FI with an "Incomplete" 'Stache?

[Bruised_Pepper]

I'm interested in financial independence so that I can retire early.  I'm not one of these people who will say "I could retire, but I'm not ready to stop working" or "I'll just cut down my hours and have more free time".  I'm in it to quit my job and never go back to the office.  Not that I hate my job or career path; I just can't stand having a constant obligation and trading my freedom for money.  In other words, I'm going to retire as soon as I possibly can. 

The rule of thumb seems to be 'build up enough in investment capital to support your yearly expenses from interest, then withdrawal at 4% a year, and your 'stache will last forever.'  How about instead of making sure the 'stache lasts forever, run a slight deficit from your early retirement age to the traditional retirement age where your social security benefits will kick in and provide enough of a 'stache supplement to last till death?  I figure this would make the early retirement come a few years sooner, and I'm not going to have children to pass any remaining money on to. 

Is anyone else considering a plan like this?

[StarryC]

I think people consider it, and the FIRECalc can take it into account.  There are some big risks, especially the younger you are at retirement.  (If you are 45, or 50 or 55 right now, or will be 55 or 60 when you start this plan, disregard the following)

Assume you may live to 90+ and you are 30 or 35 at retirement.  You'd have almost 60 years, and 30 years until that SS benefit kicks in.  I don't think people under 40 should rely on SS until they see where things are at age 50.  Second, even if SS does exist exactly as it does now, your benefit is based on your highest earning 40 quarters.  If you only work 10 years and some of those were entry level jobs, your benefit might be lower than you anticipate.

The 4% SWR is based on looking at any 30 years of market returns, not 60 years.  The odds of a long depression/ big crash/ high inflation in any 60 years are higher, I'd think.  If that happens right at the beginning, you might be in trouble running a deficit for the first 5 to 20 or 30 years. In some of the scenarios, at the end of 30 years the balance is 0, which is fine if you die, but not if you have another 30 years to live! 

If you have a 10 year work history and then live on savings for 20 years, and then find you don't have enough cash due to SS changes, market conditions, life changes, etc, you are now 50, with no recent work experience, and very old educational credentials.  It might be very difficult to find a job.  This is true for any young retiree, but it is worse if as you say you plan to do NO work, and it's more likely if you are living above your income. 

[tomsang]

StarryC. Social Security is based on the highest 35 years. So if you work for 10 years, then you will have zeros for the remainder and your benefits will be minimal.

See http://www.ssa.gov/pubs/EN-05-10070.pdf for a calculation worksheet. This is a calculation worksheet as of today, so as they change the calc to make Social Security sustainable they could increase the number of years to 45, reduce the benefits, or some other changes.

[dragoncar]

A lot of people consider an incomplete stache, but that's only because they expect to get some kind of side income in retirement.  Most of us are the kind who will get bored eventually and will start earning some money.  But if you really don't want to work another day in your life, then I'd say get the full SWR (whatever you are comfortable with).

[StarryC]

Thanks for the correction.  That makes my point even more so!  I see the 40 quarters or earnings looks like the most common way to qualify to get any benefits. http://www.ssa.gov/pubs/EN-05-10072.pdf

 

[Bruised_Pepper]

StarryC. Social Security is based on the highest 35 years. So if you work for 10 years, then you will have zeros for the remainder and your benefits will be minimal.

Hmm, that throws a wrench in the whole plan, doesn't it?  For now, I'll plan to get the full 'stache, and work out the details later.  Thanks for that important piece of info.

[chasesfish]

A lot of people consider an incomplete stache, but that's only because they expect to get some kind of side income in retirement.  Most of us are the kind who will get bored eventually and will start earning some money.  But if you really don't want to work another day in your life, then I'd say get the full SWR (whatever you are comfortable with).

+1.

This is just my opinion, but I think the reality is most people motivated enough to save, invest, and barter to the point where they can retire early at a young age, will also eventually either earn money on a side job, or trade their skill for cost savings (think MMM building the studio suite in Hawaii for no "pay").  This lets their savings continue to increase each year.

[SnackDog]

Anyone is really determined to retire can do so today.  If you don't have enough money to continue your current spending habits for the rest of your life, you will be forced to cut back.  At some stage, you may run of money and assets completely.  However, you still don't have to go back to work, you can live off the land or homeless shelters.  A great many homeless people like an unstructured life and refuse even to go to a shelter because of the loss of freedom.  Man lived for millenia without jobs or money, although food was scarce at times.  These days, nobody in the western world is without food and in fact the less money you have the more likely you are to be overfed.

[CopperTex]

Your plan sounds incredibly risky if not foolish.  There has to be some sort of work out there that you are not so desperate to get away from.

[lentilman]

StarryC. Social Security is based on the highest 35 years. So if you work for 10 years, then you will have zeros for the remainder and your benefits will be minimal.

This is true if considered in dollars, but not in percentage of payback on taxes paid. 
 
In a sense, it is actually the benefits paid to the long time highly paid worker that are minimal. 

One would have to run the numbers to decide what is preferable.  Assuming one can reach the first breakpoint in SS benefits in ten years each additional dollar of earnings gives a diminishing return.

[arebelspy]

Run your scenarios through cfiresim.com.

[MrsPete]

Sounds too risky for me.  I agree with the comments other people have made, and I think you risk finding yourself -- after years of retirement -- forced to go back to work, and it'll be harder to secure a job with a lengthy absence from work.  I'd also be wary of any retirement plan that counts on Social Security as a major income source; we individuals have no control over what happens with Social Security.   

You say you're not genuinely miserable, so look for other ways to find more freedom in the workplace -- or look for another workplace.  But work until you have a good 'stash saved up . . . PLUS some cushion.  This may be even more important for you than for a person who has children.