Author Topic: FIRE on 4%?  (Read 101419 times)

dude

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Re: FIRE on 4%?
« Reply #250 on: March 24, 2016, 06:58:28 AM »
I just want to be healthy enough to do something about.. like lift a 9mm pistol.

Of course I say that in perfect health, when I get there who knows if I could do it?
Gotta stockpile your oxycodone before the inventory controls are tightened.

Otherwise you'll end up having to do it like another famous submariner, Admiral Chet Nimitz Jr.: 
http://www.nytimes.com/2002/01/12/us/with-suicide-an-admiral-keeps-command-until-the-end.html

Great story.

Retire-Canada

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Re: FIRE on 4%?
« Reply #251 on: March 24, 2016, 09:03:54 AM »
Gotta stockpile your oxycodone before the inventory controls are tightened.

Otherwise you'll end up having to do it like another famous submariner, Admiral Chet Nimitz Jr.: 
http://www.nytimes.com/2002/01/12/us/with-suicide-an-admiral-keeps-command-until-the-end.html

I like it. Nobody is going to live forever and after a certain point it makes sense to have options to end your own life should you wish to. I hope by the time I get there doctor assisted suicide is readily available for competent adults.

Nords

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Re: FIRE on 4%?
« Reply #252 on: March 24, 2016, 11:07:06 AM »
Gotta stockpile your oxycodone before the inventory controls are tightened.

Otherwise you'll end up having to do it like another famous submariner, Admiral Chet Nimitz Jr.: 
http://www.nytimes.com/2002/01/12/us/with-suicide-an-admiral-keeps-command-until-the-end.html

I like it. Nobody is going to live forever and after a certain point it makes sense to have options to end your own life should you wish to. I hope by the time I get there doctor assisted suicide is readily available for competent adults.
Although many people see this as an example of a couple taking control of their end-of-life care, there are many more who see this as a control freak coercing his spouse into a suicide pact.  You submariners (especially nukes) are familiar with that personality...

Incentive to retire early? Sad thing about longevity stats is that they don't take into account quality of life. A person could become injured, sick, or become disabled and live for decades longer but have a very poor quality of life stuck in a nursing home or with limited function in their own home.  So while someone's particular odds of living a long life my be good, the quality of that live might be poor. Another good reason to retire early!

The flip side is my grandparents are 80+ and in great shape. But many of their friends whom they used to travel with have since died or become too ill to travel, to the point that... they aren't doing that any more.
I think lots of people do pretty well in the 70s and also 80s but lots don't. Lots of infirm older people out there. But I often hear people say they don't need to retire early because longevity studies say they will live a long life so no hurry. But most of those studies don't show the difference between an 80 year old out running marathons and an 80 year old confined to a bed in a nursing  home.  Whole different life and probably greatly different financial needs too.
One of the reasons I'm obsessed with surfing now is that I can also understand the endpoint.  Sure, standup paddling, surf skis, kayaks... plenty of assistive tech and alternatives.  Rabbit Kekai was still surfing and running his keiki surfing contest up to age 90.  However the last few years have not been as kind.

Genetics could be on your side to prolong your life.  However joint damage, degenerative osteoarthritis, and other physical recovery issues could make that an exercise in patience, endurance, and futility.

dude

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Re: FIRE on 4%?
« Reply #253 on: March 24, 2016, 12:11:05 PM »

Genetics could be on your side to prolong your life.  However joint damage, degenerative osteoarthritis, and other physical recovery issues could make that an exercise in patience, endurance, and futility.

Indeed.  I lead a very active life of rock climbing, ice climbing, mountaineering, ski mountaineering, snowboarding, surfing, working out, martial arts.  I know for a fact my window of opportunity for participating in these sports is limited.  I hope I've pushed the window out a few years by staying very fit, eating well and working in a pretty low-stress environment, but one never knows where that one major injury could be lurking.  The active outdoor life is a physical life, and it comes with its bumps and bruises.

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Re: FIRE on 4%?
« Reply #254 on: March 24, 2016, 01:16:44 PM »
Spartana: yes by the time my Dad could retire at 54 he was too sick to enjoy it. He lived until 73 and didn't want to because his quality of life was so poor.  My Mom kept him home and we bought the house next door so I could help too. She also helped with my boys so it was a win-win. He always told my Mom that they would travel when he retired. Well my Mom had to travel without him. It was one of the reasons I semi-retired at 58.  You never know what the future holds. It is also a reason I started to travel in my early 40's.  I used to love hiking in the mountains. Then at 50 I developed a few problems that made that no longer possible. I can walk miles/all day if it is semi-flat with no problem.  YOu never know when you will lose your ability to do something you love.

Nords

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Re: FIRE on 4%?
« Reply #255 on: March 24, 2016, 03:19:35 PM »
Agreed Nord's. Since you and I both retired around 41/42  and have been retired around 10ish-plus years now we know that there are changes that happen or will to our bodies. While I haven't seen any real health or fitness changes or performance declines between 42 and 52 (and I attribute much of that to being ER) and I think that will remain mostly the same between 52 to 62,  but the decades after....probably some physical decline. Don't think that I'll be playing beach volleyball at 62 and older at the same level as I could at 42 no matter how healthy my lifestyle.
I get a lot of stories from veterans, of course, both disabled and less-abled. The trend is pretty clear.

