Author Topic: Would you still retire?  (Read 4360 times)

imolina

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Would you still retire?
« on: November 28, 2020, 10:11:16 PM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

RamS

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Re: Would you still retire?
« Reply #1 on: November 28, 2020, 10:29:02 PM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

IMO, it would depend on your spending and number of years you have left. There's this calculator: https://www.firecalc.com/ where you can plug in your spending, your portfolio value, and the years, and it gives you a "success rate" as well as what your highest and lower portfolio balances can be. You do ask a good question as to which number to use, the 1.4 million or the 2 million.

Different people have different comfort levels about that percent based on the value used.  I myself would likely be most comfortable with a 100% success rate with the 1.4 million portfolio value BUT if I had been using the 2 million for many years and it was reporting a 100% success rate, then I would likely retire even though the portfolio value has changed as long as it was above 90-95% for the 1.4 million. I hope this makes sense.

So you can plug in your two numbers and see how the success rates change (if they do - perhaps your spending is so good that you're at 100% or near it in both situations)  and see what can be done to get it to close to 100% (that's my personal comfort level - most people are fine with 90% or 95% from what I understand).

--Ram

deborah

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Re: Would you still retire?
« Reply #2 on: November 28, 2020, 10:38:55 PM »
It would depend. If the value had flatlined for months at $1.4mill, but for one day in November it had gone up to $2mill and then gone back to the $1.4mill, I would say that the $2mill was just a blip and wait.

jeroly

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Re: Would you still retire?
« Reply #3 on: November 29, 2020, 06:13:59 AM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

1.  If you had anything approaching a sane asset allocation just two to four months from your retirement date, you wouldn't be 100% invested in equity, so if the market was down 30% you'd probably have something like 1.64 million (assuming a 60/40 allocation).

2.  If you have a 'target retirement number' you don't retire with less.  If it's just a 'nice-to-have' number then maybe.  If you are struggling to put a number on what your actual 'stash need is, a good starting point is 25 x your expected annual expenses in retirement. Are your planning to spend less than $65,000/year including taxes, healthcare, and funding periodic replacement of large ticket items like a car, a refrigerator, and a new roof? If so you can feel confident that you can retire on $1.64 million. (If you have expectations of a pension or social security income in retirement you can reduce the amount)

3.  There's yet another good reason not to give too much notice.

BikeFanatic

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Re: Would you still retire?
« Reply #4 on: November 29, 2020, 06:44:47 AM »
I have been in your shoes I am FI, then crash in March= not FI, then recovery! It is such a rollercoaster.

I decided to change my asset allocation, and  keep 2-3 years in cash and CD's so I do not have to tap stocks that are down in value. I don't know how old you are and if you are lean vs fat FI, but I am rather conservative so I have a paid off house and the ability to decrease my spending and my spouse is doing one more year so I do have contingency plans. and the ability to go back to work, I am keeping up my certifications and such. I really do not want to go back to work but if my stash drops, and stays there for 2 years I may have to. AT this point I am close to fat FI more than lean FI and that helps me sleep. Still I am very conservative an I feel I did work a year or 2 more than I had to. ( Mostly because  I had landed such a great job with alot of incentives to stick around)

If you can go back to work in 2 years if this thing doesnt work out then I say take the leap.
« Last Edit: November 30, 2020, 08:27:13 AM by BikeFanatic »

NotJen

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Re: Would you still retire?
« Reply #5 on: November 29, 2020, 08:25:45 AM »
I announced I was quitting and then quit before I reached my target retirement number.  Coincidentally, I hit my number after my final paycheck and market gains.  I fell below my number in March with the market dip, but I'm well above again now that the market has recovered. 

None of that matters much.

I won't increase spending due to short-term market gains.  I'll get a paid job in the future if I need to, or if I want to.  I had over a year in expenses in cash (and plans to sell my home to get more cash), so I shouldn't need to touch my investments for the first few years.

(It's an easy decision since it's just me - it would probably be different if I were supporting a family - or perhaps easier if there were 2 able bodies around).

John Galt incarnate!

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Re: Would you still retire?
« Reply #6 on: November 29, 2020, 08:35:33 AM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

Yes, I would still retire because I allowed for  inevitable portfolio-value fluctuations  when I chose the initial portfolio value that equaled FI.

