Author Topic: 2.7M, 54 years old, not enough to retire?  (Read 12082 times)

Hopper

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2.7M, 54 years old, not enough to retire?
« on: January 29, 2015, 07:07:24 PM »
My husband is risk adverse.  To put it mildly.  We just can't get on the same page with how much in assets is truly "safe." Tonight, he pointed me to an article https://www.fidelity.com/insights/retirement/can-you-afford-to-retire-early-2015 to demonstrate how unsafe it is to pull the trigger and expect that even 2.7M in net worth is enough (and sadly, no, we don't have near that.  But we will if we work until we are 54.)  $81,000/year, a 3% withdrawal... not safe enough.

I know there are lots of threads on how to get your partner on the same page.  I just don't know how to get him to see that it is okay to RE at some point and leave the pension I would get at 59... 23 long years from now.  I don't think we need a case study.  We are saving well at the moment (not mustachian levels but 30-50%) and have a net worth somewhere in the ballpark of 1M.

BTW, he says that I might as well be asking a bunch of budhist monks.  He points to concerns about healthcare, long term care, kids. and his wife's allegedly expensive vacation habits.  Do I need to better "walk the walk" and become a true mustachian to prove to my husband that at some point, we can walk away from what is, at the moment, easy money.  Its like long-term one-more-day syndrome.   

h2ogal

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #1 on: January 29, 2015, 07:15:31 PM »
Well, you can always try negotiating with him for you or both of you to take a sabbatical for a period, lets say a year, and see how it goes? 

Or why make it all or nothing...you could try a transition to a part time job?

Eric

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #2 on: January 29, 2015, 07:23:56 PM »
I don't have any practical relationship advice or anything, but I'd ask him to read this.  And keep in mind it was written in 2012, so things look even rosier now then they did at the point it was written.

https://www.kitces.com/blog/what-returns-are-safe-withdrawal-rates-really-based-upon/


Also, note in the article you linked, spending wasn't mentioned at all by the "case study" person, so the author is correct to question whether it's enough.  After all, your investments have to be a multiple of your spending.  $2.7MM isn't enough if you're spending $200K per year.

MrMoogle

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #3 on: January 29, 2015, 07:29:34 PM »
We were talking about that article in a different post:
http://forum.mrmoneymustache.com/investor-alley/can-joe-shmoe-retire/

No asset is 100% guaranteed, even cash.  In order to be "safe" you would be paying 20 years of your life.  And honestly, once you meet the 4% swr, you don't get much safer the more you work.  Being flexible in retirement helps a lot more than having more money.

Compare the cost to the benefit.  What is he afraid of?

Future Lazy

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #4 on: January 29, 2015, 07:32:56 PM »
$81,000/year, a 3% withdrawal... not safe enough.

...

BTW, he says that I might as well be asking a bunch of budhist monks.  He points to concerns about healthcare, long term care, kids. and his wife's allegedly expensive vacation habits.  Do I need to better "walk the walk" and become a true mustachian to prove to my husband that at some point, we can walk away from what is, at the moment, easy money.  Its like long-term one-more-day syndrome.

Wait - are you spending 81k a year, or just earning it right now?

The idea behind retirement savings is to replace your spending. If you're spending 81k per year, think about cutting that down. That means faster saving and less needed, so faster retirement.

Try playing around with this calculator:
http://www.cfiresim.com/input.php

Or, post an entire case study, so you can get full and complete feedback. Good luck getting the DH to relax! :)

Sid Hoffman

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #5 on: January 29, 2015, 09:40:19 PM »
We are saving well at the moment (not mustachian levels but 30-50%) and have a net worth somewhere in the ballpark of 1M.

OK, so you're 36 years old and already millionaires but your husband is not sure that you can retire even by age 59?  Yeah I second the earlier question: exactly what is your spending level?  I'm guessing to have such a net worth at your age might mean you live in a high COL area too.

Let me cut to the chase of why I started my reply: how are you tracking everything?  Spreadsheets, YNAB, Mint, or nothing?  The fact that you said 30-50% makes me feel like perhaps you are just winging it and don't actually have everything in some kind of accounting software or spreadsheet currently.  Perhaps your husband will get more comfortable if you start tracking everything?