Personally, I've been a lab rat for the last six weeks of filing my VA disability claim.  I've gained a keen appreciation of declining margins.  I'm still surprised ("chagrined"?) by how hard it's become to stay in shape over the last five years, and these days my "gaining strength" efforts are more about avoiding injuries.  It's not fun to review my old exercise logs and try to figure out how to get back up there without causing more damage.

But I think it's pretty clear why financial advisors have so much anecdotal evidence of their clients spending less as they move from their 60s to their 90s. 

Retire-Canada

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Re: FIRE on 4%?
« Reply #256 on: March 24, 2016, 03:47:12 PM »
YOu never know when you will lose your ability to do something you love.

As an outdoor sports enthusiast this ^^^ is what haunts me in terms of not FIREing as fast as I can.

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Re: FIRE on 4%?
« Reply #257 on: March 24, 2016, 05:53:06 PM »
I was just thinking on what we as a society value, i.e giving away our best years just to put food on the table and a roof over our heads..:(

brooklynguy

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Re: FIRE on 4%?
« Reply #258 on: March 24, 2016, 08:31:51 PM »
This ongoing recital of grievances regarding the inevitability of death and/or decrepitude seems like a good place to link to the latest so-good-it-has-to-be-mentioned-in-the-forum Wait But Why post (about cryonics).

EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #259 on: March 24, 2016, 11:20:32 PM »
Slightly different take, but the fact is that we will all become infirm at some point regardless of optimization.  In my case, beyond doing the best I can do with what nature and nurture has blessed upon me, I planned for enough FI to get hips, knees, (insert elective) procedure early in my advanced age.

Currently, the contingency on why I continue to work is that it does not interfere with my exercise regimen.  But I sometimes 'take one for the team' when the company pays business travel, maybe for a few more years.  I would never experience many of these things on my own dime, while getting paid extra for the privilege.

Long story short, I think younger workers should leverage that companies generally do want a healthy workforce.  Lower medical insurance costs, less sick days, more productive.  And if you hang in there long enough, you might even appreciate how well the company treats a spry yet experienced worker. 

Also, as a side note, I find it a little counter-intuitive that ER 'saves us' from dying at our desk or getting old.  My work enables a 'fast life' where I spend time being productive and challenged and time constrained, *treasuring* limited free time, as opposed to the *luxury* of thinking about and writing articles about the inevitable and immutable downsides to being mortal.  A minority of people die at their desk, but even then, it's not like they were wasting time knowing they were going to die.  And as a small consolation, their heirs are fortunate - they are well cared for by insurance (as intended). 
On the other hand, us ER folks, if we do die early despite our bravado and lower stress;  we leave our heirs with nothing 'extra' to cover this (and other) risks.

dude

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Re: FIRE on 4%?
« Reply #260 on: March 25, 2016, 06:43:01 AM »

On the other hand, us ER folks, if we do die early despite our bravado and lower stress;  we leave our heirs with nothing 'extra' to cover this (and other) risks.

Speak for yourself! If I kick prematurely in retirement, my wife gets my robust 401k, a lifetime pension survivor annuity, reasonably priced health care, and my larger SS benefit.  She'd be quite well off.  She'd be in the serious money if I kick while still working though! (because of my life insurance).

dude

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Re: FIRE on 4%?
« Reply #261 on: March 25, 2016, 07:05:35 AM »
Agreed Nord's. Since you and I both retired around 41/42  and have been retired around 10ish-plus years now we know that there are changes that happen or will to our bodies. While I haven't seen any real health or fitness changes or performance declines between 42 and 52 (and I attribute much of that to being ER) and I think that will remain mostly the same between 52 to 62,  but the decades after....probably some physical decline. Don't think that I'll be playing beach volleyball at 62 and older at the same level as I could at 42 no matter how healthy my lifestyle.

But I think it's pretty clear why financial advisors have so much anecdotal evidence of their clients spending less as they move from their 60s to their 90s.

The evidence isn't just anecdotal!  Here's a Yahoo-linked Consumer Reports article out today:

https://www.yahoo.com/news/retirement-savings-big-enough-study-170827603.html


Mr. Green

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Re: FIRE on 4%?
« Reply #262 on: March 25, 2016, 07:42:23 AM »
This ongoing recital of grievances regarding the inevitability of death and/or decrepitude seems like a good place to link to the latest so-good-it-has-to-be-mentioned-in-the-forum Wait But Why post (about cryonics).
Wow. I had now idea dying was actually such a long process. To think that one day real soon we might be able to revive someone without any brain damage 15 minutes after their heart has stopped is kind of mind blowing. And it sounds like that's just the start of it.

EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #263 on: March 25, 2016, 08:20:32 AM »

On the other hand, us ER folks, if we do die early despite our bravado and lower stress;  we leave our heirs with nothing 'extra' to cover this (and other) risks.

Speak for yourself! If I kick prematurely in retirement, my wife gets my robust 401k, a lifetime pension survivor annuity, reasonably priced health care, and my larger SS benefit.  She'd be quite well off.  She'd be in the serious money if I kick while still working though! (because of my life insurance).

But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

I do agree with you though, having done all the work for ER is the best offsetting solution so that dying early (aka life insurance) is not necessary...

brooklynguy

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Re: FIRE on 4%?
« Reply #264 on: March 25, 2016, 08:41:51 AM »
But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

That's some awfully cynical logic.  I hope and trust that my beneficiaries stand to benefit more from the presence of an alive and well brooklynguy in their lives than from the survivorship remuneration they would otherwise receive.

Nords

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Re: FIRE on 4%?
« Reply #265 on: March 25, 2016, 09:17:03 AM »
Agreed Nord's. Since you and I both retired around 41/42  and have been retired around 10ish-plus years now we know that there are changes that happen or will to our bodies. While I haven't seen any real health or fitness changes or performance declines between 42 and 52 (and I attribute much of that to being ER) and I think that will remain mostly the same between 52 to 62,  but the decades after....probably some physical decline. Don't think that I'll be playing beach volleyball at 62 and older at the same level as I could at 42 no matter how healthy my lifestyle.

But I think it's pretty clear why financial advisors have so much anecdotal evidence of their clients spending less as they move from their 60s to their 90s.

The evidence isn't just anecdotal!  Here's a Yahoo-linked Consumer Reports article out today:

https://www.yahoo.com/news/retirement-savings-big-enough-study-170827603.html
Well, that's great, thanks!  I've been waiting to see that evidence for years.  The big unknown was whether the decades of retirement underspending had a bigger effect than the end-of-life healthcare. 

So far so good!

EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #266 on: March 25, 2016, 09:21:57 AM »
But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

That's some awfully cynical logic.  I hope and trust that my beneficiaries stand to benefit more from the presence of an alive and well brooklynguy in their lives than from the survivorship remuneration they would otherwise receive.

You do have to weigh your ephemeral impact against the cold lasting reality of cash.  Call me cynical, but 100+k insurance payout vs. 'my ultimately taken for granted presence'....  well, not everyone has 100k sitting in their bank account....

But I don't even want to think about these things, which was the thrust of my initial posting.

dude

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Re: FIRE on 4%?
« Reply #267 on: March 25, 2016, 09:28:32 AM »
This ongoing recital of grievances regarding the inevitability of death and/or decrepitude seems like a good place to link to the latest so-good-it-has-to-be-mentioned-in-the-forum Wait But Why post (about cryonics).

Thought-provoking article, thanks for sharing!

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Re: FIRE on 4%?
« Reply #268 on: March 25, 2016, 02:45:20 PM »
This ongoing recital of grievances regarding the inevitability of death and/or decrepitude seems like a good place to link to the latest so-good-it-has-to-be-mentioned-in-the-forum Wait But Why post (about cryonics).

Thought-provoking article, thanks for sharing!

I thought it was a well done article, but it just made me want to advocate for assisted suicide.

EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #269 on: March 28, 2016, 08:30:00 AM »
But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

That's some awfully cynical logic.  I hope and trust that my beneficiaries stand to benefit more from the presence of an alive and well brooklynguy in their lives than from the survivorship remuneration they would otherwise receive.

You do have to weigh your ephemeral impact against the cold lasting reality of cash.  Call me cynical, but 100+k insurance payout vs. 'my ultimately taken for granted presence'....  well, not everyone has 100k sitting in their bank account....

But I don't even want to think about these things, which was the thrust of my initial posting.
But isn't the main point of MMM blog to show that money doesn't equate happiness? I assume that holds true for your heirs as well. Why the big push to work years, maybe decades, longer than you need for the sole reason of leaving a huge pile of money to people who  probably won't need it, it may not bring them added happiness compared to the time you spent away from them whike working, and who will probablt be able to earn what they need and more for themselves? I'm sure Nord's spouse and daughter are much happier with dad at home and free to spend time as a family than him working another 25 years and leaving them a bigger inheritance. Especially as neither likely needed it and could be completely self sustaining. I'd bet your family feels exactly the same - as probably most people's lived one do.

I'm sure everyone's situation is different, I know Nords is happy with his decision and it worked out great, I'm just highlighting that ER (especially ER at 30) has the additional complication of leaving your children financially exposed in the eventuality of your untimely demise vs. a helpful life insurance payout at an important time.  I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.  If you are away from your family working crazy hours or hating work, etc., then that there are different trade-offs than what I am talking about.

As for my case, my wife and I have flexibility in our work (or can quit if necessary) and we both like our work to a reasonable degree.  Our kids are at school when we are at work, so I don't think they would care if we are home or not, other than probably thinking it weird.  In my son's case, now that he is in Jr. High, I take him to school on my way to work and he gets home an hour before my wife and I.  Personally, I think he cherishes this hour of 'freedom'.

