Author Topic: Failing your Early Retirement  (Read 22016 times)

canadian bacon

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Failing your Early Retirement
« on: June 24, 2015, 08:42:05 AM »
Maybe I am the only one but my fear would be that I would quit my job and declare myself retired only to find my investments depleted...   In my mind it is easier to work a little longer than find myself needing to "start over" at some point

Has anyone here "failed" your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?

Hank Sinatra

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Re: Failing your Early Retirement
« Reply #1 on: June 24, 2015, 08:49:14 AM »
I did not fail but I understand your mental position. But I retired in 1996 just as the bubble run-up was taking off.


Much Fishing to Do

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Re: Failing your Early Retirement
« Reply #3 on: June 24, 2015, 11:48:27 AM »
"In my mind it is easier to work a little longer than find myself needing to "start over" at some point"

Correct, this is why crazy conservative SWR rates like 3-5% are generally used so your odds of succeeding are not just 1 to 1 but more like 10 to 1 or 20 to 1.  I always think an interesting approach would be to reject this idea (e.g. you're still young, now refreshed after a break so would be better off on your second go of things, etc) and so the reasonable point at which you retire is when your funds allow a SWR with maybe a 50% success rate.

Face it, if you keep working a little bit longer, at some point between a success rate of 50% and one of 100% you cross a line where your biggest threat to a long successful retirement is you not retiring....


sol

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Re: Failing your Early Retirement
« Reply #4 on: June 24, 2015, 12:27:47 PM »
the reasonable point at which you retire is when your funds allow a SWR with maybe a 50% success rate.

I like the way this person thinks.

For the record, the historical SWR for a 75/25 portfolio that is more likely to succeed than fail over 30 years is just over 6 percent in the first year, and inflation adjusted up from there.

This means that on average you are saving too much of you plan on any SWR below 6%.  If you're already at 6% then you are more likely to have worked too long than to ever have to earn another dime.
« Last Edit: June 24, 2015, 01:58:03 PM by sol »

Cookie78

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Re: Failing your Early Retirement
« Reply #5 on: June 24, 2015, 12:38:18 PM »
the reasonable point at which you retire is when your funds allow a SWR with maybe a 50% success rate.

I like the way this person thinks.

For the record, the historical SWR for a 60/40 portfolio that is more likely to succeed than fail over 30 years is just over 6 percent in the first year, and inflation adjusted up from there.

This means that on average you are saving too much of you plan on any SWR below 6%.  If you're already at 6% then you are more likely to have worked too long than to ever have to earn another dime.

Yes!!!!

Based on this new info, I'm selling my houses and quitting now! :D

aspiretoretire

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Re: Failing your Early Retirement
« Reply #6 on: June 24, 2015, 12:50:32 PM »
Would it mean under that assumption that you would need 750k rather than 1M to retire at 40k/year?

ysette9

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Re: Failing your Early Retirement
« Reply #7 on: June 24, 2015, 01:02:48 PM »
Math aside (scandalous as that sounds) I think it comes down to your personal values and risk tolerance. This forum understands it better than others, but I think we still don't fully appreciate the downside to working more than you have to because it requires putting dollar values on the things you would do otherwise with your time. How much is it worth to you to not get up to an alarm every day, to spend unlimited time with your family, to travel mid-week, to go grocery shopping when no one else is? My guess is quite a lot though how much exactly is hard to pin down. Weigh that against the decreased odds of running out of money. That answer is different for everyone and probably tough to figure out.

I think our brains are better structured to understand avoiding risk than missing out on opportunities.

Jersey Brett

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Re: Failing your Early Retirement
« Reply #8 on: June 24, 2015, 01:08:30 PM »
Ideally your investments should never deplete. That will only happen if you understand how markets move, or you have so much cash you can weather bear markets with no problem. This next one could be a doozy since this level of government interference has not been attempted before.

I was reading some interviews with legendary traders and one (who was old enough to retire by normal standards at the time) refused to retire because he didn't trust anyone to manage his money. "I'll give it to my friendly broker, he'll put it in XYZ and I'll have to go back to work in five years"

Good Luck!

Cougar

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Re: Failing your Early Retirement
« Reply #9 on: June 24, 2015, 01:13:32 PM »
Maybe I am the only one but my fear would be that I would quit my job and declare myself retired only to find my investments depleted...   In my mind it is easier to work a little longer than find myself needing to "start over" at some point

Has anyone here "failed" your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?


well that certainly a possiblitity for anyone retiring in the immediate future that is relying on money coming from investments in the financial markets as we're more likely to have a recession within the next 3 years over 3 more years of positive growth; but if you're under the 4% SWR currently for your lifespan; i'd say you're good. thats a pretty good safety net and no one can prepare for everything.

sol

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Re: Failing your Early Retirement
« Reply #10 on: June 24, 2015, 01:14:17 PM »
Would it mean under that assumption that you would need 750k rather than 1M to retire at 40k/year?

6% on 750k is actually 45k/year.  6% on 666k would give 40k/year, absent taxes.

Keep in mind this is a 50/50 chance of success.  No normal financial planner would ever advise their client to flip a coin to see if they can retire safely, but this is what the math says is the average result.  Half the people who retire in a 6% inflation adjusted SWR for 30 years should be fine, and half will need to go back to work or reduce spendng at some point in the future.

Any years that you work to get below 6% are just improving your safety margin to better than even money.  Only you can decide whether or not the added buffer is worth the additional lost years of your life.