When you say you've got 23 years ahead of you, that's a long time.  What I started doing recently was creating a new row on my spreadsheet to track everything - income, expense, and each asset type - with a snapshot at the end of each calendar year.  Perhaps you could do the same?  If you can prove year after year that expenses are stable, income is stable, and each category of your net worth is increasing at steady or at least predictable amounts then that may give him comfort.  Once you have 5, 10, or maybe 15 years of figures showing consistency year after year, then perhaps you'll have the ability to call it quits after 10 or 15 years instead of 23.

humblefi

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #6 on: January 29, 2015, 09:52:24 PM »
Quote
$81,000/year, a 3% withdrawal... not safe enough.
One aspect that I don't see here is: is the $2.7M generating any money? For example, if it is in a bond fund OR a dividend paying fund, it is probably generating some money as well. If there is income, then this should make the case stronger for retiring OR atleast setting an income target for retiring.

For example, if we assume a 3% income target, then 3% of 2.7M is $81K per year i.e. no need to withdraw from the principal.


brandino29

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #7 on: January 29, 2015, 10:06:08 PM »
Quote
$81,000/year, a 3% withdrawal... not safe enough.
One aspect that I don't see here is: is the $2.7M generating any money? For example, if it is in a bond fund OR a dividend paying fund, it is probably generating some money as well. If there is income, then this should make the case stronger for retiring OR atleast setting an income target for retiring.

For example, if we assume a 3% income target, then 3% of 2.7M is $81K per year i.e. no need to withdraw from the principal.

I think that's exactly that OP was getting at -- even with a theoretical $2.7 million and a 3% withdrawal rate not touching the principal and providing them a cushy $81k per year her husband still doesn't believe it would be safe enough to retire. 

Hopper, you should discuss with your husband the chance of a zombie apocalypse in those pending 23 years.

Static Void

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #8 on: January 29, 2015, 10:12:08 PM »
the pension I would get at 59... 23 long years from now

Just a side note -- check carefully the terms of your pension plan. It may be that you continuously accrue credits for various pension fractions which you can begin collecting at age 59 (or 55 seems common also) even if you're no longer employed there at that milestone age. You might find that sticking around for 5 or 10 years (if you haven't already) gets some good future rewards.

(If your plan works that way, then you wouldn't be "leaving" it, and might even have a fallback option of returning to that org to accrue more service credits.)

Hopper

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #9 on: January 30, 2015, 08:05:59 AM »
Thanks for all your comments and advice. We track our expenses fairly closely on Mint. We have ESplanner, one of the software programs that runs retirement scenarios.  My DH is not as worried about a zombie apocalypse so much as he is worried about one of use become a zombie and needing significant care I think. Yes, he might be willing to go PT or retire and have me keep working, but that doesn't really appeal to me for any real period of time.  I wasn't very clear in my original post, sorry.  That 81k/year was the example from the article, not my specifics. 

My situation:  I am 35 (but, effectively 23 years until I reach the age I can take my sweet, fat government pension. Of course, nothing is guaranteed, but its the next closest thing, if I stick it out.  If I leave early, I get pennies on the dollar once I hit traditional retirement age.  And I give up the healthcare benefits into retirement.  I think this is worth it to buy back my time.)  My husband is 38 and works in the private sector, and we live in DC, so yes, HCOL.  We have a child, plan for one more if it happens, and have the associated expenses of daycare and living a modest (all original!  bad heating and cooling!) but good sized single family home in a good school district. 

I think I wouldn't want to fully retire, but would work for myself 5-10 hours a week if we FIREd in 5+ years.  I would be happy to move to a lower cost of living area and buy a house outright, hopefully in a good climate and close to places to bike and walk (pools, libraries, parks, grocery stores).  I see our budget as shrinking at that point.  But, I admit that my husband is right that right now, we do not exercise our frugalities muscles as much as we should.  He is great with encouraging savings, maxing out retirement funds, stretching himself to try to fix things that break rather than hire someone, and he is the only reason I would even be able to think about retiring, to be honest. Without his earnings and his saving philosophy I would be a complete consumerist sucka (sp?) and, even if I found MMM now, it would be a long time before I got myself into a place where I could retire. 

So it makes it hard to counter his fears that we shouldn't keep working and earning, at least until I hit that pension age, so we never have to worry about the what-ifs.  He understands monte carlo theories, he crunches the numbers.  And still he is unsettled.  I guess I am thinking that true frugality now might sway him, but well, it might not.  I could pare down our spending in a number of MMM-suggested ways, republic wireless, less car trips, less impulse buys at target, fewer trips to see family.  I suppose it seems like a lot of denial when we are lucky enough to be saving significantly without doing so, and we are happy enough to keep working as we are for the next 5-10 years.  And if we do cut back and he is still worried and unsure when we reach a point when we should get the 3-4% withdrawal rate that I think we could live on comfortable, then its all for naught. 

