Author Topic: How much do you need to retire early?  (Read 32152 times)

It Figures

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How much do you need to retire early?
« on: September 30, 2012, 03:25:28 PM »
I realize that this is different for everyone, but I'm curious to know what number people are aiming for. 
« Last Edit: September 30, 2012, 05:39:29 PM by slowitdown »

Zaga

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Re: How much do you need to retire early?
« Reply #1 on: September 30, 2012, 03:50:13 PM »
For us I am aiming at debt free and $1 million invested.  This will most likely be between IRA's and 401-K's, and maybe rental houses.

There's a ways to go for us, still a good bit of debt to pay off and only investing 15% plus 6% comapny match.  I can see our progress accelerating though :-)

galaxie

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Re: How much do you need to retire early?
« Reply #2 on: September 30, 2012, 03:58:11 PM »
Our current non-mortgage expenses would lead to the conclusion that we need about $1.25 million to retire.  But I have an expensive house, so we might have saved as much $2 million by the time it's paid off.  There's essentially a cliff in our expenses at that point, and as soon as the house is paid off we can retire.  We will have saved more than enough money by then, just by taking the max employer match in our 401ks.

Of course, I personally want to overestimate the income I'll need in retirement, because you never know about health care etc. 

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Re: How much do you need to retire early?
« Reply #3 on: September 30, 2012, 04:24:03 PM »
I'm shooting for 200k F-you money, which will be enough for me to live on while I'm young but probably not forever. At that point I'll be comfortable leaving my likely-to-be awful engineering job to go do fun stuff like work on bikes, using that income to keep growing the 'stache. Of course, if the engineering job I get is better than the ones I've had so far maybe I'll stick around longer.

tracipam

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Re: How much do you need to retire early?
« Reply #4 on: September 30, 2012, 04:27:39 PM »
I'm aiming for debt free, a paid off house, and as close as possible to $500K before I say F-U to my (real) job.  At that point, the goal is to leave the money alone for as long as possible to grow while I cobble together jobs that I enjoy that pay enough to keep body and soul together--I'm thinking teaching English abroad, working at a National Park, freelance tour director, picking up classes here and there as an adjunct college professor, maybe WWOOFing... things of that nature.   

gooki

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Re: How much do you need to retire early?
« Reply #5 on: September 30, 2012, 04:46:56 PM »
$500,000 invested (i.e. not including home I'm living in) will allow me to be financially independent.

Mrs MM

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Re: How much do you need to retire early?
« Reply #6 on: September 30, 2012, 05:13:19 PM »
I'm aiming for debt free, a paid off house, and as close as possible to $500K before I say F-U to my (real) job.  At that point, the goal is to leave the money alone for as long as possible to grow while I cobble together jobs that I enjoy that pay enough to keep body and soul together--I'm thinking teaching English abroad, working at a National Park, freelance tour director, picking up classes here and there as an adjunct college professor, maybe WWOOFing... things of that nature.   

Great plan!  It doesn't have to be all or nothing... with a paid off house and low monthly expenses, things start looking pretty good.

If I had to do it all over again, knowing what I know now, I'd downsize my house, pay it off, save about $200K (or less) and then find some enjoyable work that pays my monthly bills.

DaftShadow

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Re: How much do you need to retire early?
« Reply #7 on: September 30, 2012, 05:18:11 PM »
Total Portfolio Goal = $500,000.  Note that this is for a "rent-based" living arrangement. 

$600,000 would be the goal if I own my own home ($400k Invested, $200k in House)

It Figures

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Re: How much do you need to retire early?
« Reply #8 on: September 30, 2012, 05:26:10 PM »
For us I am aiming at debt free and $1 million invested.  This will most likely be between IRA's and 401-K's, and maybe rental houses.

There's a ways to go for us, still a good bit of debt to pay off and only investing 15% plus 6% comapny match.  I can see our progress accelerating though :-)

Would debt-free include mortgage free?

Our house is worth $480,000 and we have $45,000 left on the mortgage.  We have $80,000 in RESP's(529 plan), $50,000 in RRSP (401k) and $50, 000 in investments.    Up until July we were putting all of our extra money towards the mortgage, but then we lowered our mortgage payments and are now investing more aggressively.  I'm just trying to figure out what our goal in investments should be.
« Last Edit: September 30, 2012, 05:34:56 PM by slowitdown »

happy

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Re: How much do you need to retire early?
« Reply #9 on: September 30, 2012, 05:54:46 PM »
On my current estimate of expenses 1 mill will be very safely enough with no debt and a paid off house.  As my moustache increases however, and my ability to control expenses grows, I hope I will be able to revise and decrease this.

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Re: How much do you need to retire early?
« Reply #10 on: September 30, 2012, 06:14:53 PM »
For us I am aiming at debt free and $1 million invested.  This will most likely be between IRA's and 401-K's, and maybe rental houses.

