FIRE on 4%?

[Eric]

Can we estimate the expected social security benefit for an early retiree? My wife and I have both worked enough years to qualify, but not enough to get the full amount (I think).

https://www.ssa.gov/retire/estimator.html

Go here, click on "Estimate your retirement benefits" and fill out the information.  It will take you to an estimate showing what you'd receive if you keep working until age 62+.  On that page, click "Add a New Estimate" and you can input your estimated retirement age.  This will then show you your benefit at age 62 when you stopped working at whatever age you input.  Unfortunately it doesn't show any other ages, but of course the longer you wait, the more you'll get.

[EscapeVelocity2020]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

Who is this 'Mysterious Money Mustache' you speak of?  As far as I can tell, he doesn't even post blog posts anymore (and they certainly aren't anything like the earlier blog posts).  The latest thing I found from him was a comment about recreational marijuana

Mr. Money Mustache January 16, 2016, 12:13 pm
Sorry Greg, I guess we’ll have to agree to disagree here. My thoughts are that Marijuana is by far the healthiest of the recreational drugs and is way, way better for you than a beer or a soda at the end of the day. On top of that, it’s far cheaper per serving than even boxed wine and has spectacular benefits for creative people and social bonding.

It is also not reserved for dropouts and low-achievers: you’ll find it circulating at most parties of wealthy business gurus in their 30s and 40s (in the Western half of the country, at least!)

Do you have much personal experience with the plant?

It is partially legal in 23 states and fully legal for recreational use in 4 states so far. Although it is readily available in every state, any prohibition of it is completely batshit crazy in my opinion, to the extent that I wouldn’t live in a place where it is considered criminal, or work at a company where its use was discouraged.

More on my article coming on 4/20 called “The economics of recreational marijuana” ;-)

My takeaway from all of the blog lately is that he would not be returning to work in this lifetime.  So we forever have the '4% or more works' camp (until proven wrong, since none of us have lived the next 30 years yet), and the OMG 4% could never work and here's my evidence (historically low Treasuries, rising global economic discord, crashing oil price, inflation, deflation, robots... on and on).

If you are a nervous nelly that never wants to work again and can stomach the idea that you put in a few extra years for peace of mind (or because of altruism, or wanting to be 'sure' you could care for a dependent, or whatever) - then you'll feel great when markets go down and you're still 'stashing and don't have to worry about 4% yet.

If you hate your job, or at 3% or whatever substantially 'more safe' SWR, or are willing to cut expenses to the bone, or willing to work in the future... then you won't be convinced that 4% is impossible to FIRE on.  But yes, to the OP, people have FIRE'd on 4% successfully in the past and many advise that they should've retired earlier or could have been more variable in their spending.   

[Mr. Green]

My takeaway from all of the blog lately is that he would not be returning to work in this lifetime.  So we forever have the '4% or more works' camp (until proven wrong, since none of us have lived the next 30 years yet), and the OMG 4% could never work and here's my evidence (historically low Treasuries, rising global economic discord, crashing oil price, inflation, deflation, robots... on and on).

If you are a nervous nelly that never wants to work again and can stomach the idea that you put in a few extra years for peace of mind (or because of altruism, or wanting to be 'sure' you could care for a dependent, or whatever) - then you'll feel great when markets go down and you're still 'stashing and don't have to worry about 4% yet.

If you hate your job, or at 3% or whatever substantially 'more safe' SWR, or are willing to cut expenses to the bone, or willing to work in the future... then you won't be convinced that 4% is impossible to FIRE on.  But yes, to the OP, people have FIRE'd on 4% successfully in the past and many advise that they should've retired earlier or could have been more variable in their spending.   

http://www.retireearlyhomepage.com/
That guy has been living on 4% for the last 20 years. Actually, his stash has grown so large over that 20 years he's pulling out less than 2% now! Gotta give the guy credit for pulling the trigger at 38 in 1994, well before the internet was the bastion of early retirement info that it is today. I was unaware of an examples of people who pulled the trigger on 4% so long ago before seeing that linked in another thread yesterday.

[EscapeVelocity2020]

http://www.retireearlyhomepage.com/
That guy has been living on 4% for the last 20 years. Actually, his stash has grown so large over that 20 years he's pulling out less than 2% now! Gotta give the guy credit for pulling the trigger at 38 in 1994, well before the internet was the bastion of early retirement info that it is today. I was unaware of an examples of people who pulled the trigger on 4% so long ago before seeing that linked in another thread yesterday.

I saw Dude's earlier post (and I don't disagree with anyone that says that (for most intents and purposes) 4% has not failed in the past).  So far so good for this guy too, he retired at a really good time (no bear market for 6 years, and a strong bull that more than doubled his 4% stash).  We also have recent history which *may* indicate that the equity markets which everyone rely so heavily on for the heavy lifting required in ER might not repeat what this guy experienced, so I'm not sure why it's so relevant.  Treasuries are low, the Fed's rate increase most likely contributed to the early 2016 dip, and overall it is harder than ever to find a good risk free asset coupled with volatility (as measured by VIX) is up (which is OK to good for accumulators but bad for the draw-down). 

Obviously I can't predict the next 30 years, but people should be willing to consider both sides of how they feel about arguments for and against 4% SWR and I certainly think it is flawed that folks believe they can quit early then go back to work in a decade or two.

[arebelspy]

But you don't have to completely quit, draw all the way down, and then "go back."