Ideally your investments should never deplete.

Says who?

If you want to work extra years in order to fund someone else's life, you go ahead.  But you probably shouldn't state that everyone should do so, as if it were some sort of universal truth.

I intend to work long enough to support myself and my spouse, and help (i.e. not "put") my kids through college.  That's more than I was given.  You can work longer if you like.

Eric

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Re: Failing your Early Retirement
« Reply #11 on: June 24, 2015, 01:42:01 PM »
Maybe I am the only one but my fear would be that I would quit my job and declare myself retired only to find my investments depleted... 

Hahaha.  I think everyone has that fear, with few exceptions.  We battle it by being here, by doing the math, by reading studies, by running historical scenarios, and by figuring out safety margins and flexible spending budgets.

Does it help assuage your fears if you knew that no point in history has a 4% inflation adjusted withdrawal rate ever run out of money after 20 years?  You'd have plenty of time to see this coming and make adjustments.  Of course, in the vast majority of cases, no adjustment will be necessary.  What if you knew that the average portfolio value after 30 years of 4% inflation-adjusted withdrawals is more than 100% greater (real, not nominal) than the starting value?  Would that help?

FIPurpose

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Re: Failing your Early Retirement
« Reply #12 on: June 24, 2015, 01:45:02 PM »
I have to say that this thread is getting me to think a bit more about how much I actually need to retire. The wife and I have been thinking extensively about finding lower hour/ lower paying telecommute jobs to slow travel the world for a few years. So my goal has been to find the amount I would want before starting that journey, and how much I'll have at the end of the process to retire comfortably. Since I'm 24 the SO and I would like to start a world journey in about 3-4 years and then I would like to get a phd (with a paid position to go with it). I originally thought I would need to work for 5 years before going to part-time work, but now I think we'll be able to go to in 3.5 years. Thanks much for the info, I'll be researching and discussing this in the near future.

sol

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Re: Failing your Early Retirement
« Reply #13 on: June 24, 2015, 02:01:45 PM »
I have to say that this thread is getting me to think a bit more about how much I actually need to retire.

Think carefully about you time frame, too.  The above numbers I provided are for 30 year periods.

My spouse and I will have pensions and social security which should cover our expenses in 23 years.  The 50% successful SWR for a 23 year period is an eye popping 7.25%, according to firecalc.

brooklynguy

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Re: Failing your Early Retirement
« Reply #14 on: June 24, 2015, 02:02:33 PM »
Face it, if you keep working a little bit longer, at some point between a success rate of 50% and one of 100% you cross a line where your biggest threat to a long successful retirement is you not retiring....

Of course, there's not really any magic to waiting until you cross the "more likely to succeed than not" threshold either.  It wouldn't be a totally crazy decision for someone to stop working once they've amassed enough for, say, a 25% chance of success (which translates into a historical SWR of ~ 7.2% on a 60/40 portfolio).  Doing so could allow you to stop working extremely extremely early, with a decent shot of never having to work again (even though you most likely will have to at some point, or otherwise exercise other levels of safety margin...).

canadian bacon

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Re: Failing your Early Retirement
« Reply #15 on: June 24, 2015, 02:50:33 PM »
Back to my original question:
Has anyone here run out of savings in your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?

Gone Fishing

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Re: Failing your Early Retirement
« Reply #16 on: June 24, 2015, 03:16:18 PM »
Back to my original question:
Has anyone here run out of savings in your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?

Can't think of anyone on the forum. There are not many forum members that have been retired long enough to run out of money, as most are still in the accumulation phase.  The few that have been retired for 20+ years seem to be doing pretty well, though.  Most have ended up with 2-3x+ what they would probably need.  This is a fairly conservative group.   The most famous failure in the ER community (who's name will not be mentioned) had much more serious issues than a 5-6% withdrawal rate.

As someone else pointed out (Sol, maybe?) the failures are likely to come all at once, probably after a protracted recession.

Eric

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Re: Failing your Early Retirement
« Reply #17 on: June 24, 2015, 03:19:07 PM »
Back to my original question:
Has anyone here run out of savings in your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?

There was this thread from last year with some examples and links to other forums:

http://forum.mrmoneymustache.com/welcome-to-the-forum/any-early-retirement-fails-out-there/

brooklynguy

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Re: Failing your Early Retirement
« Reply #18 on: June 24, 2015, 03:23:40 PM »
...only to find my investments depleted... 

Has anyone here "failed" your early retirement?

Back to my original question:
Has anyone here run out of savings in your early retirement?

So you're really looking for examples of retirement "failures" in the SWR-literature sense, as in, portfolio depleted down to zero?  Like, someone who watched their accounts shrink until they no longer had two nickels to rub together, but kept drawing down funds all the while?  Because I doubt you're going to find anyone who fits that picture in this forum.  All the talk around here about "adaptive" or "flexible" retirement plans reflects the reality that retirees will monitor the status of their retirements and take corrective action before it looks like they might be headed for failure, let alone before they actually get there.

Even if you use a broader definition of "failure" (like, someone who decided their portfolio trajectory ain't lookin' so good, so they returned to work), there aren't many people in that boat posting around here either, but I know it's been discussed before and I think there may be some running hreads on other ER forums profiling those kinds of retirement "failures."