There's a ways to go for us, still a good bit of debt to pay off and only investing 15% plus 6% comapny match.  I can see our progress accelerating though :-)

Would debt-free include mortgage free?

Our house is worth $480,000 and we have $45,000 left on the mortgage.  We have $80,000 in RESP's(529 plan), $50,000 in RRSP (401k) and $50, 000 in investments.    Up until July we were putting all of our extra money towards the mortgage, but then we lowered our mortgage payments and are now investing more aggressively.  I'm just trying to figure out what our goal in investments should be.
Yes, as of right now the mortgage is only $14,600 on a house worth probably around $150K.  This is a very low cost area for houses, but there are also very few jobs close so our commute is a bit killer right now.  The bigger problem is the monster student loan of about $70K.  We have tax sheltered investments of $130K right now, so we're getting somewhere :-)

arebelspy

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Re: How much do you need to retire early?
« Reply #11 on: September 30, 2012, 07:01:50 PM »
Here's some polls on this question from last spring:
www.mrmoneymustache.com/forum/ask-a-mustachian/what-is-your-number-how-much-would-you-'retire'-on

www.mrmoneymustache.com/forum/ask-a-mustachian/what's-your-target-annual-income-in-retirement

Both ran for about two months and had around 100 responses.  One is about target net worth, the other about target income.
« Last Edit: September 30, 2012, 07:05:54 PM by arebelspy »
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Re: How much do you need to retire early?
« Reply #12 on: September 30, 2012, 07:22:22 PM »
Judging by the numbers currently on the thread it seems I have a lower FI (FU?) threshold. 

If the house is paid off I would like around 300K in investments before I quit the 9-5.  This would support the bare minimum from investments, but I would also work part time in either my current second job or other part time gigs. 

Ideally I would have my current house paid off and rented out, potentially another house (or apt funded by rental), post 65 retirement fully funded, and some extraneous investments at whatever my current living expenses are and a 5% withdrawal rate.  I don't see this ideal happening unless I switch career paths or win the lottery (which I don't play) but I think I can hit 3 out of the 4 points. I still haven't decided whether I want two "retirement" figures - one pre 65 and one post 65 - or whether to combine them. 

tracipam

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Re: How much do you need to retire early?
« Reply #13 on: September 30, 2012, 07:24:54 PM »

Great plan!  It doesn't have to be all or nothing... with a paid off house and low monthly expenses, things start looking pretty good.

If I had to do it all over again, knowing what I know now, I'd downsize my house, pay it off, save about $200K (or less) and then find some enjoyable work that pays my monthly bills.

Ooooh!!!  That sounds even better!  A lot of the "older and wiser" heads in my life (grandparents, etc.) are so (needlessly--for their savings level) worried about running out of money that I've been trying to estimate high for safety.  I love that you are game for a paid off house and 200K.  Win!!!!  You just made my evening! 

Thanks!

It Figures

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Re: How much do you need to retire early?
« Reply #14 on: October 01, 2012, 07:45:28 AM »
Here's some polls on this question from last spring:
www.mrmoneymustache.com/forum/ask-a-mustachian/what-is-your-number-how-much-would-you-'retire'-on

www.mrmoneymustache.com/forum/ask-a-mustachian/what's-your-target-annual-income-in-retirement

Both ran for about two months and had around 100 responses.  One is about target net worth, the other about target income.

I guess "it's all been said before"

http://www.youtube.com/watch?v=4x5Nh_27ukM

RoseRelish

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Re: How much do you need to retire early?
« Reply #15 on: October 01, 2012, 12:37:24 PM »
I'm kicking the idea of "retiring" with invested assets of ~$200k and a ~$140k mortgage. Would run little company and hope to cover my monthly expenses - just like Mrs. MM. Sounds like a pretty decent lifestyle.

MooreBonds

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Re: How much do you need to retire early?
« Reply #16 on: October 01, 2012, 07:00:16 PM »
While I am intensely frugal at times given my bare minimum living expenses, I do enjoy my house and the area I live in (annual RE taxes $4k). Also, the big unknown is the future spouse (currently single), and what plans and goals we decide to create, since I will enjoy plenty of traveling with my future wife/family.

Also, as intensely frugal as I am, I am equally intensely conservative with my withdrawal rate, because once I hit the "eject button", there's no way I want to face a slim probability of having to re-enter the workforce in my 60s and depend on a job, after being out of the workforce for 20+ years.

Shooting for a 2.5% withdrawal rate (essentially, hoping to live off of steadily rising dividends), and an annual income of $50k w/ a paid off house - which would suggest a portfolio of roughly $2M. The good thing is that I enjoy my engineering job, so it's not an issue of absolutely needing to quit to protect my physical and mental well being and making do with a lower portfolio and/or higher withdrawal rate.

travelbug

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Re: How much do you need to retire early?
« Reply #17 on: October 01, 2012, 09:13:32 PM »
We are taking the plunge next year at 40 and 36yo with two small children as dependents.

