Did the Great Resignation class of 21-22 just pick the worst time to retire?

[Jacinle]

Not sure if it will help, but you're hardly the only one in this boat - https://thefinancebuff.com/relocating-buy-or-rent-new-rules.html

This is an interesting insight and my thoughts are roughly on the same line as I am on the same boat;

I did have more information after living here and talking to locals.  In a more normal years I would be fine deferring it for a year, but well life is alway a box of chocolate

[Channel-Z]

Dad retired in December 2008. He had planned for that time period, and he didn't see any reason to delay it, no matter the state of the financial world.

[Morning Glory]

Doesn't the low market mean that it's a really good time to do Roth conversions, since we can convert a larger number of shares without going over aca subsidy thresholds and then see the growth in our Roth accounts after the market rebounds? I was going to wait until the end of the year to do my first one, since there's a possibility of one of us taking some part time work. I can't decide now whether to do it or not. MPP I guess?

[2Birds1Stone]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

 

[NotJen]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

If I convert $10,000 this year, I can access $10,000 in 5 years penalty-free, no?  I didn't think the share price mattered.  I'd rather have more shares appreciating to access after 59.5.

[Morning Glory]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

If I convert $10,000 this year, I can access $10,000 in 5 years penalty-free, no?  I didn't think the share price mattered.  I'd rather have more shares appreciating to access after 59.5.

Yes the pipeline stays the same, but the growth happening in Roth can help with taxation after 59.5 and also with RMDs. I have very little in Roth so I won't risk running out of traditional to convert. I think I'll wait until December as planned. I've told my spouse he'll have to fund his own whiskey habit so there will likely be some part time income.

[kite]

Too individual a question to generalize.

Mom is in her 10th decade and going strong. Two of her siblings died in their 40's. Two of my siblings died in their early 60's, like my FIL, without collecting a single SS check.  This ride on planet Earth is one big crap shoot. 

[Mustache ride]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

If I convert $10,000 this year, I can access $10,000 in 5 years penalty-free, no?  I didn't think the share price mattered.  I'd rather have more shares appreciating to access after 59.5.

You are correct. There isn't a disadvantage.

[2Birds1Stone]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

If I convert $10,000 this year, I can access $10,000 in 5 years penalty-free, no?  I didn't think the share price mattered.  I'd rather have more shares appreciating to access after 59.5.

You are correct. There isn't a disadvantage.

Depends, a very early FIRE individual may want to keep more in traditional bucket to take advantage of optimizing ACA subsidies for several decades.

[NorthernBlitz]

The impressive thing about the Y2k all-stock retiree is how they've been hanging onto the precipice almost from year 1. Those early years of the dotcom crash really screwed the portfolio's ability to participate in subsequent recoveries, taking a further alarming lurch down in the GFC and then has required one of the greatest recoveries and subsequent bull markets in history just for the portfolio to keep treading water since.

It's remarkable that it hasn't already failed, if you consider that it was alredy down by 2/3rds at the 2009 nadir, barely 10 years in!

I think I heard W.Pfau say (on Afford Anything?) that if you're down > 50% in the first decade, you have a high probability to be in a failing timeline and you should cut spending and / or get some kind of an income source.

When people are analyzing this Y2k retiree, are they accounting for SS? That might be the difference in a case like this (even though we'd all prefer it to just be icing on the cake).

[maizefolk]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

[patchyfacialhair]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

This is great info. I've always simply ignored SS in my calculations as part of my safety margin and thus have never researched it beyond looking at my statements occasionally.

[LongtimeLurker]

In regards to the hypothetical Y2K retiree with 100% stocks allocation. Assuming this is an absolute diehard who rides and dies with 4% and 100% stocks no matter what, which would be absolutely incredible given the circumstances. Lets assume they were 30 when they retired. Today, they are 52, with $512K in assets. At this time, they decide its time to make changes. They continue pulling 4%, or roughly $1,700 per month.