If all goes according to plan, we will give away our wealth and our kids will make their own way for themselves, but it's nice to know that there's downside protection in the meantime.  To each their own.

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Re: FIRE on 4%?
« Reply #270 on: March 28, 2016, 08:44:08 AM »
4% is safe if you have done your homework.  If you have zero debt, if you have saved for education, healthcare, home repairs, etc.  Have all your ducks in a row before retirement.  The 4% will handle day to day expenses.  I'd hate to pay a mortage or car loan out of that 4%.

Doesn't that depend on your expenses and stash amount? 4% of $2,000,000 will pay for a car loan if it fits in your budget/expected expenses. Right?

brooklynguy

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Re: FIRE on 4%?
« Reply #271 on: March 28, 2016, 09:27:27 AM »
I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.

Exactly, and I doubt many people would consider themselves financially independent in the first place without having accumulated sufficient assets or income streams to cover all of their applicable expenses (including the expenses associated with supporting any dependents).  If you no longer need to pull a salary in order to support your dependents, then salary-replacement insurance (life insurance) is no longer necessary--but if your retirement plan lacks sufficient safety margin to support your dependents (for the remainder of their period of dependency) without counting the value of your own earning potential as a contingency measure, then you might still need life insurance (which still doesn't necessarily require you to delay retirement, but only to factor life insurance premiums into your retirement budget).

Retire-Canada

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Re: FIRE on 4%?
« Reply #272 on: March 28, 2016, 09:31:45 AM »
Doesn't that depend on your expenses and stash amount? 4% of $2,000,000 will pay for a car loan if it fits in your budget/expected expenses. Right?

For sure. Some people need 2% of their initial stash to live and have another 2% in optional expenses they can put off - like getting a new car. Other folks need every penny of their 4% WR because they pulled the FIRE pin as soon as possible and may not have budgeted to replace vehicles from it.

Lots of folks talk about 4% WR, but either plan on taking out less than 4% of the initial stash most years and look at the 4% as the max they could WR if needed or plan to work a side gig.

4% SWR is a great shorthand that the person is down with the Trinity Study, but beyond that you need details of their FIRE plan to understand what is going on.

EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #273 on: March 28, 2016, 09:55:15 AM »
I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.

Exactly, and I doubt many people would consider themselves financially independent in the first place without having accumulated sufficient assets or income streams to cover all of their applicable expenses (including the expenses associated with supporting any dependents).  If you no longer need to pull a salary in order to support your dependents, then salary-replacement insurance (life insurance) is no longer necessary--but if your retirement plan lacks sufficient safety margin to support your dependents (for the remainder of their period of dependency) without counting the value of your own earning potential as a contingency measure, then you might still need life insurance (which still doesn't necessarily require you to delay retirement, but only to factor life insurance premiums into your retirement budget).

Nice summary.  One of the things about ER that I don't like thinking about are the mortality aspects and contingency plans.  This gets easier once the kids are on their own, but I think people may overlook the life insurance angle.  I assume most folks estimate FI with themselves at the helm.  Obviously if we all knew exactly how long we had (especially in the case of dying early), then ER planning would be easier.  But it is a useful exercise, now that I'm doing it, to know how I'd feel if I did go prematurely (say before the kids go off to college in ~10 years).  In my case, I'm OK with having not retired before then because I do like my work, but it does make me want to retire and get travelling once that final finance-heavy goal is squared away (I do prioritize paying for both children's college).

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Re: FIRE on 4%?
« Reply #274 on: March 28, 2016, 11:21:07 AM »
But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

That's some awfully cynical logic.  I hope and trust that my beneficiaries stand to benefit more from the presence of an alive and well brooklynguy in their lives than from the survivorship remuneration they would otherwise receive.

You do have to weigh your ephemeral impact against the cold lasting reality of cash.  Call me cynical, but 100+k insurance payout vs. 'my ultimately taken for granted presence'....  well, not everyone has 100k sitting in their bank account....

But I don't even want to think about these things, which was the thrust of my initial posting.
But isn't the main point of MMM blog to show that money doesn't equate happiness? I assume that holds true for your heirs as well. Why the big push to work years, maybe decades, longer than you need for the sole reason of leaving a huge pile of money to people who  probably won't need it, it may not bring them added happiness compared to the time you spent away from them whike working, and who will probablt be able to earn what they need and more for themselves? I'm sure Nord's spouse and daughter are much happier with dad at home and free to spend time as a family than him working another 25 years and leaving them a bigger inheritance. Especially as neither likely needed it and could be completely self sustaining. I'd bet your family feels exactly the same - as probably most people's lived one do.

I'm sure everyone's situation is different, I know Nords is happy with his decision and it worked out great, I'm just highlighting that ER (especially ER at 30) has the additional complication of leaving your children financially exposed in the eventuality of your untimely demise vs. a helpful life insurance payout at an important time.  I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.  If you are away from your family working crazy hours or hating work, etc., then that there are different trade-offs than what I am talking about.