We will have our house paid off and an income of 100k+ pa on our investments. We have a business that we will run location independently and take a wage from, shares, cash invested and real estate.

We were going to have about 80k pa but have just invested in another real estate option which will be awesome after the next year or so with cashflow return. (35% + return pa, love that!!- you sometimes have to grab a great one...)

We could be FI independent now but need to systemise and automise our income streams for 8 more months and then we are off to travel the world for a while. (albeit frugally of course!)



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Re: How much do you need to retire early?
« Reply #18 on: October 01, 2012, 09:37:20 PM »
For me, $2MM + paid for house. We only spend about $20-24K / year without housing so this has little to do with covering expenses.

Rather, part of my goal in 'retirement' is to act as an angel investor and advisor for small businesses for at risk youth. I grew up on a reserve in Canada and few people are doing anything to help solve the problem, so part of how I want to spend my time is enabling people to succeed in their business ventures.

Having a larger 'stache allows me to make multiple small seed investments from my earnings without depleting capital.

totoro

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Re: How much do you need to retire early?
« Reply #19 on: October 01, 2012, 10:39:00 PM »
That is an admirable goal ShanghaiStashing.  I work on-reserve a fair bit.

bo_knows

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Re: How much do you need to retire early?
« Reply #20 on: October 02, 2012, 07:31:38 AM »
I would say that this number is difficult for me to come up with, because we currently live in a very high cost of living area (Washington DC Suburbs) but will ultimately retire to somewhere cheaper.

At our current spending levels (which I would assume to go down, but I'll go off of this), I think that when our non-realestate assets are ~$1.25M, we'll have plenty of room to "retire" fully, and in the time it took to do so, also partially/fully fund our childrens future education.   We're toying with the idea of semi-retirement though, because if our plan goes well, the kids will still be in the house when we're ready to retire, and we might as well work part time in our higher paying jobs to let our investments grow.

Either way, this site has given me to tools and ideas to make the next 10 years look very interesting :)

Done by Forty

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Re: How much do you need to retire early?
« Reply #21 on: October 02, 2012, 09:09:43 PM »
$600k + paid-for home

WaxOnWaxOff

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Re: How much do you need to retire early?
« Reply #22 on: October 03, 2012, 06:39:12 AM »
I haven't a clue these days. Every time I think I hit a goal number, I feel like I need more. I'm at $1M in the stash and have $150K left on the mortgage. I guess $1.5M and a paid-off mortgage is the next milestone while I figure out what to do next.

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Re: How much do you need to retire early?
« Reply #23 on: October 03, 2012, 06:54:18 AM »

Great plan!  It doesn't have to be all or nothing... with a paid off house and low monthly expenses, things start looking pretty good.

If I had to do it all over again, knowing what I know now, I'd downsize my house, pay it off, save about $200K (or less) and then find some enjoyable work that pays my monthly bills.

Ooooh!!!  That sounds even better!  A lot of the "older and wiser" heads in my life (grandparents, etc.) are so (needlessly--for their savings level) worried about running out of money that I've been trying to estimate high for safety.  I love that you are game for a paid off house and 200K.  Win!!!!  You just made my evening! 

Thanks!
Yeah, if you think about it, a paid-off house can be lived in very cheaply.  Just persuing passions can make a living pretty easily.

jrhampt

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Re: How much do you need to retire early?
« Reply #24 on: October 03, 2012, 07:01:20 AM »
We're shooting for $1M invested as our first milestone in 4-5 years, but will still have about $140k left on the mortgage at that time.  The plan is to re-evaluate our situation when we hit that milestone.  If we choose to downsize into a smaller fully paid for house in a lower tax area, which seems likely, then we will not need to work full time anymore, and one or both of us will switch to part-time work.  If we stay put, we would want to work long enough until the mortgage is paid off. 

somethingsomething

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Re: How much do you need to retire early?
« Reply #25 on: October 04, 2012, 10:59:35 AM »
i'm thinking at least $2m in liquid assets (stocks bonds REITs) before i'd really consider retiring early.

Mrs MM

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Re: How much do you need to retire early?
« Reply #26 on: October 04, 2012, 01:27:49 PM »
I'm wondering why so many of you feel you need so much?  Do we have the same definition of "retire" here?

Doesn't $1m give you $40K per year to live on (assuming my math is right here) without ever touching the principal?  With a paid off house (as some of you said), are you assuming you'll spend all that and also not work another day in your life?  It does seem like safety is playing a big role here (http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/).

We had approximately $800K in net worth (we still owed money on our house) when we decided to both quit our jobs.  Our net worth is actually higher now.