It's not a black/white on/off binary thing.

"Work full time job" or "earn no money at all."

There's such a thing as a happy medium when you have some flexibility.  :)

[ender]

But you don't have to completely quit, draw all the way down, and then "go back."

It's not a black/white on/off binary thing.

"Work full time job" or "earn no money at all."

There's such a thing as a happy medium when you have some flexibility.  :)

I think about the scenarios where you have a part-time income too. Arbitrarily for easy math, let's say you need $40k/year and so you need $1M for FIRE.

If you can work a job/hobby and make say $15/hour and work about 2 days a week, so 2x8x50 = $12k/year income, you just dropped your required assets by $12k*25 = $300,000. For most families it's even better since you become eligible for lots of tax hacks if you have some earned income vs purely conversions (EITC and savers credit are two good complete hacks options).

This isn't for everyone and won't be. Some careers will allow higher than $15/hour part-time earnings and make this even more viable. Some don't. Some will want to go 100% working to 0% working. Maybe this is a backup plan you build into your planning for feeling more secure ("if on January 1st, $40k is more than 6% of remaining portfolio, find part time job to generate $10k/income") to help alleviate worries or maybe you end up bored.

But the point is there are many options for someone who is FIRE and worried about [whatever your personal fears are].

Personally? I like the idea of switching to contract types of work and taking several months off each year once we're closer to FI.

The ? that gets me somewhat confused is people always say save 25% of your needs so 25x80k = 2 million saved for being fire'd BUT thats not true on a 4% withdrawal is it if you need to figure in taxes on your withdrawal. You need more like 2.5 million saved to net 80k. so your really saving 31x's. this is at least where i got confused.

You need to save 25x your expenses.

Your expenses include taxes, insurance, etc.

Any money you have to pay is an expense.

Save 25x that number.

Had it all but the taxes figured...guess that was a pretty obvious oops! But thanks!

Keep in mind that given current tax code, your first $20k as a married couple you pay no federal income taxes (12.6k + 4050x2  = $20.7k tax free just for a couple). Each kid adds quite a bit too (4k exemption + $1k credit). Given that it's a credit, not deduction, you really get $4k + 10k (as married, your first 18.55k is at 10% so your first two kids are mostly 10% federal taxes) or another $14k.

So with 1 kid you can have about $35k in "income" which isn't taxable. Add a second kid and you are pretty close to $50k in income you can have before you pay any federal taxes, assuming you have no other deductions/credits/etc.

It's... encouraging for Roth conversions :-)

[Mr. Green]

But you don't have to completely quit, draw all the way down, and then "go back."

It's not a black/white on/off binary thing.

"Work full time job" or "earn no money at all."

There's such a thing as a happy medium when you have some flexibility.  :)

Absolutely! Once FIRE'd, I would take a part-time job for a number of years over a full-time job for a shorter period. There's just too much that's lost in the grind of full-time work that affects overall happiness for me, and I suspect many others. No I will not be able to go back to work as a Software Engineer after being out of the industry for 15 years but I don't have to because my expenses are 30-40k. I can work part-time some where and that would cover at least 25% of my yearly spend if not more. That's part of the leap of faith to me, knowing that it will inevitably be okay (and it will be) even though my analytical brain wants to whole path mapped out RIGHT NOW. That's not including Social Security of any of the other safety nets I have available to me. But that's just my scenario. YMMV on safety nets, etc.

[soccerluvof4]

^+1... I think that is the number one thing people just cant get there head around. They don't have to go broke before they go back to work. Keep an eye on things and if your not feeling good at the time go get a job to shore things up. Most cases if they follow the principles they mostly never will need to and also why so many over save for retirement.

[ender]

^+1... I think that is the number one thing people just cant get there head around. They don't have to go broke before they go back to work. Keep an eye on things and if your not feeling good at the time go get a job to shore things up. Most cases if they follow the principles they mostly never will need to and also why so many over save for retirement.

One huge benefit from being able to read/learn all about early retirement for those of us in our twenties is that we really have access to a lot of information. Learning from others, understanding things that worked, tactics, etc.

Over the next decade of my life, it'll be easy for me to continue to learn and understand more about the whole concept of FIRE. Considerably easier than most folks here who are at the end of that journey (whether by luck or deliberate intent).

[EscapeVelocity2020]

It's interesting though, I have yet to hear anyone admit that they 'felt bad and had to go back to work'.  Plenty of, I'm making money on the side or I plan to grow my hobby business, but little admission of failure.

There are also very few people that were around for that last worst 30 year period, and none of them seem to be commenting.  I distinctly recall in 2008 and early 2009 that the ER.org forum was full of 60-something y.o. retirees wondering if they would be OK or eating catfood, complaining about big banks, corrupt government or business pension promises, etc.  I'm sure we'll get there again (unless the Fed really can just keep expanding its balance sheet, buy up any asset without consequence like domestic inflation or dollar weakness...).

I think people have short memories and little incentive to search the internet and process what 2008 was like, and an even more odd way of dismissing a big decision like giving up a job today with the idea they may have to work harder for less at a similar job in the future, when they probably are less likely to 'want' to work.

Alas, I don't have any good solutions, but I do like to get a little bit of the contrarian ideas out so that people aren't 'shocked' by the fact 2009-2015 comes to an end with a bang or a long whimper eventually.  I even think that bloggers and folks making a living on the internet are struggling to keep income stable, much less growing, but that's anecdotal (and to be expected in a business model with a low moat and constant demand to keep up in tech).