EDIT: Yes, the thread Eric linked to and the threads linked to therein are what I was thinking of.
« Last Edit: June 24, 2015, 03:28:30 PM by brooklynguy »

Much Fishing to Do

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Re: Failing your Early Retirement
« Reply #19 on: June 24, 2015, 03:29:21 PM »
Even determining what is "failure" gives some interesting scenarios.  If you work from 20-30, retire from 30-50 and follow your interests and raise your kids, etc, return to work because assets seem too depleted from 50-65, and then retire again with SS & Medicare help, seems like you've done pretty well compared to most...

shelivesthedream

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Re: Failing your Early Retirement
« Reply #20 on: June 24, 2015, 05:18:29 PM »
Has anyone here "failed" your early retirement?   If so, what were the circumstances around it?  Lessons learned or regrets?

OP, I understand where you're coming from. I totally get the ER maths, and I'm still at an early stage in the journey, but part of me is still worried that it won't work out. However, this forum is relatively young. By the time I get to FIRE I expect a lot of people to have been retired for a few decades. And a large part of me will feel more secure in my ER if some of them have failed (either had to take paid employment again or significantly reduced their spending to the point where it is an actual lifestyle change). Because if someone else has failed as has actually weathered that storm, rather than just making theoretical contingency plans, I'll feel a lot better about my prospects of permanently retiring. I'm hoping to find out that 'failing' at ER is not so bad, which will hopefully moderate my very conservative nature and actually allow me to pull the trigger when the time comes. But I'm not expecting these stories for another decade at least.

forummm

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Re: Failing your Early Retirement
« Reply #21 on: June 24, 2015, 05:26:53 PM »
the reasonable point at which you retire is when your funds allow a SWR with maybe a 50% success rate.

I like the way this person thinks.

For the record, the historical SWR for a 75/25 portfolio that is more likely to succeed than fail over 30 years is just over 6 percent in the first year, and inflation adjusted up from there.

This means that on average you are saving too much of you plan on any SWR below 6%.  If you're already at 6% then you are more likely to have worked too long than to ever have to earn another dime.

I hear you on this, Sol. But that also doesn't account for the fact that we're at an incredibly elevated CAPE and historically low interest rates. I know there are issues with CAPE likely overestimating the inflated valuations a bit, but I've seen some adjustments to CAPE (like philosophicaleconomics) to correct for this and the result is still really high. So I think a more informed approach would be to look at retirements starting with CAPEs similar to the adjusted CAPE and see what's happened with those. An analysis Beltim and Brooklynguy and I discussed some months ago found a lot higher rate of failure among higher CAPE starting points. These were also associated with a lot of inflation though. So who knows.

I think Eric's point about no 4% SWR ever running out of money within 20 years, and that we'll have plenty of lead time if we retire at the wrong time, is a good one. It's especially useful for people like you that have access to an early pension and SS--at least hopefully Congress doesn't pull those rugs out from under you.

NoraLenderbee

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Re: Failing your Early Retirement
« Reply #22 on: June 24, 2015, 06:18:46 PM »
I know several people who retired or semi-retired during the 1990s boom and had to find jobs after the dot-bomb crash. Also a few who retired in the 2000s and had to go back to work after 2008. Unfortunately, I only know them casually and don't have any details about what their finances were like or whether they were Mustachian (most probably were not).


So you're really looking for examples of retirement "failures" in the SWR-literature sense, as in, portfolio depleted down to zero?  Like, someone who watched their accounts shrink until they no longer had two nickels to rub together, but kept drawing down funds all the while?  Because I doubt you're going to find anyone who fits that picture in this forum. 


I would define "failure" in this context as having to go back to work when you didn't want to or plan to (in order to support whatever your chosen lifestyle is). Not depleting to zero necessarily.

Indexer

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Re: Failing your Early Retirement
« Reply #23 on: June 24, 2015, 07:29:33 PM »
Would it mean under that assumption that you would need 750k rather than 1M to retire at 40k/year?

6% on 750k is actually 45k/year.  6% on 666k would give 40k/year, absent taxes.

Keep in mind this is a 50/50 chance of success.  No normal financial planner would ever advise their client to flip a coin to see if they can retire safely, but this is what the math says is the average result.  Half the people who retire in a 6% inflation adjusted SWR for 30 years should be fine, and half will need to go back to work or reduce spendng at some point in the future.

Any years that you work to get below 6% are just improving your safety margin to better than even money.  Only you can decide whether or not the added buffer is worth the additional lost years of your life.

Personally I would want more than a 50% success rate.  Statistically I also believe someone working a few more years to get to a 4% SWR will actually work less on average.  Let me explain.

6% WR:  If you retire with a 6% WR and a 50% success rate there is a 50% chance you never work again.  There is also a 50% chance you end up spending down the assets and you have to go back to work.  But now you don't have that huge nest egg.  You might not be starting from scratch, but you probably aren't going to be starting at the same point you are at today.  Your portfolio will be smaller, and after years not working full time you probably aren't going to be getting the same pay you got before.  If your retirement fails you might be working another 10 years* to get back to retirement.  50% odds * 10 years = 5 years average additional work in the future.  (Rough estimates here.)  Someone also mentioned retiring with a 25% success rate.  You are probably going to work another 7.5 years. 

*Saving 50k a year at 7% growth it would take 9.7 years to get back to 666k.  Again you might not be earning enough post new employment to still save at the old rate so IMO this is being optimistic.


4% WR:  Now lets say you are already at 666k today saving 50k a year.  So you are already at the 6% WR assuming a 40k/yr WR.  What would it take to get to a 4% WR?  Now you have your high income and a lot of compounding working to your advantage.  With 7% annual returns you will hit 1 million in 3.2 years.  Now you can pull 40k a year and it is only a 4% WR.  With a 4% SWR your odds of running out of money and having to go back to work are less than 10%. 