So once that initial value obtained I would not delay retiring if at the time of my retirement the portfolio's value was less   for the reason of my expectation that it would eventually return to its  initial value.
« Last Edit: November 29, 2020, 08:38:41 AM by John Galt incarnate! »

ender

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Re: Would you still retire?
« Reply #7 on: November 29, 2020, 08:49:06 AM »
Realistically one of the biggest risks for a FIRE failure is sequence of returns.

You then know for a matter of fact that you are in a rougher SoR risk because before you've pulled the trigger you are already at 70% of your initial value.

I would probably continue working at this point as intentionally playing with one of the most serious FIRE failure risks seems foolish.

Jack0Life

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Re: Would you still retire?
« Reply #8 on: November 29, 2020, 10:29:28 AM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

If you think the market will go down by 30% by Feb, then reallocate your investments. Maybe 60/40. If your prediction does come true, then reallocate your 60/40 back to 100% and ride the waves back up.

Villanelle

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Re: Would you still retire?
« Reply #9 on: November 29, 2020, 10:31:45 AM »
Assuming my portfolio, and not just the market, was down 30%, no I likely wouldn't fully retire.  But that would depend on many, many factors.  How much do I hate my job?  Is there any possibility of going part time, WFH (post-Covid) nearly full time, finding a different job, taking on a consulting gig with either my previous employer or someone new, taking a sabbatical for a couple months, or going barista-fire in some form? 

I'd likely look for a way to keep some income while still downshifting my work in some way. 

My answer would also depend heavily on how much I had in cash, laddered CDs, etc.  If that was enough to get me through, say... a year, I'd worry less.  I haven't yet figured out a FIRE spending and withdraw strategy, but based on my reactions to questions like this one, I think it will likely involve having ~1y moderate expenses in cash (or similar), perhaps with quarterly withdraws to keep topping it up as long as the market isn't down more than x%, letting myself get no lower than y% of spending. (But that would make me somewhat of a market timer, I suppose.).  I don't want FIRE to be the time in my life that I start stressing over money.

John Doe

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Re: Would you still retire?
« Reply #10 on: November 29, 2020, 10:50:21 AM »
I am pretty much this exact situation - my portfolio is $2m and I plan on retiring in April. This past March when the markets tanked my portfolio went from $2m to $1.2m, I did very little trading, just some yield switches on a small number of holdings. I have no concerns if the value of my portfolio decreases as I am comfortable that the dividends it generates will continue. I did have a few holdings cut their dividends but this was by far the exception, some even increased.  Therefore, provided you are content with your holdings and comfortable that they will generate the income you desire AND you have a cash buffer to buy you time should the world go to hell once again, Iíd retire if I were you.  So I donít think itís quite as simple as making the decision based upon the size of your stash but rather what is that stash composed, how confident are you in your holdings and do you have a safety net in case everything does drop a significant percentage.  March 31st is my last day regardless of what happens in the markets between now and then.   

My two cents worth. Hope that helps

friedmmj

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Re: Would you still retire?
« Reply #11 on: November 29, 2020, 11:40:04 AM »
The OPs hypothetical is the equity allocation is 100%.  Thatís not a great idea as youíre about to pull the plug.  I moved from 70/30 to 40/60 this year for this very reason.  You need. Large fixed income ballast of at least 40 percent entering retirement assuming you havenít built up a ridiculously large stash.

texxan1

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Re: Would you still retire?
« Reply #12 on: November 29, 2020, 02:29:21 PM »
It really depends on what else you had prepared for this... That is basically what is happening to me, but im keeping 300k cash just for those risks the first few years... Do i think its too much, ya but i want dont want to fret over it.

if you have a paid for home, and have a way to make a little extra cash if the market tanks.. Your probably good to go

my number was 2mm..... i went over that and its still growing exceptionally... So its time....


FIRE 20/20

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Re: Would you still retire?
« Reply #13 on: November 29, 2020, 05:45:12 PM »
Letís say your target retirement number is 2 Million, and target date is February 2021. You reach your goal of 2 Million in November 2020, then the stock market starts going down and by February 2020, the market is 30% down, your portfolio is now worth 1.4 Million. Would you still retire?, you have already planned everything to retire, giving notice, etc.