Just my 2 cents.  You can of course ER on 4% and go back to work after a 50% drop in net worth too, that's fine by me.  Personally, my preference is to hang on to a job I enjoy maybe until 2% SWR, maybe even lower since my kids are still young and I don't like to think about things like ACA, figuring out how to pay for college, worrying about how the market is doing (still in accumulation, I really don't care if it is up or down right now, just how it looks when I'm pulling the trigger).  Call me a coward, I can handle it :)   

[FiveSigmas]

For those interested in failures, I found the following thread (and the linked post in particular) quite relevant:

http://forum.mrmoneymustache.com/welcome-to-the-forum/any-early-retirement-fails-out-there/msg212768/#msg212768

[AdrianC]

Can we estimate the expected social security benefit for an early retiree? My wife and I have both worked enough years to qualify, but not enough to get the full amount (I think).

https://www.ssa.gov/retire/estimator.html

Go here, click on "Estimate your retirement benefits" and fill out the information.  It will take you to an estimate showing what you'd receive if you keep working until age 62+.  On that page, click "Add a New Estimate" and you can input your estimated retirement age.  This will then show you your benefit at age 62 when you stopped working at whatever age you input.  Unfortunately it doesn't show any other ages, but of course the longer you wait, the more you'll get.

Many thanks!

[AdrianC]

I think people have short memories and little incentive to search the internet and process what 2008 was like, and an even more odd way of dismissing a big decision like giving up a job today with the idea they may have to work harder for less at a similar job in the future, when they probably are less likely to 'want' to work.

Just my 2 cents.  You can of course ER on 4% and go back to work after a 50% drop in net worth too, that's fine by me.  Personally, my preference is to hang on to a job I enjoy maybe until 2% SWR, maybe even lower since my kids are still young and I don't like to think about things like ACA, figuring out how to pay for college, worrying about how the market is doing (still in accumulation, I really don't care if it is up or down right now, just how it looks when I'm pulling the trigger).  Call me a coward, I can handle it :)   

I think you're doing it right.

[Mr. Green]

It's interesting though, I have yet to hear anyone admit that they 'felt bad and had to go back to work'.  Plenty of, I'm making money on the side or I plan to grow my hobby business, but little admission of failure.

There are also very few people that were around for that last worst 30 year period, and none of them seem to be commenting.  I distinctly recall in 2008 and early 2009 that the ER.org forum was full of 60-something y.o. retirees wondering if they would be OK or eating catfood, complaining about big banks, corrupt government or business pension promises, etc.  I'm sure we'll get there again (unless the Fed really can just keep expanding its balance sheet, buy up any asset without consequence like domestic inflation or dollar weakness...).

I think people have short memories and little incentive to search the internet and process what 2008 was like, and an even more odd way of dismissing a big decision like giving up a job today with the idea they may have to work harder for less at a similar job in the future, when they probably are less likely to 'want' to work.

Alas, I don't have any good solutions, but I do like to get a little bit of the contrarian ideas out so that people aren't 'shocked' by the fact 2009-2015 comes to an end with a bang or a long whimper eventually.  I even think that bloggers and folks making a living on the internet are struggling to keep income stable, much less growing, but that's anecdotal (and to be expected in a business model with a low moat and constant demand to keep up in tech).

Just my 2 cents.  You can of course ER on 4% and go back to work after a 50% drop in net worth too, that's fine by me.  Personally, my preference is to hang on to a job I enjoy maybe until 2% SWR, maybe even lower since my kids are still young and I don't like to think about things like ACA, figuring out how to pay for college, worrying about how the market is doing (still in accumulation, I really don't care if it is up or down right now, just how it looks when I'm pulling the trigger).  Call me a coward, I can handle it :)   

I don't think there is any "cowardly" when it comes to this stuff. It's all an exercise in risk tolerance based on the individual. I'm okay with playing the "4% SWR and safety nets" game. If I hung around for a 2% SWR, I can almost guarantee that my death-bed self would want to kick the living piss out of my current self for wasting those years, because I die a little inside every day I have to go back to my office. Your plan doesn't have to be anyone else's plan but your own. This forum just helped me realize my confidence in my own plan, and I've never been more excited about my future.

[EscapeVelocity2020]

...
If I hung around for a 2% SWR, I can almost guarantee that my death-bed self would want to kick the living piss out of my current self for wasting those years, because I die a little inside every day I have to go back to my office.
...

To be quite honest, I was exactly where you describe in my first 'adult' career also, and it sucked pretty horribly for 14 years.  I was around the MMM 4% SWR when I quit, but I had also been close to laid off so I was very gun shy about looking a gift horse in the mouth (this will be the 'idiom overdose post', just beware foreign language speakers).  I do believe it is Mustachian to milk a crap job while being frugal in order to take control of one's own destiny.  In MMM's own case, he started a housing company and a blog, and the blog seems to have turned out pretty well for him.  In my case, I leveraged the freedom to work for a company that opened with moving my family overseas.  And on into the future, it allowed me to live interesting places in the world on the company dime doing things that I'd do for much less pay (but they are an international company and, guess what, there are parts of the world that still treat their employees like respectable professionals!).  So maybe I quit now that I don't want that so much, but I also waffle because it is a pretty amazing lifestyle.