As for my case, my wife and I have flexibility in our work (or can quit if necessary) and we both like our work to a reasonable degree.  Our kids are at school when we are at work, so I don't think they would care if we are home or not, other than probably thinking it weird.  In my son's case, now that he is in Jr. High, I take him to school on my way to work and he gets home an hour before my wife and I.  Personally, I think he cherishes this hour of 'freedom'.

If all goes according to plan, we will give away our wealth and our kids will make their own way for themselves, but it's nice to know that there's downside protection in the meantime.  To each their own.

To the first bolded part: Then get life insurance, and ER, if you're worried about your heirs having enough if you pass away soon.

To the second: Getting salary protection is silly, as your stache should do that.

To the third: Insurance is that protection, if you need it.

The point the person you were quoting was trying to make is a huge lump sum at your death (gained by working many extra years past FI) is probably less valuable than actual time with you.  And if you want them to have that huge lump sum, get life insurance, but still ER.  Then you can have your cake (ER to spend time with the family) and eat it too (have big payout for them at the end).

That's in addition to whatever is left of the stache (historically, more than what you started with).

If you want to work, keep working.  Embrace it!  But no need to make excuses to rationalize it.  :)
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EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #275 on: March 28, 2016, 12:22:33 PM »
But that is the irony, that dying early benefits the non-ER>.  So folks keep writing these great posts about how a premature death in the workplace has solidified their ER, but in reality they are just hanging their benefactors out to dry. 

That's some awfully cynical logic.  I hope and trust that my beneficiaries stand to benefit more from the presence of an alive and well brooklynguy in their lives than from the survivorship remuneration they would otherwise receive.

You do have to weigh your ephemeral impact against the cold lasting reality of cash.  Call me cynical, but 100+k insurance payout vs. 'my ultimately taken for granted presence'....  well, not everyone has 100k sitting in their bank account....

But I don't even want to think about these things, which was the thrust of my initial posting.
But isn't the main point of MMM blog to show that money doesn't equate happiness? I assume that holds true for your heirs as well. Why the big push to work years, maybe decades, longer than you need for the sole reason of leaving a huge pile of money to people who  probably won't need it, it may not bring them added happiness compared to the time you spent away from them whike working, and who will probablt be able to earn what they need and more for themselves? I'm sure Nord's spouse and daughter are much happier with dad at home and free to spend time as a family than him working another 25 years and leaving them a bigger inheritance. Especially as neither likely needed it and could be completely self sustaining. I'd bet your family feels exactly the same - as probably most people's lived one do.

I'm sure everyone's situation is different, I know Nords is happy with his decision and it worked out great, I'm just highlighting that ER (especially ER at 30) has the additional complication of leaving your children financially exposed in the eventuality of your untimely demise vs. a helpful life insurance payout at an important time.  I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.  If you are away from your family working crazy hours or hating work, etc., then that there are different trade-offs than what I am talking about.

As for my case, my wife and I have flexibility in our work (or can quit if necessary) and we both like our work to a reasonable degree.  Our kids are at school when we are at work, so I don't think they would care if we are home or not, other than probably thinking it weird.  In my son's case, now that he is in Jr. High, I take him to school on my way to work and he gets home an hour before my wife and I.  Personally, I think he cherishes this hour of 'freedom'.

If all goes according to plan, we will give away our wealth and our kids will make their own way for themselves, but it's nice to know that there's downside protection in the meantime.  To each their own.

To the first bolded part: Then get life insurance, and ER, if you're worried about your heirs having enough if you pass away soon.

To the second: Getting salary protection is silly, as your stache should do that.

To the third: Insurance is that protection, if you need it.

The point the person you were quoting was trying to make is a huge lump sum at your death (gained by working many extra years past FI) is probably less valuable than actual time with you.  And if you want them to have that huge lump sum, get life insurance, but still ER.  Then you can have your cake (ER to spend time with the family) and eat it too (have big payout for them at the end).

That's in addition to whatever is left of the stache (historically, more than what you started with).

If you want to work, keep working.  Embrace it!  But no need to make excuses to rationalize it.  :)

So far the kids have more than enough time with us.  We even tried homeschooling, but moved to a better neighborhood.  My wife and I are both products of public school and think that the social aspect is just as important as the academics... but I'm starting to get off topic.

Just wondering, have any ER's looked in to life and disability insurance?  They are all basically free to me as an employee  so I have never really thought much about if these are difficult or expensive to obtain as a young retiree.

I'm not trying to rationalize working or not working, I understand that we all have different circumstances and priorities make different decisions, I'm just trying to keep what I think is an interesting thought provoking discussion moving forward. 
« Last Edit: March 28, 2016, 12:24:44 PM by EscapeVelocity2020 »

Cassie

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Re: FIRE on 4%?
« Reply #276 on: March 28, 2016, 12:32:22 PM »
When we had kids at home we took out a large term life insurance  policy for if one of us died.  It was cheap since it was term and we were young and healthy. If one had died we wouldn't have to worry abut working.

brooklynguy

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Re: FIRE on 4%?
« Reply #277 on: March 28, 2016, 12:51:27 PM »
Just wondering, have any ER's looked in to life and disability insurance?  It is basically free to me as an employee (as are short term and long term disability) so I really don't think much about if these are difficult or expensive to obtain as a young retiree.