Any FIRE plan that cannot handle a 30% drop in the market immediately after FIREing is an incomplete plan, and moving the date of the drop to a few months before FIRE doesn't change that.  I've spent a lot of time on the various cohort threads, and it seems to me that there are very few people who hit 25x their planned spending, quit, and then expect everything to be smooth sailing with zero effort on their part.  In almost every case where people post details, they have some kind of backup plan and usually multiple backups.  For instance, some people have multiple numbers (lean, expected, and luxury spending levels), and only FIRE after they've exceeded 25x their highest budget.  Many people seem to wait until they've hit 30x or more, meaning that even with a drop like that they'd still be just a bit below 25x.  Or people ignore a pension or social security when coming up with their number, or have a hobby that will probably earn some money, or in most cases people have a bunch of the above backup plans.

So for a "normal" person who has hit their FIRE goal, at least based on what I've seen over the years here, the person in your example might have spending of, say $70k for a 3.5% withdrawal rate at $2M.  At $1.4M, they might be willing to go with a 5% withdrawal rate for a year or two suspecting that they've already seen the drop early in FIRE and expect the 'stache to recover quickly.  Or they might be able to cut from $70k in spending to $56k, going from a 3.5% withdrawal rate for $2m to a 4% withdrawal rate from $1.4M.  Or they might increase their hobby income or they might realize they can sustain a 5% withdrawal rate given that they have S.S. coming in something like 25 years. 

Bottom line - I don't see people posting here that they hit 25x spending with zero ability to cut and no potential of future income and think that they're home free regardless of what happens in the markets or the real world.  In most cases when people hit their number it seems like they have oversaved so a 30% hit to their net worth probably won't impact their likelihood of success.  Or in the rare cases of people who hit 25x and quit with no backup, they usually seem to have their eyes wide open and accept that they might be in the ~5% failure group and will be ok with earning some income at some point. 

So yes, if I were in that situation I'd go ahead and FIRE because in my case I ignored my pension, ignored Social Security, had plenty to cut, had a 3.3% withdrawal rate, and was willing to return to work if needed.  Seeing a 30% drop would just make me implement the backup plans that were there all along for exactly that eventuality. 

Malcat

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Re: Would you still retire?
« Reply #14 on: November 29, 2020, 06:20:16 PM »
This hypothetical makes little sense for all of the reasons people have already said.

However, if I'm 100% equities leading up to retirement, then it's because I don't need my equities as the primary source of my retirement. Say, I have a decent pension that can cover my lean expenses and I decide to utilize a flexible withdrawal rate from my equities to cover my extras. Then I don't really care too much what the market does, I'll just spend less on extras in down years. Easy.

If I am entirely dependent on my stache for my retirement, then there's no effing way I'm 100% equities that close to my retirement date AND have only saved enough to cover my lean expenses.

If my lean expenses are under 40K and I've over saved to 2M because I got sucked into an OMY spiral, then 1.4M still more than covers me, and more years of OMY seems like a silly idea.

So basically, it depends.

PDXTabs

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Re: Would you still retire?
« Reply #15 on: November 29, 2020, 07:11:46 PM »
I'm with Malcat with "it depends." If you were targeting $80k/yr of withdrawal then I would say no, because like ender points out SOR risk is real and you have an easy opportunity to mitigate it. On the other hand, I could "retire" on maybe $12k/yr if I really wanted to, and wait for my $1.4M to go back to $2.0M. So, it depends.

imolina

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Re: Would you still retire?
« Reply #16 on: November 29, 2020, 08:00:39 PM »
Thanks for the replies. The case is hypothetical. I am planning to retire in 2 years, and my husband will continue with his business, but I want to retire when we hit 2 Million. I'd say I am a pessimistic person that is thinking of a very bad case scenario and would like to hear opinions. I dont want to work where I work now anymore, too many reasons, and working somewhere else is not an option as I am in the middle east where no part time choices are available, and I could not work full time for anyone ( I am done).

lhamo

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Re: Would you still retire?
« Reply #17 on: November 29, 2020, 08:06:17 PM »
I'd also be in the "it depends" category.

How miserable are you at current job, and how much of the stash is in liquid funds that could be used while waiting for the market to run back up?  If miserable and with enough runway (for me that would be 3-5 years of basic living expenses), I would probably go ahead.   But I could live off 3% of 1.4 mill (42k/year) just fine.

If I was more or less happy at my job and not able to travel, etc. due to Covid I would probably just go ahead and keep working through the downturn, and work on my asset allocation so that I have plenty in liquid funds when I do eventually FIRE.