Sadly, I also see MMM's blog has lost it's zest (maybe my earlier post quoting MMM's comments on marijuana seemed inflammatory or irrelevant, but I was thinking about this at the time...) which is to say - you get to a comfortable point in life and the decisions are down to - I have it all, and I really just want to do my own thing.

I can continue an easy thing in my own way, so I'll let it drag on a little longer, maybe OMY, or maybe I let it go and claim victory over this OMY syndrome.  Once you are convinced you are FI, OMY is simply an academic choice, but then is ER necessarily a victory? 

I think that Pete works because it is simply better than not working.  Billionaires work, not because they 'need the income'.  So maybe a clearer message is to get close to 4%, or at 4% SWR, and then take that freedom to start replacing income in a more preferable way.  I got lucky, MMM got pretty lucky (I doubt he expected things would turn out just so), and it is certainly possible to increase your chances and opportunity by leveraging Mustachianism to open up new avenues for success. 

But addressing the initial quote - flopping almost dead over the finish line when you hit 4% SWR shouldn't be your only plan at all, IMHO.  It is just as 'crazy' as never making a dime again and spending 4% come what may because it seems pretty darn safe historically.  Even if you do well for a decade or two, there should always be that thinking that work is something to be celebrated and you will do more of it.  Historically (maybe influenced by Puritans or those that lived in the Great Depression), it was driven by being exposed to a failure after 20 or 30 years of ER.  I'm not in that camp (although 2008 was pretty impressive to see the reality that the modern banking and market system was just a bigger and more modern version of 'It's a Wonderful Life').

Edit to add:  But I don't think it will be getting easier in the future to squeeze a crap job with frugality and end up with FI-level freedom.  My tact has been to leverage my current FI to make more future freedom (for my extended family, future 'causes') while it is still easy.  Make hay while the sun is shining, a bird in the hand is worth two in the bush, etc. (other idioms I had intended to squeeze in).  But again, all just my opinion. 

[BTDretire]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

The federal poverty level for a family of three is $20,090.
 So, as long as you think $4,910 over the federal poverty level is a Luxurious Lifestyle...
I don't, but living just above the poverty is done by millions, so clearly it can be done.

[ender]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

The federal poverty level for a family of three is $20,090.
 So, as long as you think $4,910 over the federal poverty level is a Luxurious Lifestyle...
I don't, but living just above the poverty is done by millions, so clearly it can be done.

Having a paid for home reduces the "yearly expenses" a fair bit.

[arebelspy]

I think I saw to many posts discussing 4% and wether you can make it on that.
But there was no discussion about 4% of what?
I think It is tough on 4% of $700k, much easier on $1.4M.
Also if you only have 10 years until Social Security, and will receive $20,000 that can
be like adding another $500k to you nestegg at 4%.

4% of 700k is 28k, so that would only be tough if your annual spending is higher than that.  If you spend 20k per year or 25k per year or 28k per year, then 700k is obviously plenty. The math is simple - you grow your portfolio to 25x of your annual expenses, and then mathematically you take 4% of your nest egg each yaer to spend.

Most people don't just take 4% though, they use variable withdrawal strategies, where they spend more in good years and less in bad years.

I am pretty sure MMM and family live a "luxurious lifestyle" on 25k.

The federal poverty level for a family of three is $20,090.
 So, as long as you think $4,910 over the federal poverty level is a Luxurious Lifestyle...
I don't, but living just above the poverty is done by millions, so clearly it can be done.

..and this is exactly why I bring up the imputed rent problem (in multiple threads).  His paid off house is giving him about 15k in additional "spending" via saved rent/mortgage payments.

Meaning his spending level is more like 40k, or 2x the poverty level, and yes, at that level you can get quite luxurious by optimizing that spending.

[StetsTerhune]

There other important point to me is the labor value provided by people who are FIREd. Living on poverty line income while working 80 hours a week to get there is very different than living on the poverty line and having the time to cook all your meals from scratch, do your own work around the house, etc. The justifications of where the poverty line is have essentially no bearing on people who are retired intentionally on that amount.

[AdrianC]

Some comments:

We had a couple of folks on the thread who did FIRE on 4% and more who intend to soon.

I expected more concrete examples. I think that few do actually retire on 4% and nothing else. There’s the expected pension from a former employer or military, spouse still working, expected occasional part time gigs, and the ever popular “go back to work for a couple of years” if the market tanks (which it will at some point).

Social security is an important consideration, even for an early retiree. I wasn’t even considering it. A good learning for me.

My own conclusion from this thread and others is that it is reasonable to target 25x expenses (don’t forget taxes) as your Financial Independence goal. Reach 25x with some margin of safety and most folks can give up the day job, with caveats, eyes open to risks, etc.

It is not reasonable to then take out an inflation-adjusted 4% each year with no regard to investment performance and spending levels.

And my own story?

We are comfortably FI but our expenses are growing faster than inflation – three growing kids and two ageing parents. Medical insurance plus out of pocket medical costs come a close second behind groceries as our biggest expense. It’s a concern.

We are due for some social security payments down the road (thanks again for the estimator link, Eric) and my wife will get a small pension. She’s been a SAHM for 8 years.

I’m currently averaging about 20hours/week in my consulting business, down from an average of over 50 for the last 15 years. I’m not looking for work, but it keeps coming anyway. I raised my billing rate in an effort to weed out the less desirable work!

I intend to keep working some. We get the benefits of business ownership and some income. But I’m slowing it down. Definitely intend to do less business travel and to take off the school vacations.

