Author Topic: FIRE'd Folks: Retiring on a Small 'Stache?  (Read 18120 times)

ender

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #50 on: February 08, 2020, 02:06:23 PM »
Something to keep in mind for parents, the EITC is very strong if you have children, have some income, and do not have significant investment income (which makes you ineligible for it).

https://www.bankrate.com/calculators/tax-planning/earned-income-tax-credit-calculator.aspx

Many states match EITC in some capacity too. A family of 4 making $10k/year income ends up with a $4k EITC, which if your state matches is pretty impressive return on whatever income you end up making. If your state matches 25%, that's $5k in EITC you get for making $10k income (either salary or self employment).

With the child tax credit, which is refundable up to $1400/kid and/or lets you do more Roth conversions, even making only $10k while doing no conversions results in a tax return paying out $7k.

Whether or not you feel ethical claiming these credits while having a ton of money in tax advantaged accounts or not is up to you. But, if you are considering the lean/barista FIRE approach, you really do not need a ton of actual income even if at a $15/hour job, to really make a good chunk of living expenses per year. If you can work a much higher paying job for very short term contracts per year this becomes even more lucrative (or monetizing your hobbies to pay for themselves and some self employment income).

Malcat

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #51 on: February 09, 2020, 05:59:04 AM »
This idea of if things go bad just get a job is easier said than done and may not even be possible in real life.

My close relative got wrecked by the 2008 downturn.  He had a mortgage business and did very well, then the crisis happened.  Business went under, lost his investment property because he couldn't make the payments, almost lost his house.  He couldn't get another job.  He got very sick, probably from stress, then his wife had to get any job around.  He incurred massive credit card debts and judgments which put liens on his house.  He got bailed out by Social Security Disability payments.  For him getting another job wasn't possible.

This comes up again and again.

There is a huge difference between needing a job immediately to cover urgent cash flow needs, versus needing a job at some point to replenish the coffers of a 'stache.

Also, if someone's retirement plan depends on them being employable, then they can do things along the way to sustain their employability, especially maintaining skills and professional networks that tend to generate opportunities in recessions. Because they're flexible and don't need to generate a full normal income, they can take on jobs at reduced rates of pay. Lastly, they have the time and resources to invest in training if needed, which someone who needs a job NOW can't do to take advantage of whatever skill is in demand at the moment.

Recessions are HORRIBLE for those who have a very short timeline within which they need a job, but they can provide amazing opportunities for people who have resources and flexibility.

Worst case scenario, someone could even just wait out the recession, get a job when the economy recovers, and re-up the 'stache.

Regardless, cautionary tales of people losing everything in recessions is apples to oranges compared to someone whose savings takes a hit during down years.

APowers

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #52 on: February 09, 2020, 07:23:53 AM »
This idea of if things go bad just get a job is easier said than done and may not even be possible in real life.

My close relative got wrecked by the 2008 downturn.  He had a mortgage business and did very well, then the crisis happened.  Business went under, lost his investment property because he couldn't make the payments, almost lost his house.  He couldn't get another job.  He got very sick, probably from stress, then his wife had to get any job around.  He incurred massive credit card debts and judgments which put liens on his house.  He got bailed out by Social Security Disability payments.  For him getting another job wasn't possible.

This comes up again and again.

There is a huge difference between needing a job immediately to cover urgent cash flow needs, versus needing a job at some point to replenish the coffers of a 'stache.

Also, if someone's retirement plan depends on them being employable, then they can do things along the way to sustain their employability, especially maintaining skills and professional networks that tend to generate opportunities in recessions. Because they're flexible and don't need to generate a full normal income, they can take on jobs at reduced rates of pay. Lastly, they have the time and resources to invest in training if needed, which someone who needs a job NOW can't do to take advantage of whatever skill is in demand at the moment.

Recessions are HORRIBLE for those who have a very short timeline within which they need a job, but they can provide amazing opportunities for people who have resources and flexibility.

Worst case scenario, someone could even just wait out the recession, get a job when the economy recovers, and re-up the 'stache.

Regardless, cautionary tales of people losing everything in recessions is apples to oranges compared to someone whose savings takes a hit during down years.