You might as well work 3.2 more years at your current high income with your already large portfolio to lock in never having to work again instead of 50% odds of having to possibly work another decade.  This is at least my approach.


I'm also going to agree with Forumm that valuations are pretty high.  I'm not calling a crash, but forward 10 year returns when valuations are this high normally aren't very good.

sol

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Re: Failing your Early Retirement
« Reply #24 on: June 24, 2015, 08:00:08 PM »
You might as well work 3.2 more years at your current high income with your already large portfolio to lock in never having to work again instead of 50% odds of having to possibly work another decade.  This is at least my approach.

And that is the dilemma we all face, when contemplating how OMY syndrome insidiously infects us all.  Do you work more now more to improve your odds, or maybe work more later if you end up on the wrong side of the future odds?

Following your argument above, you should never retire at anything less than 100% projected success.  Lots of people follow that path.  They are virtually guaranteed to have worked longer than necessary, though.

nereo

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Re: Failing your Early Retirement
« Reply #25 on: June 24, 2015, 08:11:06 PM »
Ideally your investments should never deplete. That will only happen if you understand how markets move, or you have so much cash you can weather bear markets with no problem. This next one could be a doozy since this level of government interference has not been attempted before.

I don't agree with this either.  Philanthropy aside, when I die if I have more than I started with I will know I spent more of my life working that I needed to.

Also, since it often gets forgotten, I just though I'd throw this out there - an additional way of having near 100% certainty that you will never run out of money is to peg your WR to the size of your portfolio at that particular moment.  Mathematically, you will never run out of money this way unless all of your assets (e.g. every stock in your index) also goes bankrupt. 
The obvious downside is it makes your annual allotted spending a bit unpredictable, but I don't see why this is so different from ordinary life - if you get a pay cut or your spouse looses their job, you live on less, or you find a side job to pick up the slack. 

Back to the original question of finding "failures" - the last several decades has (overall) been pretty good for those retiring with the 4% WR.  Before you scream about the "great recession" realize that it was only 7 years ago, and even someone who retired in 2007 and saw their portfolios decimated their very first year of retirement have not had time for their investments to completely hit $0, especially with the subsequent run-up.  The dot-com bust wasn't nearly deep enough and had a nice, quick bounce.
Inflation (a real portolio killer for the retiree) has essentially stayed below 4% since 1990 and has averaged under 3%.

Artificial or not - overall the lat 25 years has been a pretty great time to have retired.  If we hit another deep (and lengthy) recession soon I expect we'll see a lot more "failures" from people who retired in 2006-2008 hoping to live off a fixed 4-5% WR.

Indexer

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Re: Failing your Early Retirement
« Reply #26 on: June 24, 2015, 08:17:16 PM »
You might as well work 3.2 more years at your current high income with your already large portfolio to lock in never having to work again instead of 50% odds of having to possibly work another decade.  This is at least my approach.

And that is the dilemma we all face, when contemplating how OMY syndrome insidiously infects us all.  Do you work more now more to improve your odds, or maybe work more later if you end up on the wrong side of the future odds?

Following your argument above, you should never retire at anything less than 100% projected success.  Lots of people follow that path.  They are virtually guaranteed to have worked longer than necessary, though.

I don't think so.  Eventually you hit the point of diminished returns.  I think the 4% SWR is perfectly fine.  Once you get below that you are splitting hairs.  Do you prefer 99.5 or 99.7% success rate?  It gets stupid.  You are right about that, but I think 4% is a much better stopping point than 6%.  If you want to play it very safe work 1 year after hitting 4%.  Make it the line in the sand... and then retire.  :)

sol

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Re: Failing your Early Retirement
« Reply #27 on: June 24, 2015, 08:21:41 PM »
Once you get below that you are splitting hairs.

Why below that?  Why not below 90%?  Or 75%?

This is all a matter of personal risk tolerance.  I don't think there's a "right" answer to how well your proposed withdrawal strategy should backtest against historical data. 

But I conceptually like the idea of an "average" being a good benchmark.  It would be the right answer for society as a whole, which I admit is very different from the right answer for any specific individual.

Dee

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Re: Failing your Early Retirement
« Reply #28 on: June 24, 2015, 10:18:26 PM »
Are there any studies to assist those who are not concerned with preserving capital? That is, if my ideal scenario is to die with little to no capital / assets (rather than preserving all capital and living off the surplus, as with the 4% SWR), are there any models for me to turn to? It seems like one of the assumptions is usually that capital preservation is one of the goals...

sol

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Re: Failing your Early Retirement
« Reply #29 on: June 24, 2015, 10:22:33 PM »
Are there any studies to assist those who are not concerned with preserving capital?

Basically all of them.  All of the SWR research cited around these parts assumes your retirement is a "success" if you finish the time period with any positive amount of investment value. 

Mrs.LC

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Re: Failing your Early Retirement
« Reply #30 on: June 24, 2015, 11:01:29 PM »
Don't think you are going to find too many people who have failed retirement on a forum like this. Long before going broke like-minded people in this group will find a money hack of some type to build up the retirement pot. Many of us have side gigs that pay our basic expenses so we don't even dip into the retirement funds. 

brooklynguy

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Re: Failing your Early Retirement
« Reply #31 on: June 25, 2015, 04:55:28 AM »
Are there any studies to assist those who are not concerned with preserving capital?