I guess I’m FI-semi-RE.

[tj]

I don't think too many people at the MMM forums have actually FIRE'd yet so probably hard to get real data on the number of them who did it using only the 4% rule.  Most people who FIRE'd early (including myself), even if they could do it just on their stash, seem to have something else to fall back on if needed - a working spouse, a side gig, pension, SS at some point - but that doesn't mean they wouldn't be able to retire just using 4% SWR though.

Considering the forum is only a handful of years old, even if users have FIRE'D, there hasn't been a long enough time horizon to know if they had to go back to work or not.

[Eric]

I don't think too many people at the MMM forums have actually FIRE'd yet so probably hard to get real data on the number of them who did it using only the 4% rule.  Most people who FIRE'd early (including myself), even if they could do it just on their stash, seem to have something else to fall back on if needed - a working spouse, a side gig, pension, SS at some point - but that doesn't mean they wouldn't be able to retire just using 4% SWR though.

Considering the forum is only a handful of years old, even if users have FIRE'D, there hasn't been a long enough time horizon to know if they had to go back to work or not.

I don't think that's all that relevant, unless the question was "how many of you FIRE'd on 4% between when you first opened your MMM forum account and now?"

[Basenji]

so he's living a 40k lifestyle, or so, and it's quite luxurious, yes.

My back of the envelope estimation is that 40k a year puts a family better off than ~99.7% of human beings that have ever existed. I'd call that luxurious. Peer group comparison and hedonic adaptation are such a funny thing though -- I don't know how else I can rationalize people breaking out the word "suffering" to describe what would happen to their children if they're denied something only .3% of humans have ever had.

Amen.

[Cassie]

This might be a better question for folks at the EArly Retirement.org where many are in their 50's-60's.  YOu would have many more retired people. When I read there it does seem like many people have more then one type of income.

[Mr. Green]

I expected more concrete examples. I think that few do actually retire on 4% and nothing else. There’s the expected pension from a former employer or military, spouse still working, expected occasional part time gigs, and the ever popular “go back to work for a couple of years” if the market tanks (which it will at some point).

The standard market tanking is covered by the 4% rule. As to whether someone would go back to work, I guess that would be based on whatever their comfort level is. I think you're going to have a hard time finding examples of people who FIRE on 4% but have never managed to earn any other type of benefit (SS, pension, etc.) that will kick in at some point in their life. I don't even know how that would be possible, unless you earned so much money out of the gate that you retired before you earned enough credits for SS. I also suspect many people would end up earning some kind of money in some capacity out of sheer circumstance. I'm planning to FIRE at 32. In order for me to never earn another dollar until I die I'd probably have to go hide in the mountains. I think the "strict 4%" approach throws too many people off the raft.

[CanuckExpat]

I think you're going to have a hard time finding examples of people who FIRE on 4% but have never managed to earn any other type of benefit (SS, pension, etc.) that will kick in at some point in their life. I don't even know how that would be possible, unless you earned so much money out of the gate that you retired before you earned enough credits for SS. I also suspect many people would end up earning some kind of money in some capacity out of sheer circumstance. I'm planning to FIRE at 32. In order for me to never earn another dollar until I die I'd probably have to go hide in the mountains. I think the "strict 4%" approach throws too many people off the raft.

Wife and I are in the position that if/when we FIRE we wouldn't have earned enough credits for SS; this mostly has to do with us spending time outside the country and me spending time in grad school. What that has made me realize is since I'd probably do something to earn money anyways, and I'd want to earn those SS credits, I feel more comfortable about 4%, or FIREing even earlier if we want.. since we figure we'd probably do some kind of money earning gig to get those SS credits (and then later have the SS income).

[Malaysia41]

To answer the question for OP:

We fired on 5.3% withdrawal rate. Reason: we have two kids in college. Once they graduate, spending associated with them will go to zero. If they want more $, well, tough shit. They'll have to grow their mustaches.

Once they've graduated, we'll be living on 4% - of the assets I project we'll have after spending $ on college. If assets really tank over the next 10 years, we could cut out travel and tighten food spending to get down to 3.5%, or maybe lower. I'm more armchair mustachian than ERE mustachian. But I could be ERE level if I really had to.

In ten-ish years, DH qualifies to receive SS, in twenty, I qualify for SS. We've both worked enough that we're past the second knee in the SS benefits curve, so I expect my monthly check to be $1400 in today's dollars. Not too shabby. By that time our house will be paid off and so expenses will be even lower.  So, I'm assuming that if our spending cuts into our savings too much, then SS could pick up the difference when the time comes.

Worst case scenario - I go back to work for a few years. I may want to do that anyway as my discipline around doing my own thing degrades rapidly when I sit down to the computer only to find myself digging out of rabbit holes 5 hours later. Case in point: me right now at this very moment.

I must admit, I'm amazed that our stash supports us so well. Even if the market crashes spectacularly this year, I think we'll be okay, as we've got 33 months worth of cash. I know I know it's a drag on returns. However, I do not want to be in the position of selling low to pay for the utility bill.  I am working on lowering the cash on hand to 24 months. But I'm not in a hurry. We've got enough in the market as it is. 

Does that answer your question?

[AdrianC]

I expected more concrete examples. I think that few do actually retire on 4% and nothing else. There’s the expected pension from a former employer or military, spouse still working, expected occasional part time gigs, and the ever popular “go back to work for a couple of years” if the market tanks (which it will at some point).