Assuming again, this person had a $40,000 budget, with inflation that is... about $67,000. Or, $5,500 a month. So, this person would be staring at a $3,800 a month deficit in spending. Given current wages, that is certainly doable(basically a salary around $60K a year), even for a 52 year old who has not worked in the last 20 years. However, even if it was not, a combination of a new job, and some cuts to spending could probably sustain this historically unlucky person the next 13 years to age 65, when they could collect SS, and combined with a more aggressive drawdown of their portfolio, could sustain them until death(which would be somewhere between 10 to 15 years).

This is the not the absolute worst case possible(that would be major health problem, lawsuit drains your money, children are kidnapped and ransomed draining your account, etc, etc, etc...), but it is pretty close. And this scenario has a lot of improbable assumptions. Like that this poor soul rented their whole life, instead of buying a home, which would both blunt the costs of inflation and provide some emergency cash if needed.


 

[wageslave23]

I would recommend OP finds a new hobby. Contrarian opinions are nice, but if you believe we're all doomed all the time then maybe find your tribe and get some fresh air once in a while. Life is short, arguing with people on the internet won't improve your chances of FIRE success.

Yes, you are right - life is just sunshine and rainbows all the time.  Recessions are dead, the Fed has complete control and won't allow them to happen ever again. 

Does the OP have a history of continually posting that we are all doomed?  Or is this genuine concern, at a time when even the head of the Fed has admitted is unprecedented circumstances? 

OP asked a question and then produced reasons for his concern.  Feel free to provide reasons to counter, this is a healthy discussion.  Shutting down alternative perspectives is not healthy for the forum. 

Is this the worst time to retire?  The answer is we don't know yet.  If there is a recession and inflation continues at the same time?  Then yeah its going to be very bad for new retirees.  This is a good academic exercise even for those who aren't retired yet, how would I feel right now if I was newly retired?  What types of assets, backup plans would help me feel comfortable even if this type of scenario happened right after I retired?

[MrGreen]

Yes, but remember that after your conversions are seasoned (5 year ladder), it's the principle that's accessible without taxes or penalties, growth within the Roth IRA is still subject to waiting until 59.5 to access. For very early retirees this could be disadvantageous if they are relying on a Roth conversion pipeline to bridge the gap to some kind of SS or pension.

+1.

I do not subscribe to the "even spending rate over one's lifetime" thought process so I have modeled out a spending curve where it is increased before age 65 and falls off in older age as mobility decreases and one tends to find themselves with no/less debt. For the very early retiree, I find that the bottleneck to maximizing spending is the availability of Roth principal prior to age 59.5. The gist ends up being that converting the most money while a market is down is the best plan for paying as little tax as possible, however, it does not necessarily maximize spending. With enough years before age 59.5, fewer absolute dollars converted equals less Roth principal to spend. We've had some discussion on that in the Traditional to Roth thread in the Post-FIRE subforum. I have only focused on this topic as much as I have because my goal is to maximize the utility/availability of our money over our lifetime, which incidentally is not at all the most efficient way to minimize taxation over one's lifetime.

[nereo]

How much do you people spend on beer in a month??!!

[GuitarStv]

How much do you people spend on beer in a month??!!

I only drink Brewdog's The End of History.

[ChickenStash]

If we're talking someone from Montana, the per capita beer consumption would be almost 41 gallons per year as the top-ranked consumers. Utah at the low end is ~19 gallons per capita. So, I'd say a lot of beer, on average.

Source - 2018

[maizefolk]

If we're talking someone from Montana, the per capita beer consumption would be almost 41 gallons per year as the top-ranked consumers. Utah at the low end is ~19 gallons per capita. So, I'd say a lot of beer, on average.

Source - 2018

So about 440 bottles of beer a year in Montana or 200 in Utah. That does seem like ... a lot. Particularly when you consider that only about 2/3rds of american adults have had even one drink in the past year and only 1/2 in the last month, so the remaining half are necessary drinking a lot more than average to pull the average up.

[nereo]

If we're talking someone from Montana, the per capita beer consumption would be almost 41 gallons per year as the top-ranked consumers. Utah at the low end is ~19 gallons per capita. So, I'd say a lot of beer, on average.