I'm surprised by these big numbers from Mustachians!!  :) 

bo_knows

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Re: How much do you need to retire early?
« Reply #27 on: October 04, 2012, 02:27:19 PM »
I'm wondering why so many of you feel you need so much?  Do we have the same definition of "retire" here?

Doesn't $1m give you $40K per year to live on (assuming my math is right here) without ever touching the principal?  With a paid off house (as some of you said), are you assuming you'll spend all that and also not work another day in your life?  It does seem like safety is playing a big role here (http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/).

We had approximately $800K in net worth (we still owed money on our house) when we decided to both quit our jobs.  Our net worth is actually higher now.

I'm surprised by these big numbers from Mustachians!!  :)

I guess the number I gave was under the impression that I'd never work again. However, truth be told, I want to try to have both my wife and I "part-time" within a couple of years. After a few good years of saving, it seems like if we dropped our workload to barely cover our expenses, our stash will be there waiting for us in 10-20 years when we decide to totally call it quits.

It's really hard to nail down for me, since I live in an expensive city, and would want to migrate somewhere else.  It's hard to grasp the numbers on a transition to a much cheaper area. I'm probably shooting for too much.
« Last Edit: October 04, 2012, 02:52:56 PM by bo_knows »

Melissa

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Re: How much do you need to retire early?
« Reply #28 on: October 04, 2012, 02:37:47 PM »

Quote
I guess the number I gave was under the impression that I'd never work again. However, truth be told, I want to try to have both my wife and I "part-time" within a couple of years. After a few good years of saving, it seems like if we dropped our workload to barely cover our expenses, our stash will be there waiting for us in 10-20 years when we decide to totally call it quits.

I have to agree with bo_knows. 

Our $1M figure is based on never working again as well.  Plus we have three kids we would like to help through college.

And I have a slightly paraonid husband. :-)

We will 'retire' before we hit that mark though by shifting into part-time mode

mustachecat

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Re: How much do you need to retire early?
« Reply #29 on: October 04, 2012, 03:19:46 PM »
$650K, plus paid-off housing.

travelbug

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Re: How much do you need to retire early?
« Reply #30 on: October 04, 2012, 03:23:30 PM »
We are the same with our figures, we are relocating and have no idea where to as yet so we need to have a buffer to buy another house somewhere and have two small children and a love of travel.

I know all these don't have to be expensive options, but it's just that DH errs on the side of caution and to get him to even consider this was difficult at first. So I had to have large, although obtainable, numbers to have that security blanket and DH on board.

And we want the freedom to not have to work again, but I know our personalities and do truly presume that we will streamline our current businesses and perhaps add more eventually.

It's the thrill of the chase I think; to challenge ourselves with no risk as such.

matchewed

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Re: How much do you need to retire early?
« Reply #31 on: October 04, 2012, 03:32:12 PM »
450k - 550k: It truly depends on the path I go down in regards to home ownership. I do agree that there are some surprisingly high numbers here. But each to their own I guess. I'm not going to disagree if someone wants that level of security and/or comfort.

happy

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Re: How much do you need to retire early?
« Reply #32 on: October 04, 2012, 04:10:25 PM »
I'm wondering why so many of you feel you need so much?  Do we have the same definition of "retire" here?

Doesn't $1m give you $40K per year to live on (assuming my math is right here) without ever touching the principal?  With a paid off house (as some of you said), are you assuming you'll spend all that and also not work another day in your life?  It does seem like safety is playing a big role here (http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/).

We had approximately $800K in net worth (we still owed money on our house) when we decided to both quit our jobs.  Our net worth is actually higher now.

I'm surprised by these big numbers from Mustachians!!  :)

I said 1mill with a paid off house because I will be 60 or thereabouts. So the magic of compounding does not have so much time to help, and my chances of picking up random work  are probably less, and will likely be very small in a decade or so after that.   This is based on my current estimates, but as I said as I get more mustachian I hope this can go down.  It would be nice to have something left over to pass onto the kids.
« Last Edit: October 04, 2012, 04:16:18 PM by happy »

Another Reader

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Re: How much do you need to retire early?
« Reply #33 on: October 04, 2012, 04:12:02 PM »
Mrs. MM:

$40,000 is the "generally accepted" SWR rate and includes drawing down principal as well as spending the earnings over time.  More conservative folks are opposed to withdrawing principal because our optimism is not quite as "outrageous."  Personally, I look at a 2 to 2.5 percent rate of withdrawal as reasonable and "enough" is the amount needed to be fully retired, as in not ever having to work for money again, and not touch the principal.  So the number at which I am comfortable declaring FI is significantly higher and involves a lot of rental real estate. 

RoseRelish

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Re: How much do you need to retire early?
« Reply #34 on: October 04, 2012, 04:30:58 PM »
There are plenty of stocks and bonds yielding at least 4% - so you could "withdraw" at 4% without touching the principal. 2-2.5% is way too conservative, by my estimation. That's less than the dividend yield of the S&P 500! I'll be sipping a retirement brew with a safe 4-5% withdrawal rate and watching my principal grow. Good luck to you anyhow.