Basically all of them.  All of the SWR research cited around these parts assumes your retirement is a "success" if you finish the time period with any positive amount of investment value.

Although the SWR studies all define "success" as finishing retirement with more than zero dollars, they are generally focused on finding withdrawal strategies that have a high likelihood of succeeding in worst-case scenarios and therefore also have a high likelihood of preserving way too much capital.

Dee, some of the newer variable spending strategy research is designed to find strategies that strike a better balance between spending down principal and avoiding total portfolio depletion.  Pfau recently did a good overview of the variable spending strategy landscape (Making Sense Out of Variable Spending Strategies), but, as discussed in this thread, he used non-history-based assumptions about market returns that produced unfairly pessimistic results.  I remember reading another good article recently about strategies designed to spend down as much capital as possible by retirement/life-end, but I can't find it right now and don't remember the source (maybe Kitces?).  Cfiresim also gives good options for playing around with various different spending strategies to see how they fared historically.

In any event, keep in mind that it's easy for us to be armchair cowboys about aggressive retirement strategies, but, as with asset allocation selection, we shouldn't be too cavalier about gauging our own risk tolerance.  There's a reason OMY syndrome has such a high infection rate.  Does anyone really want to follow a plan that is not only likely to, but is actually designed to, leave them penniless on their deathbed?

steveo

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Re: Failing your Early Retirement
« Reply #32 on: June 25, 2015, 05:37:58 AM »
Half the people who retire in a 6% inflation adjusted SWR for 30 years should be fine, and half will need to go back to work or reduce spendng at some point in the future.

I like this idea however you are assuming that there is a 30 year retirement. If I retire at 50 I should probably assume a 50 year retirement.

patrickza

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Re: Failing your Early Retirement
« Reply #33 on: June 25, 2015, 06:24:36 AM »
I don't consider it failing if after watching your portfolio shrink for a few years you decide to go back to work. I'd rather call that flexibility. If the market tanks and I'm retired, even if I don't need to, I might decide to take up some work for a few years just to supercharge the stash at bargain prices. That work would probably be something I find fun though.   

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Re: Failing your Early Retirement
« Reply #34 on: June 25, 2015, 07:04:27 AM »
In general agreement with most here, but I'm always a little wary of the "I'll just go back to work" reasoning.  There are a million reasons why that may not be as easy as some make it sound (your skills have waned or become obsolete, medical issues, lack of stamina, high unemployment rate making the job market super competitive, etc, etc.), and sure, if all else fails, I suppose working at that gas station convenience store or as a Walmart greeter is an option -- but seriously, tell me if every time you see those people your immediate emotion isn't one of pity?  I know mine is.  When I see that 40+ dude handing out fast food burgers, my immediate thought is, "damn, how badly did this dude fuck up that he's working in a fast food joint at this point in his life?"  Do you really want to be working a minimum wage job in your 60's because you turned your back on a good job/salary for a couple years of early retirement?  Obviously, everyone's answer will differ, but mine is a resounding "HELL NO."  To me, the point of saving so much during my working life is so I don't ever have to work again!

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Re: Failing your Early Retirement
« Reply #35 on: June 25, 2015, 07:24:12 AM »
In general agreement with most here, but I'm always a little wary of the "I'll just go back to work" reasoning.  There are a million reasons why that may not be as easy as some make it sound (your skills have waned or become obsolete, medical issues, lack of stamina, high unemployment rate making the job market super competitive, etc, etc.), and sure, if all else fails, I suppose working at that gas station convenience store or as a Walmart greeter is an option -- but seriously, tell me if every time you see those people your immediate emotion isn't one of pity?  I know mine is.  [snip]
.. and my immediate response whenever someone waves this flag of fear, pity and retirement taboo is: you don't need a 'standard' 40hr/week job.  The idea is simply to supplement your retirement income, and a laughably small amount can do wonders.  For example, earning just enough to pay for 25% of your expenses is the difference between a usually save 4% WR to an historically unsinkable 3%.    And it isn't even permanent - often it will be just for 3-5 years until your portfolio can return to pre-crash levels.  THis is also most likely to happen in the first 6 years of ER, so the example of an old-guy flipping burgers seems to me to be just an emotional (rather than rational) fear tactic.

Suppose a rather soft $40k/year retirement budget.  Earning 25% of your expenses would be ...
one day per week at $18/hr as a substitute teacher OR
what a youth club soccer/swimming/basketball coach can earn in 6 months of coaching OR
... use your creativity.
« Last Edit: June 25, 2015, 07:28:54 AM by nereo »

brooklynguy

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Re: Failing your Early Retirement
« Reply #36 on: June 25, 2015, 07:25:29 AM »
When I see that 40+ dude handing out fast food burgers, my immediate thought is, "damn, how badly did this dude fuck up that he's working in a fast food joint at this point in his life?" 

Kevin Spacey would beg to differ.