Source - 2018

So about 440 bottles of beer a year in Montana or 200 in Utah. That does seem like ... a lot. Particularly when you consider that only about 2/3rds of american adults have had even one drink in the past year and only 1/2 in the last month, so the remaining half are necessary drinking a lot more than average to pull the average up.

Yikes.  At times we feel like we are habitual drinkers because we will split a pint during about half of our dinners (which is a marked increases for us vs pre-covid times).  But it amounts to a 4-pack each week or thereabouts. If the average is 440 in Montana and lots of people aren't drinking, quite a few 2-adult households are going through a pack (or more) a day.

[EscapeVelocity2020]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

The only caveat I'd give to this would be running your own numbers.  As Maize points out, there is significant 'bang for the buck' for each of those early SS contributions, with a sharp bend once you hit certain thresholds.  The first threshold being, a minimum of 40 credits (at least 10 years of paying SS tax on reasonably low thresholds of income ($6040 in 2022)).  There are also big differences between claiming at 62, 67, and 70... 

This could be an incentive for Spartana to get back and work a few more years, LOL

[Catbert]

This article is old, but I think the info is still current:

https://rootofgood.com/early-retirement-social-security/

[Glenstache]

How much do you people spend on beer in a month??!!

I only drink Brewdog's The End of History.

Sweet Jeebus is that thing potent. 110 proof beer!

[4tify]

Cherry picking a window nearer the recent peak, someone retiring around Oct-Dec, their portfolio would now:

Taken a -12% drop in nominal terms
Down another -5% in real terms
Be down by half a year's spending

I mean, pick whatever numbers you like and maybe I've presented a more extreme case here, making no adjustments for variable withdrawals etc, but it's easy to see how a x25 peak-pot is already facing the reality of now being a x20-21 pot barely 6 months later...

This is me! Yay. Luckily I put aside a full year+ of cash before I leapt, and I have the option of getting some work which I may do just to be safe if things go much further south.  I also had more than 25x and moved to a 60/40 AA to preserve NW—glad I did that! I don’t feel panicked yet since it was clear some kind of recession would be in our future near term after such a lengthy bull market.

Funniest part is my little bit of crypto is cut in half! Worst performer. Glad I didn’t take Musk’s fantasies too seriously. Certainly not a store of value or whatever else it’s supposed to be besides a parlor game??

[Turtle]

This article is old, but I think the info is still current:

https://rootofgood.com/early-retirement-social-security/

Thank you for that link.  It led me to find the rest of the data I needed for a better estimate. 

[vand]

The impressive thing about the Y2k all-stock retiree is how they've been hanging onto the precipice almost from year 1. Those early years of the dotcom crash really screwed the portfolio's ability to participate in subsequent recoveries, taking a further alarming lurch down in the GFC and then has required one of the greatest recoveries and subsequent bull markets in history just for the portfolio to keep treading water since.

It's remarkable that it hasn't already failed, if you consider that it was alredy down by 2/3rds at the 2009 nadir, barely 10 years in!

I think I heard W.Pfau say (on Afford Anything?) that if you're down > 50% in the first decade, you have a high probability to be in a failing timeline and you should cut spending and / or get some kind of an income source.

When people are analyzing this Y2k retiree, are they accounting for SS? That might be the difference in a case like this (even though we'd all prefer it to just be icing on the cake).

This is an instructive article from the doyen himself on when you should ideally expect to be drawing down into principle:
(hint: it isn't in the first decade!)

https://www.kitces.com/blog/consumption-gap-in-retirement-why-most-retirees-will-never-spend-down-their-portfolio/

[GuitarStv]

How much do you people spend on beer in a month??!!

I only drink Brewdog's The End of History.

Sweet Jeebus is that thing potent. 110 proof beer!

Yeah, but you only need to drink one.  Not a six pack.  So .  .  . saves money?

[MrGreen]

How much do you people spend on beer in a month??!!

I only drink Brewdog's The End of History.

Sweet Jeebus is that thing potent. 110 proof beer!