The standard market tanking is covered by the 4% rule. As to whether someone would go back to work, I guess that would be based on whatever their comfort level is. I think you're going to have a hard time finding examples of people who FIRE on 4% but have never managed to earn any other type of benefit (SS, pension, etc.) that will kick in at some point in their life. I don't even know how that would be possible, unless you earned so much money out of the gate that you retired before you earned enough credits for SS. I also suspect many people would end up earning some kind of money in some capacity out of sheer circumstance. I'm planning to FIRE at 32. In order for me to never earn another dollar until I die I'd probably have to go hide in the mountains. I think the "strict 4%" approach throws too many people off the raft.

I added an edit to the OP to clarify:

EDIT: I don't mean retire and never earn another dollar for the rest of your lives. I mean rather has anyone retired early intending to withdraw 4% of their portfolio annually, and has no other *regular* source of income or financial or medical benefit? Expecting SS down the road is not counted since most of us will be getting some SS.

[AdrianC]

I must admit, I'm amazed that our stash supports us so well. Even if the market crashes spectacularly this year, I think we'll be okay, as we've got 33 months worth of cash. I know I know it's a drag on returns. However, I do not want to be in the position of selling low to pay for the utility bill.  I am working on lowering the cash on hand to 24 months. But I'm not in a hurry. We've got enough in the market as it is. 

Does that answer your question?

Yes, thanks.

The cash isn't a drag on returns when there are no returns ;-)

[Retire-Canada]

I don't think there is any "cowardly" when it comes to this stuff. It's all an exercise in risk tolerance based on the individual. I'm okay with playing the "4% SWR and safety nets" game. If I hung around for a 2% SWR, I can almost guarantee that my death-bed self would want to kick the living piss out of my current self for wasting those years, because I die a little inside every day I have to go back to my office. Your plan doesn't have to be anyone else's plan but your own. This forum just helped me realize my confidence in my own plan, and I've never been more excited about my future.

+1  to the bold text ^^^. I am keenly aware that every extra day I work in the prime of my life is a huge opportunity cost vs. doing what I really love and working a little bit part-time down the road.

The opportunity cost of a 2% SWR is so incredibly high for me it makes no rationale sense to shoot for that.

I am also not concerned about working a little down the road. The risk of that vs. the certainty of working full-time a decade + to hit a lower SWR is a no brainer for me.

[NWOutlier]

I've taken the position of 'over compensate' ... meaning, if you look at the hugely rich, and you over simplify the problem; then extrapolate for yourself - it looks something like this;

during our down markets, warren buffet made 18million in dividens just from coke...  do you think his lifestyle was impacted when the market dips 40 or even 60%? 

This is what I keep in mind, I know the number that will give me the 25-33x my annual expenses... to me, that's my baseline, my zero... I'm free to do what I want.. but doubling that number could help me sustain my annual costs even in a down market without worry and in an up market the investments would grow even though I am withdrawing..  there are many strategies to mitigate... another that people talk about is, they still work part time after they hit their number, so they aren't drawing down their balance...  neat idea, you can do anything you find fun and get paid for it, doesn't matter even if it is minimum wage, it's money that isn't coming out of your investments.

So, Yes - I can see a 3-4% withdraw work, but if you're worried, it's all about the safety margins and use the numbers as guidelines, not absolutes ...  Just build in a buffer, a

http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

[NorcalBlue]

There other important point to me is the labor value provided by people who are FIREd. Living on poverty line income while working 80 hours a week to get there is very different than living on the poverty line and having the time to cook all your meals from scratch, do your own work around the house, etc. The justifications of where the poverty line is have essentially no bearing on people who are retired intentionally on that amount.

Agreed. Also big difference when you have a large stash and EF to back up a low passive income in FIRE and no debt compared to someone living on a low income with nothing saved. If you set yourself up before FIRE and have very low" needs"  expenses, $25k a year can be Damn luxurious.  I live on less than that as a single kidless person and want for nothing.

This!  I just stared FIRE at 43 - my first year.  I withdrew $36k for 2016 to live on (2.8% WR or so).  Yet, the "poorer" I get, the more my expense go down (ACA, Taxes, etc.).  Now I keep thinking....what the hell am I going do with $36k!?! - living on $26k is cake.  So now I'm thinking....do I step up my lifestyle (travel for instance) and spend the $36k (again, only 2.8% WR or so) or just live comfortably on the $26??  Since this is all new to me, and the CAPE ratio appears "frothy", I think I'll hedge my bet and target a $30k spend rate...which would be about 2.5%.

[dragoncar]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

[AdrianC]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

I wasn't asking if the 4% rule works.

I was questioning if people believed in it enough to have actually done it. Answer: lot's of people believe in the 4% rule but hardly anyone has actually done it. Most early retirees here have other incomes, such as a pension, a spouse working or real estate in addition to investments, or retired on a lower withdrawal rate. I think we had two people saying they retired on 4% or more.

This is not data, it's anecdotal, but interesting nonetheless.

[Cassie]

I don't know anyone that retired just on their own $ without another source of income.

[dragoncar]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

I wasn't asking if the 4% rule works.

I was questioning if people believed in it enough to have actually done it. Answer: lot's of people believe in the 4% rule but hardly anyone has actually done it. Most early retirees here have other incomes, such as a pension, a spouse working or real estate in addition to investments, or retired on a lower withdrawal rate. I think we had two people saying they retired on 4% or more.