FIRE 20/20

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Re: Would you still retire?
« Reply #18 on: November 29, 2020, 10:45:31 PM »
Thanks for the replies. The case is hypothetical. I am planning to retire in 2 years, and my husband will continue with his business, but I want to retire when we hit 2 Million. I'd say I am a pessimistic person that is thinking of a very bad case scenario and would like to hear opinions. I dont want to work where I work now anymore, too many reasons, and working somewhere else is not an option as I am in the middle east where no part time choices are available, and I could not work full time for anyone ( I am done).

If you post more details that might help.  I can imagine two extremely different situations that would give two different answers.  If you're 30 years old, don't have any money in any kind of pension or Canadian/UAE Social Security equivalent, both plan to quit after $2M because you want to spend $80k/year, and won't be able to find work post-FIRE then I would keep going.  If you're nearing normal retirement age, have a pension or equivalent, and want to have $2M because you want to spend $40k a year at a 2% withdrawal rate, then quit already!
I also can't tell if you are going to retire in 2 years when you expect to hit $2M, but your husband plans to keep working indefinitely, if you when you say, "I want to retire when we hit 2 Million" you mean you want your husband to also retire when you hit $2M. 
In your situation, I'd run a bunch of scenarios in FireCalc, CFireSim, or the Rich, Broke, or Dead calculator.  That should give you a better answer.  Of if you want input on your situation, include your ages, planned retirement expenses and location, any additional future income like pensions, how much flexibility you have in your budget, what withdrawal rate you'd be comfortable with and why, and expand a little on how long your husband wants to work as well as his income.  Without information like that I don't think you'll get many answers better than all of the various versions of "It depends". 


Malcat

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Re: Would you still retire?
« Reply #19 on: November 30, 2020, 06:37:44 AM »
Thanks for the replies. The case is hypothetical. I am planning to retire in 2 years, and my husband will continue with his business, but I want to retire when we hit 2 Million. I'd say I am a pessimistic person that is thinking of a very bad case scenario and would like to hear opinions. I dont want to work where I work now anymore, too many reasons, and working somewhere else is not an option as I am in the middle east where no part time choices are available, and I could not work full time for anyone ( I am done).

Then what you need to do is make the appropriate plan to retire. There are tons of ways to mitigate sequence of returns risk so that your hypothetical is literally impossible, which is what we're all saying.

It doesn't help you to know what we would do in that "worst case scenario" because there's no reason anyone would end up in that worst case scenario.

If you are two years from retiring, then I would asap start reading about SORR and establish the strategy that best serves your needs and risks.

The whole point is that your plan should work no matter what the market does. That's actually a really, really important part of planning.

For some it's a bond tent, for some it's a variable withdrawal rate that drops in down years, for some it's having a large cash buffer, for some it's having a super low withdrawal rate, for others it's living off of dividends only, and for some, it's all of the above.

Very few people here relocate to somewhere cheaper when they retire. It's an option, but not a realistic one for a lot of people because by the time most of us retire, we have established networks, family, ties we just don't want to sever.

So don't assume that because you can't relocate that the plan isn't designed to work for you.

Your plan will work if it's well thought out and accounts for your particular needs and risks. Save 25X expenses is not a retirement plan, that's a very, very, extremely rough goal based on a number you made up for yourself.

Now you have to look at those "worst case" market fluctuations and figure out what they could mean for you personally. If they could really damage your retirement plans if they happened early on (SORR), then you need to employ a SORR mitigating strategy.

If those fluctuations wouldn't hurt you, as in my examples previously, like if you have a substantial pension or you've saved over 50X your expenses, then a bond tent or large cash buffer might be totally useless for you.

I understand the urge to anticipate the worst case scenario, but what you are asking is akin to "what if you get gored to death while running with the bulls?" and we're all saying "well, we wouldn't run with the bulls, so we don't factor goring into our risk factors".

Villanelle

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Re: Would you still retire?
« Reply #20 on: November 30, 2020, 09:04:52 AM »
Thanks for the replies. The case is hypothetical. I am planning to retire in 2 years, and my husband will continue with his business, but I want to retire when we hit 2 Million. I'd say I am a pessimistic person that is thinking of a very bad case scenario and would like to hear opinions. I dont want to work where I work now anymore, too many reasons, and working somewhere else is not an option as I am in the middle east where no part time choices are available, and I could not work full time for anyone ( I am done).