Also, this scenario sounded to me like a high-income/expense lifestyle problem. "His wife had to get any job around" sounds like the kind of woe-is-me ending that simply isn't an issue for someone with a $12k/yr lifestyle, which is the discussion in this thread. For someone who needs $60k+ of cashflow to sustain their lifestyle, "any old job" is a disaster; but for someone who only needs <$12k/yr to sustain their lifestyle, "any old job" is worlds of plenty.

jim555

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #53 on: February 09, 2020, 07:35:39 AM »
Also, this scenario sounded to me like a high-income/expense lifestyle problem. "His wife had to get any job around" sounds like the kind of woe-is-me ending that simply isn't an issue for someone with a $12k/yr lifestyle, which is the discussion in this thread. For someone who needs $60k+ of cashflow to sustain their lifestyle, "any old job" is a disaster; but for someone who only needs <$12k/yr to sustain their lifestyle, "any old job" is worlds of plenty.
True maybe not totally applicable to FIRE types, but it is an example of what happens in a recession.  No jobs available.  Getting sick, at least he had SSDI.  FIRE types would not have SSDI, after 5 years SSDI ends after not working.  Too sick to work, no SSDI, is a worst case scenario for anyone.

Remember FIRE types won't be in danger until 20-30 years out.  The markets tank and don't recover, the original 4% every year becomes a much larger % due to the shrinking portfolio size.  In a fail situation it gets so low that the portfolio can't recover.  Then a job becomes needed and you better be healthy enough to work.

I guess the person would need to wait until Social Security / pension becomes an option to take.
« Last Edit: February 09, 2020, 07:50:49 AM by jim555 »

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #54 on: February 09, 2020, 09:29:31 AM »
^True but often in a big recession people (especially people who lost their jobs and much of their savings) stop hiring lawn care, pool care and childcare out and do it themselves. My neighbor did home daycare full time (single mom raising 3 kids) and her clients dropped her services once they could no longer afford it because they lost their jobs during the recession. She eventually lost her business then her house (underwater). There were LOTS of people in this kind of situation in many fields.

In any case I think the OP also has to count on inflation. If he is dependent on GFs cheap rental he needs to make some longer term plans because while $12k/year is doable now, it might not be 20 or 30 years from now when rents )and other stuff) have gone up 100%. I could easily live on $12k/ year forever when I FIREd (and still can) but I doubt I could if renting on such a low income. I just look at rent increases for studio apts over the last 30 years and yikes!
« Last Edit: February 09, 2020, 09:34:06 AM by spartana »

Malcat

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #55 on: February 09, 2020, 09:55:22 AM »
Also, this scenario sounded to me like a high-income/expense lifestyle problem. "His wife had to get any job around" sounds like the kind of woe-is-me ending that simply isn't an issue for someone with a $12k/yr lifestyle, which is the discussion in this thread. For someone who needs $60k+ of cashflow to sustain their lifestyle, "any old job" is a disaster; but for someone who only needs <$12k/yr to sustain their lifestyle, "any old job" is worlds of plenty.
True maybe not totally applicable to FIRE types, but it is an example of what happens in a recession.  No jobs available.  Getting sick, at least he had SSDI.  FIRE types would not have SSDI, after 5 years SSDI ends after not working.  Too sick to work, no SSDI, is a worst case scenario for anyone.

Remember FIRE types won't be in danger until 20-30 years out.  The markets tank and don't recover, the original 4% every year becomes a much larger % due to the shrinking portfolio size.  In a fail situation it gets so low that the portfolio can't recover.  Then a job becomes needed and you better be healthy enough to work.

I guess the person would need to wait until Social Security / pension becomes an option to take.

There are never ever no jobs available.

In fact, certain areas boom like crazy in recessions. As long as there is an economy, there will be jobs. What is incredibly difficult in a recession is to quickly replace a full income, which a FIREd person never needs to do. At most, they need to replace a portion of their annual spend, even an extra 5-15K a year would help offset SOR risk even on a 60K spend.

As I mentioned too, the FIREd person has the time and funds to retrain if needed, unlike the worker who is racing against the clock before their cash flow demands outstrip their liquidity.

No matter what, a FIREd person will never ever have the same pressures as someone who depends on cash flow for survival. The FIREd person is actually in an ideal position to capitalize upon the incredible opportunities of economic crashes: starting certain types of consulting, buying up discounted real estate, taking advantage of government subsidies for certain industries, buying or partnering with certain businesses, etc.

Having cash during a recession is AMAZING for making more money.
« Last Edit: February 09, 2020, 12:56:59 PM by Malkynn »

TomTX

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #56 on: February 09, 2020, 12:43:49 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.

So report the side gig income on your taxes and continue paying a bit into SSDI.

jim555

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #57 on: February 09, 2020, 01:12:09 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.