This is not data, it's anecdotal, but interesting nonetheless.

Well you did ask how it's working.

But I don't think having pensions or other passive income means you aren't using the 4% rule.

For example, someone who has pension cover 50% of expenses, and relies on drawing down 12.5 times brokerage investments, that's still totally in line with the idea of the 4% rule.

[Mr. Green]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

I wasn't asking if the 4% rule works.

I was questioning if people believed in it enough to have actually done it. Answer: lot's of people believe in the 4% rule but hardly anyone has actually done it. Most early retirees here have other incomes, such as a pension, a spouse working or real estate in addition to investments, or retired on a lower withdrawal rate. I think we had two people saying they retired on 4% or more.

This is not data, it's anecdotal, but interesting nonetheless.

I'm not surprised at all, given how specific the question is. I would consider it the equivalent of asking how many people like 8 oz. peach yogurt cups. If they like 6 oz. or 10 oz. they don't count, and if they like another flavor they don't count either. Plus tastes can change, just like someone who is retired can decide they want to pick up a fun summer job just to do something different. People's lives are messy and constantly changing and so I think trying to catch the "4% invested only" subset of retirees, from an already small subset of early retirees, is tough. I don't think it means no one is actually retiring on 4%, just not many on the very specific flavor you're looking for.

[dragoncar]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

I wasn't asking if the 4% rule works.

I was questioning if people believed in it enough to have actually done it. Answer: lot's of people believe in the 4% rule but hardly anyone has actually done it. Most early retirees here have other incomes, such as a pension, a spouse working or real estate in addition to investments, or retired on a lower withdrawal rate. I think we had two people saying they retired on 4% or more.

This is not data, it's anecdotal, but interesting nonetheless.

I'm not surprised at all, given how specific the question is. I would consider it the equivalent of asking how many people like 8 oz. peach yogurt cups. If they like 6 oz. or 10 oz. they don't count, and if they like another flavor they don't count either. Plus tastes can change, just like someone who is retired can decide they want to pick up a fun summer job just to do something different. People's lives are messy and constantly changing and so I think trying to catch the "4% invested only" subset of retirees, from an already small subset of early retirees, is tough. I don't think it means no one is actually retiring on 4%, just not many on the very specific flavor you're looking for.

Research shows that you should eat 5 servings of fruits and vegetables a day!  Who here eats exactly 5?  4 bananas and a pension doesn't count

[AdrianC]

I'm not surprised at all, given how specific the question is. I would consider it the equivalent of asking how many people like 8 oz. peach yogurt cups. If they like 6 oz. or 10 oz. they don't count, and if they like another flavor they don't count either. Plus tastes can change, just like someone who is retired can decide they want to pick up a fun summer job just to do something different. People's lives are messy and constantly changing and so I think trying to catch the "4% invested only" subset of retirees, from an already small subset of early retirees, is tough. I don't think it means no one is actually retiring on 4%, just not many on the very specific flavor you're looking for.

OK. How about this:

Has anyone retired early using an initial withdrawal rate of 4% or more?

Did you have any other income at retirement, such as a company or military pension, or a spouse still working?

How's it working out for you?

[Mr. Green]

I'm not surprised at all, given how specific the question is. I would consider it the equivalent of asking how many people like 8 oz. peach yogurt cups. If they like 6 oz. or 10 oz. they don't count, and if they like another flavor they don't count either. Plus tastes can change, just like someone who is retired can decide they want to pick up a fun summer job just to do something different. People's lives are messy and constantly changing and so I think trying to catch the "4% invested only" subset of retirees, from an already small subset of early retirees, is tough. I don't think it means no one is actually retiring on 4%, just not many on the very specific flavor you're looking for.

OK. How about this:

Has anyone retired early using an initial withdrawal rate of 4% or more?

Did you have any other income at retirement, such as a company or military pension, or a spouse still working?

How's it working out for you?

Definitely think you'll see more hits with that. Some folks with a pension or SS may not see it for 20 years so really it hasn't played a roll yet in their day to day living beyond being a part of what made them comfortable in retiring on their "4%."

[ender]

I'm not surprised at all, given how specific the question is. I would consider it the equivalent of asking how many people like 8 oz. peach yogurt cups. If they like 6 oz. or 10 oz. they don't count, and if they like another flavor they don't count either. Plus tastes can change, just like someone who is retired can decide they want to pick up a fun summer job just to do something different. People's lives are messy and constantly changing and so I think trying to catch the "4% invested only" subset of retirees, from an already small subset of early retirees, is tough. I don't think it means no one is actually retiring on 4%, just not many on the very specific flavor you're looking for.

OK. How about this:

Has anyone retired early using an initial withdrawal rate of 4% or more?

Did you have any other income at retirement, such as a company or military pension, or a spouse still working?

How's it working out for you?

Definitely think you'll see more hits with that. Some folks with a pension or SS may not see it for 20 years so really it hasn't played a roll yet in their day to day living beyond being a part of what made them comfortable in retiring on their "4%."

Don't forget that if someone is in their mid 40s and retire, they have only about 20 years before they can supplement their retirement with social security (or small pensions).

While that might not "fix" a failed early retirement it means you can end that 20 year period of time with considerably lower or no assets than otherwise, depending on what your expected income from them is combined. For many of us, social security will be more than enough income to cover retirement expenses in that worst case scenario.

cFIREsim gives a 79% success rate with a 6% withdrawal rate and 100% equities over a 20 year period. That means that in 4/5 historical cases, you could have covered that bridge period withdrawing 6% of your portfolio every year. Most success periods result in huge amounts of money at the end, too.

