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.