Are your investments in the ME as well?  Do you plan to stay there in retirement?  I'm not familiar with investing rule and tax laws in any ME countries, but for a US investor, I'd certainly question--as many have already done in this thread--why you would be in 100% equities at retirement.  This seems like an even more important question given this fear you have of a market drop right before (or presumably, after) you retire.

Is it safe to assume you plan to spend appoximately $80k in retirement?  If so, it seems like there is a lot of fat in that budget (though this will depend somewhat on COL, if you have a paid off home, etc.).  So that's your first safety valve after you get some of that money out of the market.  You cut back that year.  Travel locally, postpone planned upgrade, eat out a couple times less each month, etc. 

Also, are there truly NO part time jobs in your country?  Substitute teaching?  Barista?  Nothing?  That's a fairly easy way to bring in another $10k, which isn't a lot of money, except it's actually a lot of money when it means you withdraw ~12% less from your stache.  If those things truly don't exist where you are, what about consulting?  What about tutoring online? 

FInally, you say you are DONE, but you still have two more years to work.  If you are truly that DONE, then perhaps you need to explore ways to cut your spending.  An extra $5k per year in the bank now not only gets you to your target faster, it moves your target closer because you won't need as much to fund the lower spending.  If you cut $5k from spending, you need $125,000 less saved. 

trollwithamustache

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Re: Would you still retire?
« Reply #21 on: November 30, 2020, 09:45:48 AM »
how much to do you have in cash?

maybe not efficient per MMM standard rules of conduct, but if you have a year or 2 sitting in cash, then a lot of these market blips don't matter as much stress wise. You have to pick you points to pull out another 6 mo or year.

alcon835

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Re: Would you still retire?
« Reply #22 on: December 08, 2020, 07:00:38 AM »
For me it would depend on (1) how much cash I have, (2) how long can I survive without touching my investments, and (3) how difficult it would be to find another job before my cash position goes away.

My plan is to have at least 1-year in cash (maybe 2) plus another one or two years in CDs. So, presumably, when I hit my FIRE number I've also got enough money to live on for 3 years. In my industry, as long as I stay tangentially aware of changes to the market, I can pretty easily take a year or two off and pop back into the workforce if I need to.

So for your example, I would hope it would look like this for me:

  • I hit my FIRE number in November 2019.
  • I notify my employer of my plan to retire in February 2020 (probably in December to give them a 3-month buffer to replace me).
  • In January, I withdraw all the funds I'll need for 2020 and setup a 1-year CD and a 2-year CD as a recession survival fund.
  • I invest all my remaining income from January until my retirement.
  • In February, I retire from work.
  • In March, my stock takes a 40% hit and drops from $2M to $1.4M. I feel stressed and uncertain about the future, but that has zero direct impact on my ability to live in 2020.
  • In Nov/Dec 2020 I review the market and determine if I am going to pay for 2021 with CD or investments (depending on if the market rebounded or not).
  • In Nov/Dec 2021, I review the market and determine if I am going to pay for 2022 with a CD or investments or if I need to start looking for work to make up for the loss.

All-in-all, if I am ready to FIRE, it means I have some recession buffers. For 2020, my investments would actually be above $2M when I go to review them in November. I wouldn't even need the CD money and could easily live off of my investments.

imolina

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Re: Would you still retire?
« Reply #23 on: December 12, 2020, 08:00:17 PM »
For me it would depend on (1) how much cash I have, (2) how long can I survive without touching my investments, and (3) how difficult it would be to find another job before my cash position goes away.

My plan is to have at least 1-year in cash (maybe 2) plus another one or two years in CDs. So, presumably, when I hit my FIRE number I've also got enough money to live on for 3 years. In my industry, as long as I stay tangentially aware of changes to the market, I can pretty easily take a year or two off and pop back into the workforce if I need to.

So for your example, I would hope it would look like this for me:

  • I hit my FIRE number in November 2019.
  • I notify my employer of my plan to retire in February 2020 (probably in December to give them a 3-month buffer to replace me).
  • In January, I withdraw all the funds I'll need for 2020 and setup a 1-year CD and a 2-year CD as a recession survival fund.
  • I invest all my remaining income from January until my retirement.
  • In February, I retire from work.
  • In March, my stock takes a 40% hit and drops from $2M to $1.4M. I feel stressed and uncertain about the future, but that has zero direct impact on my ability to live in 2020.
  • In Nov/Dec 2020 I review the market and determine if I am going to pay for 2021 with CD or investments (depending on if the market rebounded or not).
  • In Nov/Dec 2021, I review the market and determine if I am going to pay for 2022 with a CD or investments or if I need to start looking for work to make up for the loss.