Another Reader

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Re: How much do you need to retire early?
« Reply #35 on: October 04, 2012, 04:37:13 PM »
My real estate pays more than that and has tax advantages.  That's not the point.  I planned for a lower withdrawal rate and leveraged to get there faster.  Now I'm having a virtual retirement brew with a lot less worry.

RoseRelish

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Re: How much do you need to retire early?
« Reply #36 on: October 04, 2012, 04:40:38 PM »
Congrats on getting there faster! I read somewhere that the key to quick wealth is leverage. Either financial or operational - which is why real estate and starting a business are some of the best ways to get wealthy...if you do it right.

PS: Are "virtual brews" as tasty as "real" brews? ;)

velocistar237

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Re: How much do you need to retire early?
« Reply #37 on: October 04, 2012, 05:24:57 PM »
I'm going part-time at a net worth of about $600K. The house won't be paid off by then.

kisserofsinners

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Re: How much do you need to retire early?
« Reply #38 on: October 04, 2012, 05:36:29 PM »
For the wife and I our current goal is $900k net worth, but it's likely to go down. This total includes us renting as we currently do.
« Last Edit: October 04, 2012, 09:43:59 PM by kisserofsinners »

somethingsomething

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Re: How much do you need to retire early?
« Reply #39 on: October 04, 2012, 08:30:15 PM »
There are plenty of stocks and bonds yielding at least 4% - so you could "withdraw" at 4% without touching the principal. 2-2.5% is way too conservative, by my estimation. That's less than the dividend yield of the S&P 500! I'll be sipping a retirement brew with a safe 4-5% withdrawal rate and watching my principal grow. Good luck to you anyhow.

Are you in the US?

I don't know any bonds that are yielding that much and I don't buy junk bonds. I also don't invest specifically in dividend stocks (for a variety of reasons), but rather a sensible allocation among a couple mutual funds. I am also shooting for 2.5%-3% withdrawal, personally.

MooreBonds

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Re: How much do you need to retire early?
« Reply #40 on: October 04, 2012, 09:21:00 PM »
I'm wondering why so many of you feel you need so much? 

Like I said in my post:
I do enjoy my house and the area I live in (annual RE taxes $4k). Also, the big unknown is the future spouse (currently single), and what plans and goals we decide to create, since I will enjoy plenty of traveling with my future wife/family.

Also, as intensely frugal as I am, I am equally intensely conservative with my withdrawal rate, because once I hit the "eject button", there's no way I want to face a slim probability of having to re-enter the workforce in my 60s and depend on a job, after being out of the workforce for 20+ years.

Shooting for a 2.5% withdrawal rate (essentially, hoping to live off of steadily rising dividends), and an annual income of $50k w/ a paid off house - which would suggest a portfolio of roughly $2M. The good thing is that I enjoy my engineering job, so it's not an issue of absolutely needing to quit to protect my physical and mental well being and making do with a lower portfolio and/or higher withdrawal rate.

Do we have the same definition of "retire" here?

Well, the generally accepted definition of retirement means not being bound by a job to report to in order to earn income to pay your expenses. 

In actuality, looking at some of the super low portfolios people suggest, it looks like people aren't really looking to 'retire', but instead 'quit my full time job and just do whatever to make ends meet down the road'. If that's what floats your boat, more power to you - but as for me, when I "retire", I want to "retire", not just take an indefinite hiatus from work which may or may not last the rest of my life, as well as enjoy a variety of activities, some free, some low-cost, and some of which have higher financial outlays than others.

$300k portfolios??? Do people realize that just a new roof on even a small house can run $4k to replace? That's nearly half of your annual portfolio withdrawal! Or a new furnace for $2,500? What kinds of shocks can their portfolios handle? They obviously sleep better than I would knowing that there would be more than a non-miniscule chance they'll be forced to get a job at some unknown point. And part of the joys of ER (to me) is having the freedom from being bound by a job. Just that alone is joy in and of itself, whether I spend that additional money or not.

Granted, my 'minimum costs of survival' only run about $15k/year (RE taxes, utilities, insurance, food)....but as I mentioned before, I must err on the fairly conservative side. And the $15k is just bare survival - things I enjoy like a few trips/several cruises a year adds up. :) I also think many of the forum members have a lack-of-age-bias, in that they may not have as large of a range of life experiences that would make them be more conservative and shoot for a larger portfolio.

Before I get flamed, I realize many of the members have lived truly awe-inspiring lives....what I'm trying to say in the above are things like paying out the ass (and then some) for a health insurance policy when you're 55...or living in the same house for 30 years, and replacing the roof once, water heater 3 times, A/C twice, redoing the driveway once, painting 3 times, etc.