Ok, enough complainypants from me.  :) Any facepunches?   
« Last Edit: January 30, 2015, 08:10:52 AM by Hopper »

Fishingmn

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #10 on: January 30, 2015, 08:22:54 AM »
Honestly, 20+ years from now is to long to worry about on your part anyway. One thing you can count on is change.

Continue the plan - sounds like you are doing great. Just keep open communication and enjoy the ride.

SunshineGirl

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #11 on: January 30, 2015, 08:29:21 AM »
It might be easier if you can come to agreement on what you want the next five years of your life to look like, and what position you want to be in five years from now. For instance, if the goal is to save 40-50% of your current income and be in a position to buy a house outright in a lower COL area -- whether you actually do or not -- might be a goal he can get on board with.

misschedda

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #12 on: January 30, 2015, 09:51:57 AM »
Hopper, are you in the FERS retirement system with the federal government? I ask because a lot of people don't understand exactly how the FERS pension works and it's actually a lot more generous than they think. Disregard this if you're in some other system.

DoubleDown

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #13 on: January 30, 2015, 10:07:32 AM »
Here we are again. In another thread I just replied that my wife has the same mindset of your husband (outrageously risk-averse, expects doom and gloom scenarios). I demonstrated to her 1,000 ways how set we are financially, but she may never come to recognize or accept it. It's a personality thing, not an intellectual understanding thing. I retired despite her misgivings, and she continues to work because she's risk-averse. Perhaps you can just decide to retire on your own, and your husband can continue working despite how unnecessary it is from a financial standpoint.

neo von retorch

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #14 on: January 30, 2015, 10:13:30 AM »
Hopper,

If I understand correctly, you have an underlying concern that either you have a "risky" spending profile or at least that your husband believes it to be so. Would you care to dive deeper into your spending and see if there are some scary things going on there? Maybe you can figure out what aspects of your spending are the most variable and fiscally dangerous, and figure out how to level those things out in a way that gives your husband the reassurance he needs.

 - neo

Hopper

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #15 on: January 31, 2015, 06:46:07 AM »
Here we are again. In another thread I just replied that my wife has the same mindset of your husband (outrageously risk-averse, expects doom and gloom scenarios). I demonstrated to her 1,000 ways how set we are financially, but she may never come to recognize or accept it. It's a personality thing, not an intellectual understanding thing. I retired despite her misgivings, and she continues to work because she's risk-averse. Perhaps you can just decide to retire on your own, and your husband can continue working despite how unnecessary it is from a financial standpoint.

Yeah, you are right.  Its a personality thing I think.  And, all in all, not the worst problem to have!  We are not at the point where even I think we have enough to retire, so I guess I can revisit the options when we get there. 


Hopper,

If I understand correctly, you have an underlying concern that either you have a "risky" spending profile or at least that your husband believes it to be so. Would you care to dive deeper into your spending and see if there are some scary things going on there? Maybe you can figure out what aspects of your spending are the most variable and fiscally dangerous, and figure out how to level those things out in a way that gives your husband the reassurance he needs.

 - neo

You nailed it.  When we got together, I was digging my way out of credit card and student loan debt from overspending and underearning.  I went for public service but went to private schools, and I had a hard time turning down vacations to China, Thailand, and made several large moves without savings to finance them.  I saw the light long ago, cleaned up my act, paid off the debt, and upped my earnings.  Marrying a high earner and a saver kicked that into overdrive and that is how we have the 1M net worth now. That doesn't count all of his premarital non-joint savings, but does count some of his 401K I think.  But in some ways my DH is afraid I could revert back.  That won't happen.  I could dive deeper and post a case study, I am sure I would learn some things and get motivation to be more frugal, but I really don't believe that my current spending is the problem.  So instead I just read others case studies.

Hopper, are you in the FERS retirement system with the federal government? I ask because a lot of people don't understand exactly how the FERS pension works and it's actually a lot more generous than they think. Disregard this if you're in some other system.

Yes, its FERS.  Its no CSRS (the old system for employees who started before the mid-1980s), but it is generous.  It is a lot less generous if you don't stay the course.  Which is my husband's issue.