They mean the end of your personal history, since you won't remember anything!

[jinga nation]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

This is great info. I've always simply ignored SS in my calculations as part of my safety margin and thus have never researched it beyond looking at my statements occasionally.

Same. The constant political clusterfuckery with SS - will it be there or will it not, when I FIRE in about 10-12 years, causes me to ignore it in my calculations. If SS still exists at FIRE-time, great, it'll be a bonus. If not, whatever, at least I was prepared for it.

Also, there'll be a 8 year gap between my planned FIRE and collecting SS early. Estimate is that I'll get $2260/month if I start collecting early. Can't ignore, but have to plan without having to fully rely on it.

[EscapeVelocity2020]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

This is great info. I've always simply ignored SS in my calculations as part of my safety margin and thus have never researched it beyond looking at my statements occasionally.

Same. The constant political clusterfuckery with SS - will it be there or will it not, when I FIRE in about 10-12 years, causes me to ignore it in my calculations. If SS still exists at FIRE-time, great, it'll be a bonus. If not, whatever, at least I was prepared for it.

Also, there'll be a 8 year gap between my planned FIRE and collecting SS early. Estimate is that I'll get $2260/month if I start collecting early. Can't ignore, but have to plan without having to fully rely on it.

From the SSA.gov website -

As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.  At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76 percent of scheduled benefits. Thus, the Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future. The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some combination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75 years.

So yeah, I'm not going to depend on Congress to grow a backbone and increase taxes.  Much more likely that benefits will be quietly reduced, especially the COLA/inflation adjustment.

[Must_ache]

I think it's not a great time to retire.  I wouldn't want to retire when that stock valuations were super-high, gas prices are high, QT, recession is a big possibility.

Suppose person A retired last year at the peak of the market with $1,000,000 expecting to live forever on $40,000/yr adjusted for inflation.
Six months later the market drops by 20%.  Person B who was essentially in the same situation as person A was six months ago, now retires assuming they will live forever on $800,000 x 0.04 = $32,000/yr adjusted for inflation.

There is no difference between A and B apart from a number from a single point in time around which they are making a lot of assumptions.  I'd rather experience the drop ahead of time or assume something in my calculations.  $1M last year could easily be $600K next year.  My net worth skyrocketed in the last three years far above my own doing, and some of it could disappear just as easily.  I say if you can afford to live (for a time) on 4% of as far you believe your net worth could drop, go for it.

[Glenstache]

I think it's not a great time to retire.  I wouldn't want to retire when that stock valuations were super-high, gas prices are high, QT, recession is a big possibility.

Suppose person A retired last year at the peak of the market with $1,000,000 expecting to live forever on $40,000/yr adjusted for inflation.
Six months later the market drops by 20%.  Person B who was essentially in the same situation as person A was six months ago, now retires assuming they will live forever on $800,000 x 0.04 = $32,000/yr adjusted for inflation.

There is no difference between A and B apart from a number from a single point in time around which they are making a lot of assumptions.  I'd rather experience the drop ahead of time or assume something in my calculations.  $1M last year could easily be $600K next year.  My net worth skyrocketed in the last three years far above my own doing, and some of it could disappear just as easily.  I say if you can afford to live (for a time) on 4% of as far you believe your net worth could drop, go for it.

This is an odd combination of recognition of sequence of returns risk (SORR) and not recognizing that the Trinity study (and follow ups) include many dips/recessions in the dataset. The stronger case for concern right now is that if you plug in the scenario above (1M and 40k spend) most of those 5% of failures happen in cycles starting around the late 60s to early 70s, which have a lot of similarity to today (decline and inflation).
https://www.cfiresim.com/e1c6893f-1640-419d-a0cc-36cbe03c2cb0

So, I think there is reason to think that the probability of failure is greater than 5% (aka blanket application of the 4% rule) based on what we can guess at seems probable over the next year or so. However, the big swings you are worried about are effectively guaranteed to happen over most of our early retirement time intervals. Later is just better because you have fewer years left to live.