All-in-all, if I am ready to FIRE, it means I have some recession buffers. For 2020, my investments would actually be above $2M when I go to review them in November. I wouldn't even need the CD money and could easily live off of my investments.

You case is exactly the sample I was looking for. Fortunately you were lucky the market recovered very quick.

Loren Ver

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Re: Would you still retire?
« Reply #24 on: December 17, 2020, 09:41:26 AM »
This was a really had question.  I read it back when it was posted and thought about it quite a bit.  Then I talked to DH about it.  Think think think. 

We both came to the same conclusion and it was rather delightful, but still rather us, so maybe not so helpful to the OP.  Thought I'd post it anyway, since the question was asked.

Two major points DH and I both considered:

Firstly - Sequence of return risks (SORR) are an early retirees greatest risks.  Other posters have pointed this out up thread.  This was our biggest concern as you cannot know this until after the fact, but starting off in the hole, well, you know when you are starting.  Scary stuff.

Secondly - We would rather be retired than not retired. 

To us,  the second point would win out.  In fact, it did for us.  We retired before our stache hit our number since we liked the date that we had picked and wanted to start our next adventure.  We had a decent emergency fund, enough to cover our mortgage for two years if the market tanked since we would still have a mortgage.  We still had a student loan to pay off.  Our asset allocation is highly aggressive. 

Now it wasn't a 30% drop in the market, but it was a lot of things that many people would mark against us and tell us we should wait.  Maybe even 30% of our stashe's worth, worth of waiting.  It was a risk we were willing to take. 

YMMV

TheAnonOne

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Re: Would you still retire?
« Reply #25 on: December 17, 2020, 10:59:45 AM »
I mean, if your fire number was X, and now its X - 30%, you don't have enough money. I get that technically it WAS worth said amount, but it isn't anymore.

People still retiring, why didn't you retire while you were on your way up originally at 70% of your stated goal? I mean, it's going to get there eventually anyway?

In most cases.... you're talking about a few months of extra work, maybe 1-2 years on the long side, in recent market history. Probably not worth the risk.

We all want to FIRE, but months to a year of work isn't worth the risk of depleting your life savings. Remember, if you're wrong, you might have to start over, suddenly a few months of work sounds pretty nice :)

Malcat

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Re: Would you still retire?
« Reply #26 on: December 17, 2020, 11:31:16 AM »
This was a really had question.  I read it back when it was posted and thought about it quite a bit.  Then I talked to DH about it.  Think think think. 

We both came to the same conclusion and it was rather delightful, but still rather us, so maybe not so helpful to the OP.  Thought I'd post it anyway, since the question was asked.

Two major points DH and I both considered:

Firstly - Sequence of return risks (SORR) are an early retirees greatest risks.  Other posters have pointed this out up thread.  This was our biggest concern as you cannot know this until after the fact, but starting off in the hole, well, you know when you are starting.  Scary stuff.

Secondly - We would rather be retired than not retired. 

To us,  the second point would win out.  In fact, it did for us.  We retired before our stache hit our number since we liked the date that we had picked and wanted to start our next adventure.  We had a decent emergency fund, enough to cover our mortgage for two years if the market tanked since we would still have a mortgage.  We still had a student loan to pay off.  Our asset allocation is highly aggressive. 

Now it wasn't a 30% drop in the market, but it was a lot of things that many people would mark against us and tell us we should wait.  Maybe even 30% of our stashe's worth, worth of waiting.  It was a risk we were willing to take. 

YMMV

Divorce is actually an early retirees most likely and dangerous risk. SORR can be very easily mitigated, it's only dangerous if you don't plan for it.

However, many marriages can't handle a dramatic lifestyle alteration, and very early retirees tend to retire at the age where the height of divorces normally occur.

The impact on the 'stache can also be devastating, well beyond the magnitude of a nasty and persistent market tumble, and the principal reduction is permanent.

