren't turbulent times in the past.  The real question is, why are the next 50 years going to be even more turbulent then any 50 year period before it?

Also consider that a 4% withdrawal rate was picked as the general "safe withdrawal rate" because it's one of the worst case scenarios to still be viable the vast majority of the time.  There were many many years where someone could've safely withdrawn more than that and still ended up with a grand surplus of money.

Is it naive to use the past to model the future?  Maybe, but there's really no better tool.  (Unless someone in the future invents a crystal ball, then all bets are off!)

[SugarMountain]

Well, if you FIREd in Japan in the mid-80s, you're now 30 years into it and pretty screwed if your money was in the Nikkei.

Diversify, diversify, diversify!

Sure, but the more you diversify in truly decoupled investments, the lower your rate of return is.  I believe most of the SWR studies have been around the US stock market.  While I believe in American exceptionalism to a degree (mostly due to the vast natural resources and lack of enemies at our borders compared to most countries), I suspect very few people in the US really are diversified against system risk of the US economy.

[WildJager]

Well, if you FIREd in Japan in the mid-80s, you're now 30 years into it and pretty screwed if your money was in the Nikkei.

Diversify, diversify, diversify!

Sure, but the more you diversify in truly decoupled investments, the lower your rate of return is.  I believe most of the SWR studies have been around the US stock market.  While I believe in American exceptionalism to a degree (mostly due to the vast natural resources and lack of enemies at our borders compared to most countries), I suspect very few people in the US really are diversified against system risk of the US economy.

No doubt.  I give myself the peace of mind that if our economy did entirely collapse (as it almost did in 2008 frankly), there are larger problems we'll be concerned with than a nice nest egg. 

The other aspect that early retirement frankly alludes to is continuing to develop sustainment skills.  I'll try not to speak for everyone when I say that sitting around watching TV all day would be boring.  I personally plan on learning how to build a house... and then subsequently build a house.  How to hunt and trap.  How to garden expertly. 

Point of all this is, all the free time from early retirement will allow you to train your "doomsday" skills if that's what you're into.  If the economy dips... it will recover as it always has (the net physical assets of the companies themselves will preclude total collapse just from individuals selling stock).  If the fiat currency collapses, again, we have bigger problems.  Hope those doomsday skills have been honed!

And in the end, everything in life is about risk.  I've had enough brushes with death that I'm more realistically worried about a freak accident killing me early than the economy collapsing.  I would feel much worse if I was sitting on my death bed after avoiding all the things I love in life just because I was too scared to venture out into the unknown.

Good luck!   

[RetiredAt63]

Truly, life has changed so much.  My Dad was born in 1915, my Mom in 1917.  Think of all the changes they saw. Children during the roaring 20's, teens in the Depression, then WWII.  Technology - rural electrification, telephone technology, TV, computers, space exploration. 

As society and its tools change, we get used to them and take them for granted.  There is a story about some bright grad student asking Robert Heinlein why he didn't just use a computer, instead of doing flight path trajectories on paper on the living room floor for one of his early juvenile SF books.  RAH looked at him and pointed out that there were no personal computers when he wrote that book!

So who knows what is ahead?  All we can do is hope for the best and plan for the worst, like people have always done.  Sorry, got a little philosophical there   ;-)

[SugarMountain]

Sorry, got a little philosophical there   ;-)

My post was triggered because I got a little philosophical thinking about this stuff.  Time, mortality, changes, etc. are all ripe for philosophical thoughts.

[golden1]

I hear you.  FireCALC is a nice tool, but in the end, it doesn't really make sense to assume that the future is going to be like the recent past.  And the last hundred years counts as the recent past IMO.  Also, it gives a broad view of how long your money can last, but there is so much uncertainty on an individual basis.  My dad died at age 47.  My great Aunt lived to be 100.   Looking at my genetic history, females in my family tend to live past age 90, so I figure I have about 50 years left too (I'm almost 42).  However, the flip side is I could die tomorrow.  So I have a hard time delaying gratification too much, living for a future retirement that I may or may not ever see.  Therefore, I take a more moderate view.  I'll buy my future freedom, but not at the complete expense of my present.

[SugarMountain]

I hear you.  FireCALC is a nice tool, but in the end, it doesn't really make sense to assume that the future is going to be like the recent past.  And the last hundred years counts as the recent past IMO.  Also, it gives a broad view of how long your money can last, but there is so much uncertainty on an individual basis.  My dad died at age 47.  My great Aunt lived to be 100.   Looking at my genetic history, females in my family tend to live past age 90, so I figure I have about 50 years left too (I'm almost 42).  However, the flip side is I could die tomorrow.  So I have a hard time delaying gratification too much, living for a future retirement that I may or may not ever see.  Therefore, I take a more moderate view.  I'll buy my future freedom, but not at the complete expense of my present.

Exactly, there just isn't that much data for a 50 year retirement when you are only looking at ~150 years worth of data, especially when the 20th century kind of was the American century.  At the end of each of the two world wars, the US was the one power still standing with a truly functioning economy which lead to the roaring 20s and booming 50s & 60s.  We got a 3rd boost by being the leaders in the technology revolution in the 90s.

I'm at the point that I could probably FIRE right now if I cut my expenses a bit, so the trade offs that I'm looking at are 1) extra security vs pain of continued working and 2) indulging in luxuries vs pain of continued working.

I struggle with both a fair amount trade offs a fair amount.  For #1 if I count on social security and count my home equity, I easily have enough to manage a 4% withdrawal rate.  For #2 if we cut out booze (wine especially), eating out, cable, and took less expensive trips we could be there without counting on SS or the home equity.  (From my view home equity is basically the backstop of last resort, either selling the house or reverse mortgaging it down the road if things get ugly.)