So report the side gig income on your taxes and continue paying a bit into SSDI.
Pretty easy to do, you only need to earn $1,410 in a quarter for the quarter to count.

American GenX

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #58 on: February 09, 2020, 01:31:07 PM »
I could easily live on $12k/ year forever when I FIREd (and still can) but I doubt I could if renting on such a low income. I just look at rent increases for studio apts over the last 30 years and yikes!

Yeah, that's a pretty low amount.  I have a paid off house, but my short term bare bones budget is still $13,440/yr.  And I say short term because that excludes home maintenance (and I have a roof that will need replaced in the next few years) and the eventual cost of a new car some years down the road.  And bare bones is not how I would want to live - that means no "fun" money.

I would have to downsize my home or get a roommate to get my bare bones down to $12K/yr, which still wouldn't cover average home maintenance and future vehicle replacement costs.

My stash isn't exactly small, but it's all I'll have to live on for over 10 years, no pension.  And due to health care coverage costs, the above numbers will be higher when I FIRE.

2Birds1Stone

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #59 on: February 09, 2020, 02:46:38 PM »
Some great discussion here.....

In my county, minimum wage is $13/hr.  Using https://smartasset.com/taxes/new-york-paycheck-calculator#ip8puzTacC,

You can see that working just two, 8 hour shift per week, you're able to take home $806/month or $9,672/yr, after taxes and FICA.

Since I'm using a conservative 3% WR, this could potentially replace the need for $320k in invest assets. At current low spending, covers over 50% of my current spending annual spending (55% to be exact!).

A minimum wage job should be pretty easy to find, in an absolutely horrible SOR scenario. If you plug that into any FIRE modeling scenario, the impact is HUGE.

With even a little bit of skills, social connection, luck, etc someone could probably find something a few bucks an hour over min wage rather easily.

In parts of the country where min wage is much lower than $13/hr, the worst case would be picking up a third shift per week.....this kind of resilience is not as easy for someone who has a higher spending level (in absolute terms).

« Last Edit: February 09, 2020, 02:48:21 PM by 2Birds1Stone »

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #60 on: February 09, 2020, 11:10:08 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.

So report the side gig income on your taxes and continue paying a bit into SSDI.
Whaaa...? You mean work? That stuff will kill ya ;-). Seriously though I am in that category of no disability insurance since my mid-ish 40s. But I consider my FIRE to be kind of like disability insurance, meaning I don't have to work so if disabled it wouldn't  financially wreak me. However if SHTF and I was at some point dependent on a job later in life but was unable to work,  then it might matter. So something the leanFIRE people may need to consider and occasionally do some work that pays into SS to keep that SSDI available to them. 
« Last Edit: February 09, 2020, 11:13:59 PM by spartana »

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #61 on: February 09, 2020, 11:24:25 PM »
I could easily live on $12k/ year forever when I FIREd (and still can) but I doubt I could if renting on such a low income. I just look at rent increases for studio apts over the last 30 years and yikes!

Yeah, that's a pretty low amount.  I have a paid off house, but my short term bare bones budget is still $13,440/yr.  And I say short term because that excludes home maintenance (and I have a roof that will need replaced in the next few years) and the eventual cost of a new car some years down the road.  And bare bones is not how I would want to live - that means no "fun" money.

I would have to downsize my home or get a roommate to get my bare bones down to $12K/yr, which still wouldn't cover average home maintenance and future vehicle replacement costs.

My stash isn't exactly small, but it's all I'll have to live on for over 10 years, no pension.  And due to health care coverage costs, the above numbers will be higher when I FIRE.
I'm fortunate (or unfortunate depending on how you look at it) to have access to the VA so healthcare is almost zero for me. That could change so I don't count on it but it does help keep the stash intact longer. After housing costs (buy or rent) it seems to be the biggest expense for most - especially as they get older and premiums go higher. I can keep my base expenses very low, especially with a paid off house, and now with a roommate I have zero housing expenses. I am also very willing to down size (again) or even rent if for some reason my expenses were higher in the future. So even though my expenses are low, I can increase them beyond the lean FIRE if wanted or needed so not in.a fixed situation like the OP.
« Last Edit: February 09, 2020, 11:26:39 PM by spartana »

helloyou

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #62 on: July 06, 2020, 07:07:01 PM »
Thanks its very insightful. I'm exactly in this situation with a small stash of 600-700k. My expense is around 1500-2000/month so I should cover for 25x

But still I'm wondering if its enough to go fire!