Again, most early retirees (who are no longer dependent on a salary) would have no need for these forms of salary-replacement insurance, except to the extent they are relying on their own earning potential in their retirement planning.  Term life insurance is relatively cheap for young, healthy individuals.  Disability insurance, though, doesn't really make sense in the context of a person who is not earning an income.  It is intended to replace a portion of your current income in the event you become unable to continue earning that income as a result of a disability, so it is generally not available if you are not currently earning an income (and, in the U.S., assuming your total work history is long enough to qualify you, you already have disability insurance through Social Security, but there too you will only be eligible for benefits if you meet the recent work history test (again, based on the rationale that disability insurance is intended to replace income you would have been earning but for the disability)).

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Re: FIRE on 4%?
« Reply #278 on: March 28, 2016, 12:57:50 PM »


So far the kids have more than enough time with us.  We even tried homeschooling, but moved to a better neighborhood. My wife and I are both products of public school and think that the social aspect is just as important as the academics... but I'm starting to get off topic.


Of course socialization is an important aspect of growing up, but it is a very old & tired myth that homeschooled children are not socialized.

https://www.youtube.com/watch?v=xJHt-m3VX6o

 Even if it were true, a traditional school setting is far from an ideal social environment.  My wife attended public school her entire childhood, and is far more committed to homeschooling as many of our kids as possible.  There are no absolute answers, however, and due to two of my boys not responding to homeschooling well, we did send them to public school this year to see if a bit of professional training would help.  It has not, other than provide my wife more time with the other three.  Common Core math method is insane, and we are likely to pull the two boys back out of public school over that subject alone.  We are currently considering sending them to a private school next year, despite the cost.

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Re: FIRE on 4%?
« Reply #279 on: March 28, 2016, 01:09:59 PM »

I'm sure everyone's situation is different, I know Nords is happy with his decision and it worked out great, I'm just highlighting that ER (especially ER at 30) has the additional complication of leaving your children financially exposed in the eventuality of your untimely demise vs. a helpful life insurance payout at an important time.  I'm not arguing to leave a bigger inheritance beyond FI, but the real point of life insurance is to compensate for the lost salary.  If you are ER, you should consider that the spouse and kids can stay FI through some tough times without this additional upfront payout.  If you are away from your family working crazy hours or hating work, etc., then that there are different trade-offs than what I am talking about.

As for my case, my wife and I have flexibility in our work (or can quit if necessary) and we both like our work to a reasonable degree.  Our kids are at school when we are at work, so I don't think they would care if we are home or not, other than probably thinking it weird.  In my son's case, now that he is in Jr. High, I take him to school on my way to work and he gets home an hour before my wife and I.  Personally, I think he cherishes this hour of 'freedom'.

If all goes according to plan, we will give away our wealth and our kids will make their own way for themselves, but it's nice to know that there's downside protection in the meantime.  To each their own.

To the first bolded part: Then get life insurance, and ER, if you're worried about your heirs having enough if you pass away soon.

To the second: Getting salary protection is silly, as your stache should do that.

To the third: Insurance is that protection, if you need it.

The point the person you were quoting was trying to make is a huge lump sum at your death (gained by working many extra years past FI) is probably less valuable than actual time with you.  And if you want them to have that huge lump sum, get life insurance, but still ER.  Then you can have your cake (ER to spend time with the family) and eat it too (have big payout for them at the end).

That's in addition to whatever is left of the stache (historically, more than what you started with).

If you want to work, keep working.  Embrace it!  But no need to make excuses to rationalize it.  :)
Insurance is designed to replace stuff that you can't afford to replace on your own.

When someone decides that they're financially independent, then ideally they wouldn't need life insurance because they're not using their life energy to collect a paycheck.  The whole point of FI is that they have other income streams to replace the salary.  If they die then their investment portfolio keeps spewing out interest, dividends, and capital gains.  Their tenants keep paying the rent.  There's no "loss of income" for them to replace with a life insurance claim.  If anything, the family's expenses would go down because the dearly departed is no longer eating food or using services or driving vehicles.

If someone ERs and their death would leave their children "financially exposed" (whatever that entails) then they're not financially independent and should not have ER'd.  Maybe one edge case would be life insurance to fund a special-needs trust for an adult child who's not capable of living independently after you're gone.  But... edge case.

I can see using life insurance as an estate planning tool.  But that has nothing to do with financial independence.

I can understand buying an annuity for longevity insurance, but that's merely one way to handle the possibility of portfolio failure. 