Most of the 20% failure scenarios are also pretty obvious that a problem is happening, either ending in the Great Depression or starting around 1970. With a bit of common sense it seems like you could pretty easily identify when you are in those situations and adjust your income (or spend) appropriately.

[Mr. Green]

Most of the 20% failure scenarios are also pretty obvious that a problem is happening, either ending in the Great Depression or starting around 1970. With a bit of common sense it seems like you could pretty easily identify when you are in those situations and adjust your income (or spend) appropriately.

Agreed. The most obvious one would be a substantial loss right after retirement without a quick recovery or a prolonged period of little to no gains right after retirement. MadFIentist has an excellent post about the correlation between returns early in retirement and portfolio failure. I intend to FIRE later this year, regardless of what the market is doing. That simply means I'll need to give some attention to returns over the next 5-10 years and if they under perform substantially then I'll probably want to entertain part time work for a few years to ensure my stash goes the distance. I suppose some might call that an RE failure, but the possibility of a few years of part-time work a decade from now beats the pants off of another year of my career.

[Retire-Canada]

I suppose some might call that an RE failure, but the possibility of a few years of part-time work a decade from now beats the pants off of another year of my career.

I'd only be willing to call returning to some easy PT work a FIRE failure if we also call working extra years at the prime of a person's life to get a ludicrously low WR a FIRE failure.

From an opportunity cost perspective retiring early and maybe having to do some PT work during a bad spell in the economy is not worse than 100% chance of working extra years FT saving up for a 2% or 3% WR.

[Mr. Green]

I suppose some might call that an RE failure, but the possibility of a few years of part-time work a decade from now beats the pants off of another year of my career.

I'd only be willing to call returning to some easy PT work a FIRE failure if we also call working extra years at the prime of a person's life to get a ludicrously low WR a FIRE failure.

From an opportunity cost perspective retiring early and maybe having to do some PT work during a bad spell in the economy is not worse than 100% chance of working extra years FT saving up for a 2% or 3% WR.

I would agree, but I know some folks seem to be more strict in their definitions of things. I suppose it only really matters to the person executing his/her game plan. In my case I'm happy to work a little later, if it means avoiding another year in my career. And that's assuming I don't eventually get into something I like, and get paid as a side effect.

[Retire-Canada]

I would agree, but I know some folks seem to be more strict in their definitions of things. I suppose it only really matters to the person executing his/her game plan. In my case I'm happy to work a little later, if it means avoiding another year in my career. And that's assuming I don't eventually get into something I like, and get paid as a side effect.

Ultimately the only reason defining failure matters is that how a community defines failure steers the collective ship in a specific direction. So if "we" say it's not a failure to squander the most precious recourse known to man....time....especially time during the prime of one's life...then we'll see more people adding belts, suspenders, extra rope, boxes of duct tape, super glue to the already pretty darn safe 4% WR.

If we on the other hand call working too much and saving too much a "failure" then folks who are learning about FIRE methodology will at least have on their radar that there is a real cost to that approach.

This is especially true if in practice few FIRErs actually retire and never earn additional dollars over the course of a 40-50yr retirement. Then they can conceivably "fail" both ways!

[dude]

The problem with this question is that you are going to get recency bias.  The trinity study was only published in 1998.  There hasn't been a 30-year period after 1998 so NO ONE can yet tell you if the 4% rule works with "in sample" data.

I'm personally considering a 5% withdrawal rate these days.  But I'm willing to go back to work.

I wasn't asking if the 4% rule works.

I was questioning if people believed in it enough to have actually done it. Answer: lot's of people believe in the 4% rule but hardly anyone has actually done it. Most early retirees here have other incomes, such as a pension, a spouse working or real estate in addition to investments, or retired on a lower withdrawal rate. I think we had two people saying they retired on 4% or more.

This is not data, it's anecdotal, but interesting nonetheless.

Pretty sure Retired Syd did precisely this.  http://retiredsyd.typepad.com/  She's got posts from the past about following the 4% SWR, and she retired in early 2008, right before the crash.

[AdrianC]

So, the modified query is:

Has anyone retired early using an initial withdrawal rate of 4% or more?

Did you have any other income at retirement, such as a company or military pension, or a spouse still working?

Let's hear about it. How's it working out for you?

[brooklynguy]

So, the modified query is:

Has anyone retired early using an initial withdrawal rate of 4% or more?

I believe a man known as Mister Money Mustache did this.  He has a website about it.

[EscapeVelocity2020]

Pretty sure Retired Syd did precisely this.  http://retiredsyd.typepad.com/  She's got posts from the past about following the 4% SWR, and she retired in early 2008, right before the crash.

Thanks for the link to the blog, interesting stuff.  But it looks more to me like she went with a 3% SWR which also had plenty of discretionary spending room to cut...

Alas, although I retired with 33 times the budget for our remodeled lifestyle, the market has since reduced that nest egg to 28 times the retirement budget.  So what do we do now?  The same thing I did when I decided to retire, the same thing Jacob writes about:  reduce the expense budget.

[AdrianC]

I believe a man known as Mister Money Mustache did this.  He has a website about it.

Did he FIRE on 4%? I haven't read every blog post yet. I seem to remember his wife continued to work and they got medical benefits for the family through her work.