Things that younger people (like me) may not immediately think of (and therefore, not necessarily price into) a true Early Retirement portfolio to last 60 years - longer than, what, 99.999% of the mutual funds in existence? Longer than several folks live for their entire lives? Hell, a 50-60 year retirement is probably longer than (guessing) 80%-90% of the companies out there!

Doesn't $1m give you $40K per year to live on (assuming my math is right here) without ever touching the principal?  With a paid off house (as some of you said), are you assuming you'll spend all that and also not work another day in your life?  It does seem like safety is playing a big role here (http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/).

A portfolio has been shown historically to provide a 4% inflation-adjusted withdrawal through any 30 year period from 1900ish through now - in the United States.* Which could include spending down part of the principal, depending on the unknowns of what the future holds. In fact, in some 30 year periods, your portfolio dropped to roughly HALF of the initial starting value, before the economy eventually recovered, and limped to the end of the 30 years.

*3 big caveats:
1. A 30 year period where you ended year 30 with just $10 in your kitty was a 'success'. Extend the time periods to 40 years long (or even longer), and you don't come out with a 100% success rate for a 4% withdrawal. I don't recall the exact %, but it was definitely lower than 4%.
2. History NEVER repeats itself - but it can be a decent guideline to SWAG with. Meaning that things will never be as bad (or as good) as the extreme predictions, but that the future will always have some new elements to it. Will it be a 30 year period that will not exceed past periods in the negative sense? Maybe yes, and maybe no.
3. US-centric bias - On a global perspective, the 4% withdrawal is somewhat flawed because the data is the beneficiary of one of the worst market periods (Great Depression) being offset by the meteoric rise of the US as the world's financial and industrial powerhouse, with incredibly cheap use of natural resources to achieve that growth. Along with a relatively stable political climate.

Reference the graph below (obtained from a message thread on the ER Forum at http://www.early-retirement.org/forums/f28/feel-better-about-the-usa-swr-in-other-developed-countries-53493.html)which shows that if you use a global average, it's far lower than 4% - and that's for just 30 years! When you take the US population into a global %, you can see that a minority of people are able to use the 4% figure...meaning that it's not just something you can necessarily assume for any person, in any country, at any point in time, as history proves otherwise.

And if the 4% SWR only works for the past 100 years in the US, but not in most other countries.....why would it continue to work in the US, while it hasn't worked in the other countries? Maybe it will - but when I roll the die, I like to have the odds significantly stacked in my favor, not playing with just an "even odds" (or worse) situation.

are you assuming you'll spend all that and also not work another day in your life? 

Well, the title of this thread is "How much do you need to retire early", after all. =) not "How much would you need to take a 5 year sabbatical", or "What would you need to just work part-time". If I had confidence that I could work a reliable part-time gig earning close to what I do now, for an extended period of time, I might consider a lower initial balance....but when I know that I most likely won't find a PT job that has a wage and/or consistent schedule anywhere close, I'd much rather work 6 or 8 more years full-time and pull the plug, knowing I can do anything I want, rather than having to be dependent upon a part-time position (which could still create stress and headaches) for 20 years...and then find out I have to work an extra 5 part-time years because the work/wages haven't been enough to meet my needs.
« Last Edit: October 04, 2012, 09:44:04 PM by MooreBonds »

TwoWheels

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Re: How much do you need to retire early?
« Reply #41 on: October 04, 2012, 09:36:38 PM »
I'm thinking $750k and a paid-off house. So I'm assuming $30k/year of living expenses, which is a total guess at this point since I'm unmarried and have no kids. My current annual expenses, excluding rent, are in the $10k-$15k range, so I'm probably being pretty conservative. Especially given that despite my best efforts, I'll probably end up earning some money in retirement. ;)

But there's also the issue of 401(k) - a large chunk of that $750k will not be generating liquid income. Yes, I could do the IRA pipeline thing, but that seems like a giant pain in the ass. As my retirement date becomes less distant, I may consider postponing it long enough to not have to touch the 401(k), which would give me some serious peace of mind anyway. I'm barely a year into my working career, so it's hard to say how I'll feel about it when the time comes.

Russ

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Re: How much do you need to retire early?
« Reply #42 on: October 04, 2012, 09:55:44 PM »
Do we have the same definition of "retire" here?

Well, the generally accepted definition of retirement means not being bound by a job to report to in order to earn income to pay your expenses. 

In actuality, looking at some of the super low portfolios people suggest, it looks like people aren't really looking to 'retire', but instead 'quit my full time job and just do whatever to make ends meet down the road'. If that's what floats your boat, more power to you - but as for me, when I "retire", I want to "retire", not just take an indefinite hiatus from work which may or may not last the rest of my life, as well as enjoy a variety of activities, some free, some low-cost, and some of which have higher financial outlays than others.