This is why my spouse and I have no Survivor Benefits Plan insurance and no life insurance.  We have enough money for the rest of our lives, we self-insured for the longevity risk with our military pensions & Social Security, and we don't need to do any further estate planning.  If one of us dies then that pension stops, but the other one of us doesn't need it.

Our daughter's almost 24 years old, but I'm very happy that I started ER when she was only nine years old.  During her teen years (what I think of as "the Danger Years") she would've been ecstatic to come home from school to an empty house.  I wasn't in the kitchen baking cookies, but I was there to listen to her vent about her day and discuss all of those impromptu teachable moments which are best handled while the crisis is hot.  In other words, I was "there for her" whether she thought it was a good idea or not.  Even today she occasionally thanks me for something she learned from us as a teen-- and it's a lot easier to handle those situations when you're (1) home, (2) not crazed from work or office politics, (3) not fully scheduled with domestic chores or parental shuttle duty, and (4) relatively well-rested. 

Do I wish that I'd been able to stay home with my daughter for the first nine years of her life?  Sure-- what little I remember of those times is being exhausted, sick, and largely overwhelmed.  It's amazing how quickly my health bounced back after I recovered from chronic fatigue.

arebelspy

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Re: FIRE on 4%?
« Reply #280 on: March 28, 2016, 01:35:35 PM »
So far the kids have more than enough time with us.  We even tried homeschooling, but moved to a better neighborhood.  My wife and I are both products of public school and think that the social aspect is just as important as the academics... but I'm starting to get off topic.]

The kids don't have to quit school just because you ER.  The two are not connected in any way.  :)
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Mr. Green

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Re: FIRE on 4%?
« Reply #281 on: March 28, 2016, 01:45:40 PM »
I'll give my personal example as what I would consider to be the one decent case for term life insurance, post-FIRE. My wife and I took out 30 year term policies in our mid-20s, because the rates were low based on our age and it covered the period where we would have children. Now we're looking at FIRE, using a 4% SWR for roughly 30k of expenses annually. Where I would see the insurance as still valuable is the case where we experience a poor sequence of returns during the first 10 years of FIRE. Say we have two kids and then I die 5-8 years into FIRE, while at the same time it becomes apparent that we're in one of those bad sequences where one of us would have gone back to work for a spell. Well if I just died, it  would be difficult for my wife to go back to work because she now has to find a job that covers childcare for a couple kids and still pays some extra money that makes the job worth taking. The term policies completely eliminate that scenario.

arebelspy

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Re: FIRE on 4%?
« Reply #282 on: March 28, 2016, 02:02:17 PM »
I'll give my personal example as what I would consider to be the one decent case for term life insurance, post-FIRE. My wife and I took out 30 year term policies in our mid-20s, because the rates were low based on our age and it covered the period where we would have children. Now we're looking at FIRE, using a 4% SWR for roughly 30k of expenses annually. Where I would see the insurance as still valuable is the case where we experience a poor sequence of returns during the first 10 years of FIRE. Say we have two kids and then I die 5-8 years into FIRE, while at the same time it becomes apparent that we're in one of those bad sequences where one of us would have gone back to work for a spell. Well if I just died, it  would be difficult for my wife to go back to work because she now has to find a job that covers childcare for a couple kids and still pays some extra money that makes the job worth taking. The term policies completely eliminate that scenario.

Smart.  I like that.

A 10-year term might be enough, but 20-year term for the more paranoid conservative to help cover the combo "sequence of returns risk & someone dying" scenario.

The odds of both are likely around a percent, depending on their health profile, age, family history, etc. (The odds of bad sequence of returns maybe 30%, the odds of them dying in that first decade if young enough, maybe 5%--I'm just making up numbers and you can run more accurate ones using stock market returns and actuarial tables, but my point is, combo-ing the two makes the odds that both happen quite small), but you can insure against it, for fairly cheap.
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EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #283 on: March 28, 2016, 02:24:34 PM »
Thanks for the replies all.  I'm probably confusing things when I said 'salary replacement', I should have said 'FI insurance'.  In my own personal case, since it is 10 years until my wife and kids would be paying for college, I'd like to hedge my absence (or disability) with a chunk of extra cash for a reasonable cost.  I'd hate for the market to tank and my spouse to feel like she has to sell equities, so that payout would basically sit in cash to ensure FI (smooth out the sequence of returns). 

I could see myself doing the 10-yr term option...  once the kids are through college and on their own, things become less complicated.

Mr. Green

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Re: FIRE on 4%?
« Reply #284 on: March 28, 2016, 02:28:20 PM »
A 10-year term might be enough, but 20-year term for the more paranoid conservative to help cover the combo "sequence of returns risk & someone dying" scenario.
You're probably right. We bought those policies when FIRE was just a glimmer in my eye. We did 30-year terms for $500,000 because we knew kids would come later and we wanted to be covered until the kids would be out of the house. They're really cheap if you're in good health and young. We opted for the "return of premium" option, meaning if we don't die within the term we get our money back and it only cost $1200 a year between us. I'd guess a straight term policy is substantially less.

arebelspy

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Re: FIRE on 4%?
« Reply #285 on: March 28, 2016, 02:31:27 PM »
Thanks for the replies all.  I'm probably confusing things when I said 'salary replacement', I should have said 'FI insurance'.  In my own personal case, since it is 10 years until my wife and kids would be paying for college, I'd like to hedge my absence (or disability) with a chunk of extra cash for a reasonable cost.  I'd hate for the market to tank and my spouse to feel like she has to sell equities, so that payout would basically sit in cash to ensure FI (smooth out the sequence of returns). 