2lazy2retire

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Re: Failing your Early Retirement
« Reply #37 on: June 25, 2015, 08:14:21 AM »
In general agreement with most here, but I'm always a little wary of the "I'll just go back to work" reasoning.  There are a million reasons why that may not be as easy as some make it sound (your skills have waned or become obsolete, medical issues, lack of stamina, high unemployment rate making the job market super competitive, etc, etc.), and sure, if all else fails, I suppose working at that gas station convenience store or as a Walmart greeter is an option -- but seriously, tell me if every time you see those people your immediate emotion isn't one of pity?  I know mine is.  [snip]
.. and my immediate response whenever someone waves this flag of fear, pity and retirement taboo is: you don't need a 'standard' 40hr/week job.  The idea is simply to supplement your retirement income, and a laughably small amount can do wonders.  For example, earning just enough to pay for 25% of your expenses is the difference between a usually save 4% WR to an historically unsinkable 3%.    And it isn't even permanent - often it will be just for 3-5 years until your portfolio can return to pre-crash levels.  THis is also most likely to happen in the first 6 years of ER, so the example of an old-guy flipping burgers seems to me to be just an emotional (rather than rational) fear tactic.

Suppose a rather soft $40k/year retirement budget.  Earning 25% of your expenses would be ...
one day per week at $18/hr as a substitute teacher OR
what a youth club soccer/swimming/basketball coach can earn in 6 months of coaching OR
... use your creativity.

No No No - having to go back to work IMO would suck a 1000 times more than putting in a few extra years now. Would not get nearly the same pay coupled with the fact that I NEED to be there and no idea how long for - f@ck that, my worst nightmare, undoing all the hard work from earlier years.
Aiming for 3% @50, knowing that if it really sucks I can up the SWR and jump ship sooner  -this gives me a huge feeling of comfort which makes my job tolerable and gives a sense of been in control, unlike the scenario above where so dumbass manager has me by the balls.
« Last Edit: June 25, 2015, 08:18:21 AM by 2lazy2retire »

nereo

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Re: Failing your Early Retirement
« Reply #38 on: June 25, 2015, 08:26:53 AM »
In general agreement with most here, but I'm always a little wary of the "I'll just go back to work" reasoning.  There are a million reasons why that may not be as easy as some make it sound (your skills have waned or become obsolete, medical issues, lack of stamina, high unemployment rate making the job market super competitive, etc, etc.), and sure, if all else fails, I suppose working at that gas station convenience store or as a Walmart greeter is an option -- but seriously, tell me if every time you see those people your immediate emotion isn't one of pity?  I know mine is.  [snip]
.. and my immediate response whenever someone waves this flag of fear, pity and retirement taboo is: you don't need a 'standard' 40hr/week job.  The idea is simply to supplement your retirement income, and a laughably small amount can do wonders.  For example, earning just enough to pay for 25% of your expenses is the difference between a usually save 4% WR to an historically unsinkable 3%.    And it isn't even permanent - often it will be just for 3-5 years until your portfolio can return to pre-crash levels.  THis is also most likely to happen in the first 6 years of ER, so the example of an old-guy flipping burgers seems to me to be just an emotional (rather than rational) fear tactic.

Suppose a rather soft $40k/year retirement budget.  Earning 25% of your expenses would be ...
one day per week at $18/hr as a substitute teacher OR
what a youth club soccer/swimming/basketball coach can earn in 6 months of coaching OR
... use your creativity.

No No No - having to go back to work IMO would suck a 1000 times more than putting in a few extra years now. Would not get nearly the same pay coupled with the fact that I NEED to be there and no idea how long for - f@ck that, my worst nightmare, undoing all the hard work from earlier years.

Well... we're going to have to agree to disagree on this (and that's fine).  To me it seems insane to want to work a few extra years now when you are young and healthy to offset the chance that you might have to do some occasional part-time work somewhere down the road.  The notion of not getting 'nearly the same pay" seems to drive a lot of the OMY syndrome but in my view it's completely a straw-man. You don't need to work the same job or get the same pay.  You wouldn't even need to cover your expenses - not by a long shot.  It's just small corrections, and at least to me these temporary, part-time gigs can be fun, allowing me to meet new people and do new things.
::shrug:: just my personality I guess.

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Re: Failing your Early Retirement
« Reply #39 on: June 25, 2015, 08:39:50 AM »
I have to say that this thread is getting me to think a bit more about how much I actually need to retire.

Think carefully about you time frame, too.  The above numbers I provided are for 30 year periods.

My spouse and I will have pensions and social security which should cover our expenses in 23 years.  The 50% successful SWR for a 23 year period is an eye popping 7.25%, according to firecalc.

No doubt. I plan on hitting about $500k and calling it quits for our high paying jobs. I'll probably do part-time work/ SWAMI until 40 in a field that I have more interest in.
I should at least have about 1.25MM at 40 even if I never put in another dime. Who knows, maybe I'll still enjoy my work at 40 too much to give it up, maybe not. But by that point I'll have the freedom to do pretty much whatever I please.

Of course this is all conservative thinking. What do I really think will happen? We'll end up having a really great stock run somewhere between now and when I'm 40, end up with way more than 1.25MM, and even my part-time work could potentially cover more than what we spend. My guess is that we'll really be way beyond set even at 35. We'll see though. As a human, I adapt to the moment not to the unknown future.

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Re: Failing your Early Retirement
« Reply #40 on: June 25, 2015, 08:54:42 AM »
In general agreement with most here, but I'm always a little wary of the "I'll just go back to work" reasoning.  There are a million reasons why that may not be as easy as some make it sound (your skills have waned or become obsolete, medical issues, lack of stamina, high unemployment rate making the job market super competitive, etc, etc.), and sure, if all else fails, I suppose working at that gas station convenience store or as a Walmart greeter is an option -- but seriously, tell me if every time you see those people your immediate emotion isn't one of pity?  I know mine is.  [snip]
.. and my immediate response whenever someone waves this flag of fear, pity and retirement taboo is: you don't need a 'standard' 40hr/week job.  The idea is simply to supplement your retirement income, and a laughably small amount can do wonders.  For example, earning just enough to pay for 25% of your expenses is the difference between a usually save 4% WR to an historically unsinkable 3%.    And it isn't even permanent - often it will be just for 3-5 years until your portfolio can return to pre-crash levels.  THis is also most likely to happen in the first 6 years of ER, so the example of an old-guy flipping burgers seems to me to be just an emotional (rather than rational) fear tactic.