Honestly, 20+ years from now is to long to worry about on your part anyway. One thing you can count on is change.

Continue the plan - sounds like you are doing great. Just keep open communication and enjoy the ride.

Thanks.  Its nice to get that kind of reminder.  I was just exasperated when he pointed me to the article as a counterpoint to the MMM stuff I have been sharing with him.  Lots and lots of open communication going on here.  :)

It might be easier if you can come to agreement on what you want the next five years of your life to look like, and what position you want to be in five years from now. For instance, if the goal is to save 40-50% of your current income and be in a position to buy a house outright in a lower COL area -- whether you actually do or not -- might be a goal he can get on board with.

Right.  Small goals.  We haven't been able to pick a target place on where to move if we ever do agree to FIRE early.  So we probably will just keep talking and saving. Thanks!     

mozar

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #16 on: January 31, 2015, 12:04:25 PM »
When do you vest? Can't you wait till you vest and then stop working, then get your pension when it's time?

neo von retorch

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #17 on: February 02, 2015, 09:05:57 AM »
You nailed it.  When we got together, I was digging my way out of credit card and student loan debt from overspending and underearning.  I went for public service but went to private schools, and I had a hard time turning down vacations to China, Thailand, and made several large moves without savings to finance them.  I saw the light long ago, cleaned up my act, paid off the debt, and upped my earnings.  Marrying a high earner and a saver kicked that into overdrive and that is how we have the 1M net worth now. That doesn't count all of his premarital non-joint savings, but does count some of his 401K I think.  But in some ways my DH is afraid I could revert back.  That won't happen.  I could dive deeper and post a case study, I am sure I would learn some things and get motivation to be more frugal, but I really don't believe that my current spending is the problem.  So instead I just read others case studies.

How much of your time together have you been "reformed"? Intuitively, we sense (often correctly) that "past behavior is the greatest indicator of future behavior." Still, we do learn, grow and ultimately change, if we're open to it and continually practice new habits. Maybe he just needs "more time" where you are the "new you" and not the "old you." By the time you're 54, he'll have seen a lot more of the "new you!"

mlejw6

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #18 on: February 02, 2015, 11:09:24 AM »
I would just like to point out (as some others have) that to have $1M net worth at your ages is incredible! I am your age and I look forward to the day that my net work is 1/10th of that (which is several many years in the future......)

nereo

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #19 on: February 02, 2015, 11:39:45 AM »
Hopper - a few thoughts
Your husbands reluctance to retire early isn't rooted in sound economics or mathematics; there is some deeper psychological barrier at work.  Perhaps his identity or self worth is tied to his job, and retiring early seems like 'quitting life'.  Regardless, it will be a slow, gradual process for his thoughts to change.  Thankfully, it sounds like you have several years for you two to come to an understanding.

also - even if you had literally 0% returns, $2.7M in 10 years would allow you to withdraw over $50k/year until you were both past 100, with no SS or pension aid whatsoever. That's safety.

As Neogodless said, it may take many years for him to  accept that the 'reformed' you is here to stay.  Initial impressions last. Keep up your new ways and after several years he'll notice that your annual expenses have stayed low.

nereo

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #20 on: February 02, 2015, 11:40:15 AM »
Hopper - a few thoughts
Your husbands reluctance to retire early isn't rooted in sound economics or mathematics; there is some deeper psychological barrier at work.  Perhaps his identity or self worth is tied to his job, and retiring early seems like 'quitting life'.  Regardless, it will be a slow, gradual process for his thoughts to change.  Thankfully, it sounds like you have several years for you two to come to an understanding.

also - even if you had literally 0% returns, $2.7M in 10 years would allow you to withdraw over $50k/year until you were both past 100, with no SS or pension aid whatsoever. That's safety.

As Neogodless said, it may take many years for him to  accept that the 'reformed' you is here to stay.  Initial impressions last. Keep up your new ways and after several years he'll notice that your annual expenses have stayed low.

tmterrill

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #21 on: February 02, 2015, 01:00:07 PM »
I just want to hypothesize what maybe some of his thought process is because it might help you understand his current trepidation. Hopefully it isn't taken in a bad way because it sounds like you have improved your habits.