[maizefolk]

I think it's not a great time to retire.  I wouldn't want to retire when that stock valuations were super-high, gas prices are high, QT, recession is a big possibility.

Suppose person A retired last year at the peak of the market with $1,000,000 expecting to live forever on $40,000/yr adjusted for inflation.
Six months later the market drops by 20%.  Person B who was essentially in the same situation as person A was six months ago, now retires assuming they will live forever on $800,000 x 0.04 = $32,000/yr adjusted for inflation.

There is no difference between A and B apart from a number from a single point in time around which they are making a lot of assumptions.  I'd rather experience the drop ahead of time or assume something in my calculations.  $1M last year could easily be $600K next year.  My net worth skyrocketed in the last three years far above my own doing, and some of it could disappear just as easily.  I say if you can afford to live (for a time) on 4% of as far you believe your net worth could drop, go for it.

That is a very understandable emotional response. But the problem is that you won't know if you experienced "the drop" or just "the first part of the drop", except in hindsight. The market can drop 10, 20, or 30% and recover. It can also drop 10, 20, or 30% and then drop another 10, 20, or 30%.

[hdatontodo]

I retired a couple of years ago at age 60. I have 2 years expenses in the bank, a (gasp) paid off TH and Social Security starting this year for me and my minor child. Since I'm not planning on taking much out of my 401K for 4 years, I am not sweating the market drop.

Sent from my SM-G991U1 using Tapatalk

[Telecaster]

So yeah, I'm not going to depend on Congress to grow a backbone and increase taxes.  Much more likely that benefits will be quietly reduced, especially the COLA/inflation adjustment.

I find it unlikely benefits will be reduced for people over about age 50.   By that I mean, any future benefit cuts won't apply to people who are about 50 or older at the time of the cut.   The reason is there would be near rioting in the streets if people paid into the system nearly their whole working lives found out they were getting a benefit cut.   

[maizefolk]

So yeah, I'm not going to depend on Congress to grow a backbone and increase taxes.  Much more likely that benefits will be quietly reduced, especially the COLA/inflation adjustment.

I find it unlikely benefits will be reduced for people over about age 50.   By that I mean, any future benefit cuts won't apply to people who are about 50 or older at the time of the cut.   The reason is there would be near rioting in the streets if people paid into the system nearly their whole working lives found out they were getting a benefit cut.

I've heard this logic before. And I agree with the likely outcome. But we increasingly live in a country where both political parties are willing to do stupid and destructive things so long as they think voters will blame the other party more than them for the consequences. I could very well see a divided congress/presidency in 11 years where democrats were pushing a bill that raised taxes to secure benefits, republicans one that cut other spending to secure benefits, and neither side willing to bend an inch because their political consultants were telling them how much it'll help them in the 2034 elections if the other party is branded as the one that broke social security.

[clifp]

Depending on their age at retirement I doubt a 30-something Y.O. early retiree in 2000 will get very much in SS 30 years later unless they work at least occasionally. Beer money maybe ;-)? Inflation (at least at current levels) would probably eat into that small amount pretty fast.

A fair bit more than beer money. Social security is really generous on the low end, and people who earn high incomes for small numbers of years get treated like people who earned low incomes for many years.

Say someone worked from age 22-35 at $80k/year in today's dollars. That gives them $1.12M in lifetime earnings and an average monthly income over their 35 top years (including 21 years of zeros) of $2,666. Social security replaces 90% of their first $1,024/month in income and 32% of the rest, so they'd be looking at about $1,450/month in social security income adjusted upward with inflation each year. That's not private yacht money, but it's also not a rounding error in most people's budgets.

That's pretty decent estimate, although probably low for high earners who are typical for super earlier retires.
I had small earning from 16-21. I worked from 22-39 when I retired maxed out payroll taxes about 27. I retired in 99/2000 and still had residual income, bonus and options at 40. Until the last 2 years I no SSI deduction and now have modest earnings form a business. My SS at 62 (this year) is $1961, $2665 at Full retirement and $3366 at 70. 