$300k portfolios??? Do people realize that just a new roof on even a small house can run $4k to replace? That's nearly half of your annual portfolio withdrawal! Or a new furnace for $2,500? What kinds of shocks can their portfolios handle? They obviously sleep better than I would knowing that there would be more than a non-miniscule chance they'll be forced to get a job at some unknown point. And part of the joys of ER (to me) is having the freedom from being bound by a job. Just that alone is joy in and of itself, whether I spend that additional money or not.

Even by your definition I will be retired with a portfolio of 200k. Assuming 4% SWR, which I know is riskier than most people like around here but whatever, that's $8000/year. When you're young, single, don't own a car, and need no more than a bedroom (or, in my case, a VW Type 2... well I guess that is a car but I don't plan on driving much) to hold all your stuff, that's pretty comfortable. All my expenses will be covered by my investments. Now, I'll very likely choose a cool job to fill my time and make some more dollars, but all that money will go to the 'stache so that I can continue to be retired for an even longer time! And hey, if I need to go back to work when I'm 40, so be it. If has-been athletes can un-retire whenever they feel like it, so can I.

Another Reader

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Re: How much do you need to retire early?
« Reply #43 on: October 04, 2012, 10:09:27 PM »
I'm wondering why so many of you feel you need so much? 

Like I said in my post:
I do enjoy my house and the area I live in (annual RE taxes $4k). Also, the big unknown is the future spouse (currently single), and what plans and goals we decide to create, since I will enjoy plenty of traveling with my future wife/family.

Also, as intensely frugal as I am, I am equally intensely conservative with my withdrawal rate, because once I hit the "eject button", there's no way I want to face a slim probability of having to re-enter the workforce in my 60s and depend on a job, after being out of the workforce for 20+ years.

Shooting for a 2.5% withdrawal rate (essentially, hoping to live off of steadily rising dividends), and an annual income of $50k w/ a paid off house - which would suggest a portfolio of roughly $2M. The good thing is that I enjoy my engineering job, so it's not an issue of absolutely needing to quit to protect my physical and mental well being and making do with a lower portfolio and/or higher withdrawal rate.

Do we have the same definition of "retire" here?

Well, the generally accepted definition of retirement means not being bound by a job to report to in order to earn income to pay your expenses. 

In actuality, looking at some of the super low portfolios people suggest, it looks like people aren't really looking to 'retire', but instead 'quit my full time job and just do whatever to make ends meet down the road'. If that's what floats your boat, more power to you - but as for me, when I "retire", I want to "retire", not just take an indefinite hiatus from work which may or may not last the rest of my life, as well as enjoy a variety of activities, some free, some low-cost, and some of which have higher financial outlays than others.

$300k portfolios??? Do people realize that just a new roof on even a small house can run $4k to replace? That's nearly half of your annual portfolio withdrawal! Or a new furnace for $2,500? What kinds of shocks can their portfolios handle? They obviously sleep better than I would knowing that there would be more than a non-miniscule chance they'll be forced to get a job at some unknown point. And part of the joys of ER (to me) is having the freedom from being bound by a job. Just that alone is joy in and of itself, whether I spend that additional money or not.

Granted, my 'minimum costs of survival' only run about $15k/year (RE taxes, utilities, insurance, food)....but as I mentioned before, I must err on the fairly conservative side. And the $15k is just bare survival - things I enjoy like a few trips/several cruises a year adds up. :) I also think many of the forum members have a lack-of-age-bias, in that they may not have as large of a range of life experiences that would make them be more conservative and shoot for a larger portfolio.
Before I get flamed, I realize many of the members have lived truly awe-inspiring lives....what I'm trying to say in the above are things like paying out the ass (and then some) for a health insurance policy when you're 55...or living in the same house for 30 years, and replacing the roof once, water heater 3 times, A/C twice, redoing the driveway once, painting 3 times, etc.

Things that younger people (like me) may not immediately think of (and therefore, not necessarily price into) a true Early Retirement portfolio to last 60 years - longer than, what, 99.999% of the mutual funds in existence? Longer than several folks live for their entire lives? Hell, a 50-60 year retirement is probably longer than (guessing) 80%-90% of the companies out there!

Doesn't $1m give you $40K per year to live on (assuming my math is right here) without ever touching the principal?  With a paid off house (as some of you said), are you assuming you'll spend all that and also not work another day in your life?  It does seem like safety is playing a big role here (http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/).

A portfolio has been shown historically to provide a 4% inflation-adjusted withdrawal through any 30 year period from 1900ish through now - in the United States.* Which could include spending down part of the principal, depending on the unknowns of what the future holds. In fact, in some 30 year periods, your portfolio dropped to roughly HALF of the initial starting value, before the economy eventually recovered, and limped to the end of the 30 years.