I could see myself doing the 10-yr term option...  once the kids are through college and on their own, things become less complicated.

Yeah, 10-year term to hedge against the combo of early sequence of returns risk + untimely death doesn't seem unreasonable.

If it's what's needed to get someone over the hump to actually ER (i.e. they have enough, but are just worried about that scenario), it seems worth it.
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EscapeVelocity2020

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Re: FIRE on 4%?
« Reply #286 on: March 28, 2016, 02:35:58 PM »

Our daughter's almost 24 years old, but I'm very happy that I started ER when she was only nine years old.  During her teen years (what I think of as "the Danger Years") she would've been ecstatic to come home from school to an empty house.  I wasn't in the kitchen baking cookies, but I was there to listen to her vent about her day and discuss all of those impromptu teachable moments which are best handled while the crisis is hot.  In other words, I was "there for her" whether she thought it was a good idea or not.  Even today she occasionally thanks me for something she learned from us as a teen-- and it's a lot easier to handle those situations when you're (1) home, (2) not crazed from work or office politics, (3) not fully scheduled with domestic chores or parental shuttle duty, and (4) relatively well-rested. 

Do I wish that I'd been able to stay home with my daughter for the first nine years of her life?  Sure-- what little I remember of those times is being exhausted, sick, and largely overwhelmed.  It's amazing how quickly my health bounced back after I recovered from chronic fatigue.

As a side note, I do appreciate the insight Nords.  My wife was stay-at-home when the kids were young which is absolutely the best thing FI has given us so far.  She recently went back to work (at our children's school) for personal fulfillment.  I'll have to bring this approaching 'danger years' discussion up during our walk this evening and see what she thinks.  She'll probably volunteer me to be the stay-at-home this time...   

brooklynguy

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Re: FIRE on 4%?
« Reply #287 on: March 28, 2016, 03:19:56 PM »
Yeah, 10-year term to hedge against the combo of early sequence of returns risk + untimely death doesn't seem unreasonable.

If it's what's needed to get someone over the hump to actually ER (i.e. they have enough, but are just worried about that scenario), it seems worth it.

Anyone interested in pursuing this strategy might also want to look into how much portfolio hedging protection (against whatever market scenario would have triggered the decision to return to work) could be bought for the price of the life insurance premiums (as an alternative to purchasing the life insurance).  However, given how cheap term life insurance can be (and how expensive portfolio hedging protection seems to be (see this old thread on the topic)), my guess is that the answer would probably be "not much."  But it might be worth pricing it out just to check.  Under that alternative, your "insurance premiums" would pay off in the bad sequence of returns scenario alone (even if you don't also suffer a simultaneous untimely death), but I'm not sure if there are hedging instruments available that extend out more than five years into the future.

zz_marcello

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Re: FIRE on 4%?
« Reply #288 on: May 03, 2016, 11:26:59 AM »
.... We did 30-year terms for $500,000 because we knew kids would come later and we wanted to be covered until the kids would be out of the house. T... it only cost $1200 a year between us....
Ok; but thats still $100k total opportunity cost to insure $500k 2016 Dollar. ($100 per month over 30 years with ~6% after inflation stock market yield)
The $36k that you would get back after 30 years are worth less than $20k then. (in case you get 0 yield)




arebelspy

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Re: FIRE on 4%?
« Reply #289 on: May 03, 2016, 12:02:41 PM »
I never said that.  Might want to fix your quote tags.
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Re: FIRE on 4%?
« Reply #290 on: May 03, 2016, 12:04:07 PM »
Quote
($100 per month over 30 years with ~6% after inflation stock market yield)

If 6% after inflation was guaranteed, nobody would need almost any kind of insurance!

Mr. Green

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Re: FIRE on 4%?
« Reply #291 on: May 03, 2016, 01:22:41 PM »
.... We did 30-year terms for $500,000 because we knew kids would come later and we wanted to be covered until the kids would be out of the house. T... it only cost $1200 a year between us....
Ok; but thats still $100k total opportunity cost to insure $500k 2016 Dollar. ($100 per month over 30 years with ~6% after inflation stock market yield)
The $36k that you would get back after 30 years are worth less than $20k then. (in case you get 0 yield)
You were quoting me, and we're actually insuring $1 million 2016 dollars. The $100 per month is both policies combined (they're 500k each). Whatever the opportunity cost is, I can't fix it because I still need term life insurance for a while and now that we're almost 10 years older a regular term policy will probably cost as much as our return of premium policies did in our mid-20's.