[Must_ache]

So, I think there is reason to think that the probability of failure is greater than 5% (aka blanket application of the 4% rule) based on what we can guess at seems probable over the next year or so. However, the big swings you are worried about are effectively guaranteed to happen over most of our early retirement time intervals. Later is just better because you have fewer years left to live.

Sure big swings are guaranteed to happen, but the price you pay for your assets affects their returns.  Over a 20-yr window someone retiring today automatically generating a 1%/yr higher return (approximately) than someone who retired at year-end 2021, and so the person retiring today must have a higher success rate than the same person retiring December of last year.  I don't think it's enough to chant "sequence of returns risk" and wish it away.       

[maizefolk]

But beyond all of that, what I know is that I freaking LOVE not working.  And unless the end of times comes, I'm not going back to work.  And if it's the end of times, I'm probably not going back to work then either.  It's entirely possible that I have enjoyed the last 11 months of my life more that at any period in my life.  And this is from someone who has (almost) always enjoyed life.  For 11 months I've determined what I did with my time everyday.  And even during the time that was difficult (caring for my mom in her final days) I was so dang grateful to be able to choose that over going to a job everyday. I continue to be grateful that I don't have to work. 

Needed to read this tonight. Thanks, @Ladychips!

[Malossi792]

Curious, anyone doing az ERN style rising equity glidepath (active/passive) and feeling ok?
This is exactly the scenario where it could be quite beneficial if we keep going lower.
That's (the glidepath, not the going lower) what I'm planning to do when the time comes, I'm interested in the emotional side, would appreciate if anyone could share.
Thanks!

[bryan995]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Not very safe. And while lowering expenses is possible, it’s not very fair to the math. It’s still a big loss.

Not sure what the best solution. For me, I’ve always been planning to FIRE in 2025 and shooting for a fatFIRE HCOL CA budget using <3% SWR. Giving ample buffer to absorb >98% of what the future could bring. Though if we stay in this recession/lull, with high inflation, I will likely just work through it. Keeping a strong income is a sure way to keep afloat. Then I could hopefully time FIRE with the traditional post-recession boom, driving SWR from 3% -> <1% before the next cycle/recession ultimately hits.

[vand]

I've been giving this thread alot of thought because I retired 11 months ago.  In all of my pre-retirement planning, I found that the times the 4% rule fails is during times of inflation + flat/down markets.  Well here we are.  I have also found in the last few months that there is a ton of difference between buying the dip when you are still working and just watching the dip because you are NOT working and can't buy in.  And I've been reading about how long it has taken the market to recover in the past (which is not particularly enjoyable reading).  Do I think this is one of the failure times?  I have no idea.  It could be.  Or it might not be.  The problem is we'll only know in hindsight which is a risk I don't want to take.

All of that said, I planned and planned and planned before we retired.  We have multiple streams of income. We can live on my pension, our rentals, and my husbands social security (two of which I feel are dang near guaranteed income and the rentals are super strong at the moment).  Have I panicked?  Yes, a little in that I've stopped our withdrawals of investments.  Have I started acting crazy by selling everything and going cash?  Absolutely not.  Was I withdrawing 4% in the first place?  No.  While I believe in the math of the 4% rule, apparently I never believed it enough to stake my future on it.  Just the extra things in life. 

But beyond all of that, what I know is that I freaking LOVE not working.  And unless the end of times comes, I'm not going back to work.  And if it's the end of times, I'm probably not going back to work then either.  It's entirely possible that I have enjoyed the last 11 months of my life more that at any period in my life.  And this is from someone who has (almost) always enjoyed life.  For 11 months I've determined what I did with my time everyday.  And even during the time that was difficult (caring for my mom in her final days) I was so dang grateful to be able to choose that over going to a job everyday. I continue to be grateful that I don't have to work. 

So for me, in the big picture, if I have to modify the 4% rule, or cut my spending, or just be more aware of money, I'm ok with that.  Because being retired is awesome!