*3 big caveats:
1. A 30 year period where you ended year 30 with just $10 in your kitty was a 'success'. Extend the time periods to 40 years long (or even longer), and you don't come out with a 100% success rate for a 4% withdrawal. I don't recall the exact %, but it was definitely lower than 4%.
2. History NEVER repeats itself - but it can be a decent guideline to SWAG with. Meaning that things will never be as bad (or as good) as the extreme predictions, but that the future will always have some new elements to it. Will it be a 30 year period that will not exceed past periods in the negative sense? Maybe yes, and maybe no.
3. US-centric bias - On a global perspective, the 4% withdrawal is somewhat flawed because the data is the beneficiary of one of the worst market periods (Great Depression) being offset by the meteoric rise of the US as the world's financial and industrial powerhouse, with incredibly cheap use of natural resources to achieve that growth. Along with a relatively stable political climate.

Reference the graph below (obtained from a message thread on the ER Forum at http://www.early-retirement.org/forums/f28/feel-better-about-the-usa-swr-in-other-developed-countries-53493.html)which shows that if you use a global average, it's far lower than 4% - and that's for just 30 years! When you take the US population into a global %, you can see that a minority of people are able to use the 4% figure...meaning that it's not just something you can necessarily assume for any person, in any country, at any point in time, as history proves otherwise.

And if the 4% SWR only works for the past 100 years in the US, but not in most other countries.....why would it continue to work in the US, while it hasn't worked in the other countries? Maybe it will - but when I roll the die, I like to have the odds significantly stacked in my favor, not playing with just an "even odds" (or worse) situation.

are you assuming you'll spend all that and also not work another day in your life? 

Well, the title of this thread is "How much do you need to retire early", after all. =) not "How much would you need to take a 5 year sabbatical", or "What would you need to just work part-time". If I had confidence that I could work a reliable part-time gig earning close to what I do now, for an extended period of time, I might consider a lower initial balance....but when I know that I most likely won't find a PT job that has a wage and/or consistent schedule anywhere close, I'd much rather work 6 or 8 more years full-time and pull the plug, knowing I can do anything I want, rather than having to be dependent upon a part-time position (which could still create stress and headaches) for 20 years...and then find out I have to work an extra 5 part-time years because the work/wages haven't been enough to meet my needs.

Plus 1 on all the above, especially the "lack-of-age-bias". 

smalllife

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Re: How much do you need to retire early?
« Reply #44 on: October 05, 2012, 07:02:18 AM »
If your definition of "retire" is "retiring from the 9-5 for a more variable and pleasant part time working experience", than yes, 200-300K (in which I was not including the house) would be more than sufficient.   And if you have a really big expense, you work a few more hours or dip into the principal.  I would be bored out of my mind never working for 50-60 years!  And if I really want to have that kind of life, I will sell the house and move somewhere super cheap overseas. 

jrhampt

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Re: How much do you need to retire early?
« Reply #45 on: October 05, 2012, 01:38:11 PM »
I'm wondering why so many of you feel you need so much?  Do we have the same definition of "retire" here?

I'm surprised by these big numbers from Mustachians!!  :)

I'm not sure about others' situations, but both my husband and I will probably be financially supporting aging family members.

JT

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Re: How much do you need to retire early?
« Reply #46 on: October 06, 2012, 12:09:42 AM »
$500K is my goal - although if I'm clever with investments this might change!

galaxie

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Re: How much do you need to retire early?
« Reply #47 on: October 08, 2012, 11:24:12 AM »
I estimated 2027 dollars to get 2M.  Current non-house expenses for the two of us are $48k.  Assuming 3% inflation for 15 years, to stay at the current spending level we'd need $75k/year.  That's 3.7% of 2 million in my back-of-envelope 2027 dollars.

arebelspy

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Re: How much do you need to retire early?
« Reply #48 on: October 08, 2012, 11:32:03 AM »
I estimated 2027 dollars to get 2M.  Current non-house expenses for the two of us are $48k.  Assuming 3% inflation for 15 years, to stay at the current spending level we'd need $75k/year.  That's 3.7% of 2 million in my back-of-envelope 2027 dollars.

Good point.  One's number will look different in nominal versus real dollars.
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Mrs MM

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Re: How much do you need to retire early?
« Reply #49 on: October 08, 2012, 02:33:05 PM »
Thanks for all the responses everyone!  I agree that the amount will be different for everyone.

I do think that the word "retire" means not ever having to work again (investments pay for monthly costs), but the potential of part-time work or other paid work helps with the safety margin.

For big expenses, like roof repairs, etc. some people may be renting in retirement, or traveling, so those things might not come into play.  I also think that when you have more time, you can be more creative with things like this.  Last time we needed a roof replaced, MMM put an ad out in craigslist.  We ended up hiring a roofing guy that way and he agreed to let MMM work on the roof as well.  That helped reduce the cost and allowed MMM to learn how to replace his own roof.  We also recently had our entire house repainted as a labor trade with a painter friend.  It's amazing what you can do with all that extra time!