Discounting Old Age/Early Death Risk

[PDX Citizen]

I've been pondering lately how far to work before I call it quits/cut back.  This site has been very helpful, but in general, the 4% safe withdraw rate is a bit more conservative then what I have been using (I've generally been shooting for about 5%, realizing that the savings may not last forever).  I understand the rationale for a safer rate (4%), but when I consider the extra working years it requires, it is a bit of a hard pill to swallow.  At it's foundation, it seems like the 4% rule is meant to give us a good chance of our savings never running out, but the catch is that none of us actually will live forever to test this assumption.

If none of us really know how long we will live, just as there is a risk of saving too little, then there is also a risk of working too long and saving too much money and not getting to enjoy it.  Also, time off now probably allows me to do more things and enjoy them more while I'm physically able, then it probably will when I'm geriatric.  Furthermore, if I'm wrong and my savings don't last, I could always go back to work at an older age, but if I'm wrong in the opposite direction, and work too long, there is no way to get those lost years back. So, considering all this, I'm wondering if anybody has attempted to account for this mathematically (ie. how much more is time off worth now against an uncertain future?)  And if so, is there a way to integrate this into FI/retirement planning?

My apologies if this question is a bit morbid!

[Eric]

It's a good question.  In general, I think erroring on the side of working more while in the prime of your career is the preferred error choice as it'll be harder to pick up work later after either your skills or health have deteriorated.  The thought of going back to work because you have to when you're 80 is not an appealing idea.

I haven't really done the math on it though.  The updated Trinity Study  (Table 2 for inflation adjusted withdrawals) gives a 5% inflation adjusted withdrawal from a mix of 75/25 an 82% chance of succeeding (i.e. >$0 remaining) after 30 years.  However, I'm assuming the success rate continues to fall as you stretch the timeline even further.  And that would make me nervous, personally.

Have you considered your SS payments as part of your withdrawal rate?  Such as a possible higher withdrawal rate initially, then somewhat mitigated by SS.  I think you'd have a good idea early on if it was sustainable depending on market conditions for the first handful of years.

From reading around here, it seems that most people who pull the plug have their mindset and attitude changed so much that they would have a really hard time going back to work full time.  Or even part time if that time was spent in an office.  But of course, that's a personal consideration.

Sorry, I don't think any of that directly answered your question.

[PDX Citizen]

Thanks - that actually is helpful.  I still need to figure out how to run FIRE, but that seems about in line with what I a have been calculating.  It's really just good to hear from other people considering or enjoying early-retirement in order to avoid making any mistakes as I attempt it.  One part of me says I shouldn't be so greedy, and should just consider any extra money I earn to be resources I could give to charity and loved ones, but then again, an extra day behind a desk when it's sunny outside sometimes feels like a slow death!

[MooseOutFront]

I think there are lots of situations that justify a more aggressive withdrawal rate.  If I wanted to tempt fate I could plan on running out of money at 70 yrs old and then have SS, inherited land, and a frugal lifestyle to live out my days on no problem.

And that's not even considering how flexible we all are that retire in our 30's and 40's to just go back to work in case of a black swan or similar that necessitates it.  I personally plan for a 4%, but am not scared to "retire" before the stache gets there.  Theoretically. :)