So for me, the question would be:
Which is better for the marriage? Working a bit longer or quitting as soon as possible?

skip207

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Re: Would you still retire?
« Reply #27 on: December 17, 2020, 02:15:51 PM »
Itís a no from me.   I would want my number to be stable for 12 months before pulling the pin.
My number is 850k but I wonít quit work the day I go from 849 to 850.
I compare it to a race motor.  It might do 12000 rpm for 15 seconds then blow up but that wonít win a race.  You need it to do 12000rpm for 2 hours...

So for me, in my situation, I think at or over number for 12 months and then I am done.  I would like to think I would start planning my exit around half way through.

I might consider a shorter time period if I was older and a year was a long time but I hope to fire at 43 ish so 12 months is security and worth the time.

Villanelle

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Re: Would you still retire?
« Reply #28 on: December 17, 2020, 03:35:48 PM »
Itís a no from me.   I would want my number to be stable for 12 months before pulling the pin.
My number is 850k but I wonít quit work the day I go from 849 to 850.
I compare it to a race motor.  It might do 12000 rpm for 15 seconds then blow up but that wonít win a race.  You need it to do 12000rpm for 2 hours...

So for me, in my situation, I think at or over number for 12 months and then I am done.  I would like to think I would start planning my exit around half way through.

I might consider a shorter time period if I was older and a year was a long time but I hope to fire at 43 ish so 12 months is security and worth the time.

Just out of curiosity, is there a number at which you would abandon the 12 month cushion?  For example, if your number is 850, but at 3 months you were at 950, would you retire then?  Or if at 3 months and then still at 6 months it was at 950? 

Loren Ver

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Re: Would you still retire?
« Reply #29 on: December 20, 2020, 07:05:37 PM »
This was a really had question.  I read it back when it was posted and thought about it quite a bit.  Then I talked to DH about it.  Think think think. 

We both came to the same conclusion and it was rather delightful, but still rather us, so maybe not so helpful to the OP.  Thought I'd post it anyway, since the question was asked.

Two major points DH and I both considered:

Firstly - Sequence of return risks (SORR) are an early retirees greatest risks.  Other posters have pointed this out up thread.  This was our biggest concern as you cannot know this until after the fact, but starting off in the hole, well, you know when you are starting.  Scary stuff.

Secondly - We would rather be retired than not retired. 

To us,  the second point would win out.  In fact, it did for us.  We retired before our stache hit our number since we liked the date that we had picked and wanted to start our next adventure.  We had a decent emergency fund, enough to cover our mortgage for two years if the market tanked since we would still have a mortgage.  We still had a student loan to pay off.  Our asset allocation is highly aggressive. 

Now it wasn't a 30% drop in the market, but it was a lot of things that many people would mark against us and tell us we should wait.  Maybe even 30% of our stashe's worth, worth of waiting.  It was a risk we were willing to take. 

YMMV

Divorce is actually an early retirees most likely and dangerous risk. SORR can be very easily mitigated, it's only dangerous if you don't plan for it.

However, many marriages can't handle a dramatic lifestyle alteration, and very early retirees tend to retire at the age where the height of divorces normally occur.

The impact on the 'stache can also be devastating, well beyond the magnitude of a nasty and persistent market tumble, and the principal reduction is permanent.

So for me, the question would be:
Which is better for the marriage? Working a bit longer or quitting as soon as possible?

This is a good point.  Our marriage was strong before we pulled the plug and it is even more enjoyable now that we have stopped working.  So I would say that, almost two years in, it was a net win for us.  Would have gone sooner if we could have pulled it off.  But we are a rather odd couple and know our limitations with each other and have realistic expectations that work for us (example lots of alone time to follow our own pursuits as introverts).
But I can see how so much instant possibly unstructured together could cause friction if you don't have good communication and boundaries already set up.

SwordGuy

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Re: Would you still retire?
« Reply #30 on: December 20, 2020, 08:25:28 PM »
Bottom line - I don't see people posting here that they hit 25x spending with zero ability to cut and no potential of future income and think that they're home free regardless of what happens in the markets or the real world.

I haven't seen anyone HIT 25x spending (using the stock/bond portfolio as the income source) and think that.

I've seen quite a few START the FIRE journey thinking that they can do that.    I hit them with a hard dose of reality when I see them but I'm willing to wager there are quite a few who come here, gloss thru the articles, see 25x, don't figure out their home equity and cars don't count, and leave to work their misguided plan on their own.