Suppose a rather soft $40k/year retirement budget.  Earning 25% of your expenses would be ...
one day per week at $18/hr as a substitute teacher OR
what a youth club soccer/swimming/basketball coach can earn in 6 months of coaching OR
... use your creativity.

No No No - having to go back to work IMO would suck a 1000 times more than putting in a few extra years now. Would not get nearly the same pay coupled with the fact that I NEED to be there and no idea how long for - f@ck that, my worst nightmare, undoing all the hard work from earlier years.

Well... we're going to have to agree to disagree on this (and that's fine).  To me it seems insane to want to work a few extra years now when you are young and healthy to offset the chance that you might have to do some occasional part-time work somewhere down the road.  The notion of not getting 'nearly the same pay" seems to drive a lot of the OMY syndrome but in my view it's completely a straw-man. You don't need to work the same job or get the same pay.  You wouldn't even need to cover your expenses - not by a long shot.  It's just small corrections, and at least to me these temporary, part-time gigs can be fun, allowing me to meet new people and do new things.
::shrug:: just my personality I guess.

I agree with you completely on this one. I expect I'll do casual temp jobs for fun sometimes even if I don't need to. The first couple years I'm curious if I can do enough little temp jobs of side gigs to cover my very low expected expenses, just for fun.

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Re: Failing your Early Retirement
« Reply #41 on: June 25, 2015, 09:27:08 AM »
Re: working a little longer for a more "safe" retirement vs. taking a part-time job (by necessity) later on if things go worse than hoped: There's of course no one-size-fits-all answer, but an important factor for me was taking advantage of the much higher pre-retirement pay vs. "side gig" income later on. Working six months more at the much higher paying professional job would probably fund 5-10 years of "side gig" or part-time income later on. Some benefits to working a little while longer instead of (possibly) relying on part-time income later:

- Improves odds of not being an ER "failure" statistic and going back to part-time work
- Gives added side benefit of less worry/stress
- The extra money you earned can compound returns all the years you don't need to tap it. As an example, if you earn $100k more than needed, that could easily double to $200k in 10-12 years. Now you have a huge safety margin or extra money if you didn't need to access it for an emergency.

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Re: Failing your Early Retirement
« Reply #42 on: June 25, 2015, 09:59:44 AM »
Re: working a little longer for a more "safe" retirement vs. taking a part-time job (by necessity) later on if things go worse than hoped: There's of course no one-size-fits-all answer, but an important factor for me was taking advantage of the much higher pre-retirement pay vs. "side gig" income later on. Working six months more at the much higher paying professional job would probably fund 5-10 years of "side gig" or part-time income later on. Some benefits to working a little while longer instead of (possibly) relying on part-time income later:

- Improves odds of not being an ER "failure" statistic and going back to part-time work
- Gives added side benefit of less worry/stress
- The extra money you earned can compound returns all the years you don't need to tap it. As an example, if you earn $100k more than needed, that could easily double to $200k in 10-12 years. Now you have a huge safety margin or extra money if you didn't need to access it for an emergency.
agree that there's no 'one-size-fits-all".  Personally, we are not high-earners, so perhaps if we brought in $100k+ annually we would view things differently.

My main concern and reason for entering this debate is that OMY seems to driven mostly by fear and time is the one commodity you can't get more of.*
There's a law of diminishing returns at work here - to go from a 5% to 4% WR requires a 20% increase in your portfolio.  From 4% to 3% requires a 25% increase, yet the relative 'safety' of these WR deminishes (from ~40% to 15% to 0%, respectively).  Depending on your income and savings rate and market conditions, each reduction can add years to your full-time working life to try to prevent something that is already unlikely to happen.
Personally, I'm asking 'is there a better way" - and for me and my spouse, keeping the option of part-time work on the table means we can declare FI with a 5% WR and have the exact same safety (~0%) as someone with a 3% WR. For us, this is a 'stach difference of over $400,000, and could easily require us to work a decade longer than necessary.
I'm foregoing the certainty of working now for the unlikely need that i will need to work later (sporadically and part-time) or reduce expenses.  The idea of staying financially active actually appeals to me, as I'm already constantly turning down small paid gigs that I would enjoy because I don't have the time with my current job. 

*unless of course you can become healthier in ER, increasing both your quality of life and your life expectancy. 

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Re: Failing your Early Retirement
« Reply #43 on: June 25, 2015, 10:09:17 AM »
Kevin Spacey would beg to differ.

"You don't get to tell me what to do ANYMORE, ever!"

I watched that movie again a couple months ago. Interesting to compare Lester's mindset to mine in this current FIRE endeavor. The "Fuck it!" attitude he displayed was awesome. Taking back his life, his time, his mind, his body was all great. The drugs, adultery, and extortion are not part of my plan (well, maybe the drugs) but the rest was pretty damn empowering and all things I hope to emulate to some extent.

Edit: But I don't plan to die within a year of quitting either.