He is already divorced once, that ex-wife probably took A LOT (half or more) of money from him because it sounds like he is the far bigger bread winner here. He then meets a new wife (OP) who has a job where she doesn't make much and went to expensive private school for and thus lots of debt. We don't know how much you actually cleaned up your act or how much the difference was made up by marrying a high earner. How long would it have taken you to "clean up your act" and get out of debt if you had not married a very high earner? 5 years? 10? 20? 40?

What if things don't work out between you two after he quits his job to retire? He likely may not be able to get another job making nearly as much as he does now, and you have taken half his/your stache. All of a sudden he only has half that 2.7 mill plus possible alimony for kids or whatever else gets awarded in the divorce.

He probably just needs more time to see you being frugal (in the realm of MMM frugal). My current GF was a lot like you when I first met her, she has changed a lot since then but I don't think I could trust her to be frugal enough to retire very early and me not be very very concerned about that idea.

Hopper

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #22 on: February 02, 2015, 08:35:42 PM »
Hopper - a few thoughts
Your husbands reluctance to retire early isn't rooted in sound economics or mathematics; there is some deeper psychological barrier at work.  Perhaps his identity or self worth is tied to his job, and retiring early seems like 'quitting life'.  Regardless, it will be a slow, gradual process for his thoughts to change.  Thankfully, it sounds like you have several years for you two to come to an understanding.

also - even if you had literally 0% returns, $2.7M in 10 years would allow you to withdraw over $50k/year until you were both past 100, with no SS or pension aid whatsoever. That's safety.

As Neogodless said, it may take many years for him to  accept that the 'reformed' you is here to stay.  Initial impressions last. Keep up your new ways and after several years he'll notice that your annual expenses have stayed low.

Thanks.  Sounds like staying the course and cutting costs is the way forward.  Although his pushing the article with the 2.7M fellow who didnt think he could retire is still a mental disconnect in my view. 

I just want to hypothesize what maybe some of his thought process is because it might help you understand his current trepidation. Hopefully it isn't taken in a bad way because it sounds like you have improved your habits.

He is already divorced once, that ex-wife probably took A LOT (half or more) of money from him because it sounds like he is the far bigger bread winner here. He then meets a new wife (OP) who has a job where she doesn't make much and went to expensive private school for and thus lots of debt. We don't know how much you actually cleaned up your act or how much the difference was made up by marrying a high earner. How long would it have taken you to "clean up your act" and get out of debt if you had not married a very high earner? 5 years? 10? 20? 40?

What if things don't work out between you two after he quits his job to retire? He likely may not be able to get another job making nearly as much as he does now, and you have taken half his/your stache. All of a sudden he only has half that 2.7 mill plus possible alimony for kids or whatever else gets awarded in the divorce.

He probably just needs more time to see you being frugal (in the realm of MMM frugal). My current GF was a lot like you when I first met her, she has changed a lot since then but I don't think I could trust her to be frugal enough to retire very early and me not be very very concerned about that idea.

tmterrill - I asked for opinions, so I don't fault you for having one.  You are right relationships and moneyi are all about trust.  Frankly, if I didn't feel like we could, at some magic number in the future, maintain our spending to be within the 3-4% withdrawal rate, I would not want to retire (which to me means working for myself PT.  No real idea of the income that would generate, but it wouldn't matter because we wouldn't need it).   

A couple of small corrections:  My DH and I are each other's first (and yes, hopefully only) marriage.  He has no other kids except our child.  He is the bigger bread winner, you are right.  But I also make six figures a year and have done so for over half of our marriage (it was approaching that for the first few years).  I work hard and am seeing a ROI on my expensive degrees now.  And, if I presume to follow your logic and turn out to be my husband's wife #1, no judge in his or her right mind would award me alimony with my skill set and income potential, even if I somehow were out for blood. It comes down to trust, to be sure, but thats really not my style anyway. 

The chunk of student loans that our joint income has paid off is only slightly more than what our toddler has in 529 plans right now.  My consumer debt was paid off before we got married, although my DH did let me live rent free for a year to make that happen.  And by now I could have paid that off myself if we hadn't gotten married and now be ready to start seriously saving.  Okay, defensive statements done.  I think you make some good observations, and maybe provide me more insight into my DH's psyche, as I know divorce is something that he fears in general - nothing about me specifically.  I am lucky to have a partner who makes good money, wants to save for retirement, helped me prioritize getting out of debt when we first got together, and makes me think about these things.  Now if he could just get me into researching fund, rebalancing the portfolio, and bogleheads, I would probably be his perfect spouse. Maybe I will make him a happy guy and go fund my IRA tonight.  As good as sex?  :)

tmterrill

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #23 on: February 04, 2015, 11:44:43 AM »
Thats what I get for assuming. With you making 6 figures and him presumably a good amount more than that he has no foot in reality to say you two cannot retire well before 'normal'.