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #63 on: July 07, 2020, 06:30:07 PM »
I feel like I may not 'qualify' for this thread but my situation is a bit special.

I met my SO after she had retired from local government, she draws a generous pension from 30 years of employment with her employer. She gets healthcare coverage and the retirement is cost of living adjusted. Upon deciding to get married I decided to give up my career in Europe (a glorious 9 to 5 with limited growth potential but no stress) and start over in the US. After 9 years in the private sector over here I have amassed a nice stash, which will be topped off by the equity payout from our home sale. If I get the job I'm currently interviewing for then we'll be moving to Western-Europe where I'll work another few years at which point we will start slow traveling throughout Europe.

If this job pursuit does not pan out then I will pull the plug now with about $460-470k invested with a plan of leaving my retirement funds largely untouched for 10 or so years. We do expect to come back to the US later and I will then earn the final 4 credits to gain Soc Sec eligibility. As part of this option we will start slow traveling immediately which should be sustainable based on the numbers that we have run multiple times. As an EU citizen I can relatively easily bring her along, enabling multi-year stays in Europe as desired.

The biggest hurdles for me were:
1. the feeling that I'm taking advantage of her retirement to pull the plug early into my US career
2. the risk that my SO passes before my funds can grow to my projected spending levels as I don't have survivor benefits. She is a cancer and stroke survivor so this isn't as remote a possibility unfortunately.

Through multiple conversations it has become clear we both feel we are both getting a good deal as she is appreciative of my willingness to forego financial and professional ambition for the sake of time together and i feel fortunate she is willing to 'fund' our lifestyle for a number of years.

BicycleB

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #64 on: July 07, 2020, 10:32:51 PM »
^Interesting story! Best wishes for your time together.

Missy B

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #65 on: July 08, 2020, 12:51:52 PM »
Some great discussion here.....

In my county, minimum wage is $13/hr.  Using https://smartasset.com/taxes/new-york-paycheck-calculator#ip8puzTacC,

You can see that working just two, 8 hour shift per week, you're able to take home $806/month or $9,672/yr, after taxes and FICA.

Since I'm using a conservative 3% WR, this could potentially replace the need for $320k in invest assets. At current low spending, covers over 50% of my current spending annual spending (55% to be exact!).

A minimum wage job should be pretty easy to find, in an absolutely horrible SOR scenario. If you plug that into any FIRE modeling scenario, the impact is HUGE.

With even a little bit of skills, social connection, luck, etc someone could probably find something a few bucks an hour over min wage rather easily.

In parts of the country where min wage is much lower than $13/hr, the worst case would be picking up a third shift per week.....this kind of resilience is not as easy for someone who has a higher spending level (in absolute terms).

In the last recession in which I was unemployed, I had a hellish time trying to get a minimum wage job. I agree that it doesn't take much income to replace the shrinkage of your stash, but if your stash has shrunken massively, likely the recession is deep and that means there are a lot of other people looking and employers can be choosy. It's not realistic that you're going to get a job as a server or barrista if you don't already have experience, or basic office work unless you're right up to date with the most recent versions of programs. In fact, all the min-wage office jobs I looked at were requesting skills sets that would have needed at least 1 yr training in a dedicated program or 2 yr on the job to acquire.

Of course if you have a healthy network and a lifetime of different skill sets from different jobs it should be easier to get something.
But people talk about minimum wage jobs on the boards like there are always these entry-level jobs going begging, and depending on the timing and your location I don't think that's true.

Cassie

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #66 on: July 08, 2020, 03:33:02 PM »
This virus has really changed things and a minimum wage job is no longer a given. Most of our fast food restaurants are drive through only even though they are allowed to reopen.

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #67 on: July 08, 2020, 04:15:56 PM »
^Interesting story! Best wishes for your time together.
Yeah and we plan to mitigate some of the death risk with some life insurance on my wife. Perfect solution that we should never have to use.

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #68 on: July 08, 2020, 04:16:59 PM »
This virus has really changed things and a minimum wage job is no longer a given. Most of our fast food restaurants are drive through only even though they are allowed to reopen.
I think there will be an influx of remote entry level type roles in the future. People will be able to run their side hustle online even more so than they are today.

ender

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #69 on: July 08, 2020, 07:35:13 PM »
This virus has really changed things and a minimum wage job is no longer a given. Most of our fast food restaurants are drive through only even though they are allowed to reopen.