And also, I'm with nereo and others who would prefer to quit early with a bit of added risk/lower certainty than work a few years longer than necessary.
« Last Edit: June 25, 2015, 10:15:02 AM by Cheddar Stacker »

nereo

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Re: Failing your Early Retirement
« Reply #44 on: June 25, 2015, 10:24:08 AM »

Edit: But I don't plan to die within a year of quitting either.
... did Lester?
:-)

Cheddar Stacker

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Re: Failing your Early Retirement
« Reply #45 on: June 25, 2015, 10:33:45 AM »

Edit: But I don't plan to die within a year of quitting either.
... did Lester?
:-)

Spoiler alert: http://www.imdb.com/title/tt0169547/synopsis?ref_=ttpl_sa_2

Quote from: Lester Burnham
"I guess I could be really pissed off about what happened to me... but it's hard to stay mad, when there's so much beauty in the world. Sometimes I feel like I'm seeing it all at once, and it's too much, my heart fills up like a balloon that's about to burst... and then I remember to relax, and stop trying to hold on to it, and then it flows through me like rain. And I can't feel anything but gratitude for every single moment of my stupid little life. You have no idea what I'm talking about, I'm sure. But don't worry... you will someday."

It's an entertainingly dark, messed up movie, but there are some interesting life choices/messages in it as well, like the bolded part of the quote above.

2lazy2retire

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Re: Failing your Early Retirement
« Reply #46 on: June 25, 2015, 10:47:48 AM »
Re: working a little longer for a more "safe" retirement vs. taking a part-time job (by necessity) later on if things go worse than hoped: There's of course no one-size-fits-all answer, but an important factor for me was taking advantage of the much higher pre-retirement pay vs. "side gig" income later on. Working six months more at the much higher paying professional job would probably fund 5-10 years of "side gig" or part-time income later on. Some benefits to working a little while longer instead of (possibly) relying on part-time income later:

- Improves odds of not being an ER "failure" statistic and going back to part-time work
- Gives added side benefit of less worry/stress
- The extra money you earned can compound returns all the years you don't need to tap it. As an example, if you earn $100k more than needed, that could easily double to $200k in 10-12 years. Now you have a huge safety margin or extra money if you didn't need to access it for an emergency.
agree that there's no 'one-size-fits-all".  Personally, we are not high-earners, so perhaps if we brought in $100k+ annually we would view things differently.

My main concern and reason for entering this debate is that OMY seems to driven mostly by fear and time is the one commodity you can't get more of.*
There's a law of diminishing returns at work here - to go from a 5% to 4% WR requires a 20% increase in your portfolio.  From 4% to 3% requires a 25% increase, yet the relative 'safety' of these WR deminishes (from ~40% to 15% to 0%, respectively).  Depending on your income and savings rate and market conditions, each reduction can add years to your full-time working life to try to prevent something that is already unlikely to happen.
Personally, I'm asking 'is there a better way" - and for me and my spouse, keeping the option of part-time work on the table means we can declare FI with a 5% WR and have the exact same safety (~0%) as someone with a 3% WR. For us, this is a 'stach difference of over $400,000, and could easily require us to work a decade longer than necessary.
I'm foregoing the certainty of working now for the unlikely need that i will need to work later (sporadically and part-time) or reduce expenses.  The idea of staying financially active actually appeals to me, as I'm already constantly turning down small paid gigs that I would enjoy because I don't have the time with my current job. 

*unless of course you can become healthier in ER, increasing both your quality of life and your life expectancy.

 i would agree that the level of earnings before FIRE would change my opinion somewhat as regards entertaining the idea of returning to work at a later stage.

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Re: Failing your Early Retirement
« Reply #47 on: June 25, 2015, 10:48:34 AM »
I'm only 3 weeks into FIRE, so no failure yet, but of course it's something I thought a lot about. However after having friends die in their late 40's/early 50's, and a parent die before age 70, I realize I could also fail to ER by continuing with OMY - if I died before ER, then I would also consider that a failure. It's a personal decision, but for me it was worth the slight risk of FIRE failure to go ahead and do it while I'm still healthy and can hopefully enjoy many years of not working.  If I was younger and hadn't entered the age where friends start dying, maybe I would have done a few more OMYs. I'm also fairly confident that if worse came to worse, I would find a way to become reemployed at something I enjoy doing, and since I'm not much of a spendy-pants, it would be ok if I wasn't earning anywhere near what I had been.

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Re: Failing your Early Retirement
« Reply #48 on: June 25, 2015, 11:27:29 AM »
Ok, so let's say you have 25x annual expenses saved.  Let's say things go horribly wrong and your long term returns (after inflation) are $0 (it would never be precisely $0, but you get my point).

You now have 25 years to figure out some other way to cut expenses or add in a bit of income.  I think you could figure something out in 25 years.

sol

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Re: Failing your Early Retirement
« Reply #49 on: June 25, 2015, 11:38:12 AM »
Ok, so let's say you have 25x annual expenses saved.  Let's say things go horribly wrong and your long term returns (after inflation) are $0 (it would never be precisely $0, but you get my point).

You now have 25 years to figure out some other way to cut expenses or add in a bit of income.  I think you could figure something out in 25 years.

Look at the historical failure cases and you'll see that retirements generally don't fail because of poor investment returns, they fail because of runaway inflation.

In those cases, your 25x expenses may only last 15 years.  Still plenty of time to see it coming and make adjustments, IMO.
« Last Edit: June 25, 2015, 12:26:31 PM by sol »