The fact that he understands all kinds of investing ideas and theories but does not understand how robust the 4% withdrawal rate is then I dunno what to say.

When most people apply the 4% withdrawal they also generally using a number they could cut back on if the market took a dip (something the 4% SWR does not even take into account) making it even safer.

I would just continue with the plan as you are doing great. Some people do not like to count their eggs before they hatch so to speak, that may be what he is going through. He might understand in the back of his mind that 4% or 3% SWR is perfectly safe but until he gets close to that he may not even want to think about it. If he is currently not on board with it I would not take that as meaning he never will be. Things change, people change, especially over 10 years.

At some point it may be productive to ask what he thinks could be the realistic (aka not the end of the world or permanent economic relapse and decline) worst case scenario. For me personally if the 4 or 3% SWR stops working then I will care more about how many guns, ammo, food, and water I have than my 401k balance.

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #24 on: February 04, 2015, 12:33:23 PM »
You might try this approach with your husband as a way to meet him "half way": look into purchasing a guaranteed annuity to meet your basic living expenses, so that he'd never have to worry about running out of money or whether you've saved enough, or whether a 4% or 3% SWR is "safe" enough. Just like your FERS pension will be a guaranteed future income, you could take some portion of your investments in the future and buy another safe income stream.

For example, say you save up a total of $1 Million. You could take $750,000 to purchase an annuity that would provide you with $35,000 annual income for life (I'm making up these numbers though they're probably somewhere in the ballpark). Then you can continue investing the remaining $250k in stocks or other things for discretionary spending, knowing that you'll still get at least $35,000 a year for life (plus your FERS pension and Social Security one day). If the markets tank, you're okay on your other $250k since it's used only for discretionary spending and provides you with a cushion for vacation travel, health emergencies, etc.

It's less optimal strictly from the rate of return standpoint (an annuity at today's rates will typically only provide you with 2-3% annual returns), but in exchange you get security and peace of mind which your husband apparently requires.

Hopper

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Re: 2.7M, 54 years old, not enough to retire?
« Reply #25 on: February 05, 2015, 10:46:38 AM »


When most people apply the 4% withdrawal they also generally using a number they could cut back on if the market took a dip (something the 4% SWR does not even take into account) making it even safer.

I would just continue with the plan as you are doing great. Some people do not like to count their eggs before they hatch so to speak, that may be what he is going through. He might understand in the back of his mind that 4% or 3% SWR is perfectly safe but until he gets close to that he may not even want to think about it. If he is currently not on board with it I would not take that as meaning he never will be. Things change, people change, especially over 10 years.

At some point it may be productive to ask what he thinks could be the realistic (aka not the end of the world or permanent economic relapse and decline) worst case scenario. For me personally if the 4 or 3% SWR stops working then I will care more about how many guns, ammo, food, and water I have than my 401k balance.

Right.  Ch-cha-changes.... Maybe I will get more risk adverse as the time comes closer to FIRE. :)  We have had good talks about cutting back expenses to demonstrate we can live on less, so we will do that and save more, win win.  And wait and see who blinks first.   

You might try this approach with your husband as a way to meet him "half way": look into purchasing a guaranteed annuity to meet your basic living expenses, so that he'd never have to worry about running out of money or whether you've saved enough, or whether a 4% or 3% SWR is "safe" enough. Just like your FERS pension will be a guaranteed future income, you could take some portion of your investments in the future and buy another safe income stream.

For example, say you save up a total of $1 Million. You could take $750,000 to purchase an annuity that would provide you with $35,000 annual income for life (I'm making up these numbers though they're probably somewhere in the ballpark). Then you can continue investing the remaining $250k in stocks or other things for discretionary spending, knowing that you'll still get at least $35,000 a year for life (plus your FERS pension and Social Security one day). If the markets tank, you're okay on your other $250k since it's used only for discretionary spending and provides you with a cushion for vacation travel, health emergencies, etc.

It's less optimal strictly from the rate of return standpoint (an annuity at today's rates will typically only provide you with 2-3% annual returns), but in exchange you get security and peace of mind which your husband apparently requires.

Definitely something to think about.  Thanks.