Meanwhile around here, I see constant help wanted signs.

Probably very different regional differences on this still.

Paul der Krake

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #70 on: July 08, 2020, 11:45:31 PM »
I am not worried about finding a minimum wage job in the US, because the labor market is so flexible (i.e. can be fired for any and no reason), which ensures openings all the time. I see help wanted signs here in Hawaii even though the unemployment rate is around 20%. Very different story in other countries with more rigid labor laws.

Monerexia

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #71 on: July 09, 2020, 12:13:11 AM »
Several risks--if insurance coverage is ~$400/month, rent is ~500/month, food is ~$300/month you're already over $10K w/o transportation or emergencies and a living situation that can be precarious or less than ideal. Also if you retire early remember that social security is based on an average of your working salary best 30 years so you may arrive at 62 with little to count on.

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #72 on: July 09, 2020, 10:09:33 AM »
Several risks--if insurance coverage is ~$400/month, rent is ~500/month, food is ~$300/month you're already over $10K w/o transportation or emergencies and a living situation that can be precarious or less than ideal. Also if you retire early remember that social security is based on an average of your working salary best 30 years so you may arrive at 62 with little to count on.
You can pretty accurately predict what soc sec will be based on current calculation so it's not a total crapshoot. I don't count on anything but use it as a windfall if it happens.

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #73 on: July 09, 2020, 05:08:11 PM »
^Interesting story! Best wishes for your time together.
Yeah and we plan to mitigate some of the death risk with some life insurance on my wife. Perfect solution that we should never have to use.
Job didn't happen so on to plan b.

Linea_Norway

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #74 on: July 11, 2020, 08:51:37 AM »
I feel like I may not 'qualify' for this thread but my situation is a bit special.

I met my SO after she had retired from local government, she draws a generous pension from 30 years of employment with her employer. She gets healthcare coverage and the retirement is cost of living adjusted. Upon deciding to get married I decided to give up my career in Europe (a glorious 9 to 5 with limited growth potential but no stress) and start over in the US. After 9 years in the private sector over here I have amassed a nice stash, which will be topped off by the equity payout from our home sale. If I get the job I'm currently interviewing for then we'll be moving to Western-Europe where I'll work another few years at which point we will start slow traveling throughout Europe.

If this job pursuit does not pan out then I will pull the plug now with about $460-470k invested with a plan of leaving my retirement funds largely untouched for 10 or so years. We do expect to come back to the US later and I will then earn the final 4 credits to gain Soc Sec eligibility. As part of this option we will start slow traveling immediately which should be sustainable based on the numbers that we have run multiple times. As an EU citizen I can relatively easily bring her along, enabling multi-year stays in Europe as desired.

The biggest hurdles for me were:
1. the feeling that I'm taking advantage of her retirement to pull the plug early into my US career
2. the risk that my SO passes before my funds can grow to my projected spending levels as I don't have survivor benefits. She is a cancer and stroke survivor so this isn't as remote a possibility unfortunately.

Through multiple conversations it has become clear we both feel we are both getting a good deal as she is appreciative of my willingness to forego financial and professional ambition for the sake of time together and i feel fortunate she is willing to 'fund' our lifestyle for a number of years.

Does her generous pension contain a widow pension? Often this is a lot lower than the original pension, but all bits might help.

And about taking advantage, it might be nice for her as well to have a partner who doesn't need to work fulltime, so that you can travel together whenever it suits you.
« Last Edit: July 11, 2020, 08:53:22 AM by Linea_Norway »

BTDretire

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #75 on: July 30, 2020, 03:07:08 PM »
*I'll turn it into a traditional IRA. By this time next year my 401k will be close to $90k. By FIRE, probably between $130-$150k since I max it each year and get a 6% dollar for dollar company match. If your money supposedly doubles every 10 years, in 30 years when I can access it, it'll be ...
Year 0 $130k
Year 10 $260k
Year 20 $540k
Year 30 $1080k
And just for a little reality, if inflation for the next 30 yrs is as it was the last 30 years,
your $1,080,000 will be liking having $550,000 today.

ItsALongStory

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #76 on: July 30, 2020, 05:28:37 PM »
@Linea_Norway we met after she had retired so unfortunately there is no survivor benefit.

Her perspective is certainly that it's great for her to have a husband available vs me being limited by work commitments.

Cassie

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #77 on: July 31, 2020, 03:30:09 PM »
Our state went from a low to a high unemployment rate since the pandemic because the economy is very tourism based.