This is a great and honest post. You hit the nail on the head when you say that coping with dips when you have no new income is a totally different ball game to when you are still accumulating. The beneficiaries and losers of a bear market net each other out, and if you aren’t accumulating then you are going to be counted amongst the losers.


While I would still expect the 4% rule to hold up for you, it’s important to recognise that we are into uncharted waters in many ways, and we’re probably heading for one of the less favourable outcomes in the distribution curve. Anything you can do to protect your portfolio during this difficult period will help greatly. Financial freedom is not having to worry about your money, not matter how large of a stash you have built.

[maizefolk]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Looking at the change in the CPI fro February of 2020 (right before the effects of the lockdown kicked in) to today, prices are up about 11.4% and the S&P is up 15.4% in that same time period.

Looking at just time the fall from the top in December, the stock market has returned ~ -19% and prices are only up about 3%

I wouldn't be surprised if a year from now we're looking at a 20+% total increase in costs since the start of the pandemic, and maybe even negative return since the start of the pandemic, but the average american isn't seeing quite that large an increase in costs or a decrease in assets yet.

[2Birds1Stone]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Not very safe. And while lowering expenses is possible, it’s not very fair to the math. It’s still a big loss.

Not sure what the best solution. For me, I’ve always been planning to FIRE in 2025 and shooting for a fatFIRE HCOL CA budget using <3% SWR. Giving ample buffer to absorb >98% of what the future could bring. Though if we stay in this recession/lull, with high inflation, I will likely just work through it. Keeping a strong income is a sure way to keep afloat. Then I could hopefully time FIRE with the traditional post-recession boom, driving SWR from 3% -> <1% before the next cycle/recession ultimately hits.

I was about to poke gigantic holes in your math but see that @maizefolk beat me to it.

Valuations matter, a 4% SWR at SP500 peak is not the same as after a 20% drawdown. There's an entire SWR series on ERN if you care to educate yourself about the specifics.

Your plan is sound, for someone who wants to work as long as possible to take the smallest perceived financial risk.......then again you could die in 2026 and it's all for naught.

[Dicey]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Looking at the change in the CPI fro February of 2020 (right before the effects of the lockdown kicked in) to today, prices are up about 11.4% and the S&P is up 15.4% in that same time period.

Looking at just time the fall from the top in December, the stock market has returned ~ -19% and prices are only up about 3%

I wouldn't be surprised if a year from now we're looking at a 20+% total increase in costs since the start of the pandemic, and maybe even negative return since the start of the pandemic, but the average american isn't seeing quite that large an increase in costs or a decrease in assets yet.

I think I understand that middle sentence, but I'm not positive. Can you clarify, please @maizefolk?

[bryan995]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Not very safe. And while lowering expenses is possible, it’s not very fair to the math. It’s still a big loss.

Not sure what the best solution. For me, I’ve always been planning to FIRE in 2025 and shooting for a fatFIRE HCOL CA budget using <3% SWR. Giving ample buffer to absorb >98% of what the future could bring. Though if we stay in this recession/lull, with high inflation, I will likely just work through it. Keeping a strong income is a sure way to keep afloat. Then I could hopefully time FIRE with the traditional post-recession boom, driving SWR from 3% -> <1% before the next cycle/recession ultimately hits.

I was about to poke gigantic holes in your math but see that @maizefolk beat me to it.

Valuations matter, a 4% SWR at SP500 peak is not the same as after a 20% drawdown. There's an entire SWR series on ERN if you care to educate yourself about the specifics.

Your plan is sound, for someone who wants to work as long as possible to take the smallest perceived financial risk.......then again you could die in 2026 and it's all for naught.

What’s wrong with the math? Granted it was 3am for me as I was up with the baby. But even pre/coffee it looks good.

The 30% was a nice round number to make the point. Not exactly as things are today, but close I’d say.  Inflation rates are more so a personal thing. Ie Anyone renting in HCOL for the past 24 months is sure to agree with the 30% COL increase on their single largest budget line item.

Not planning to work forever. That would be silly.  Though I do enjoy work and am now entering peak earning years.  But I also not going to retire in a time of a global pandemic, everything bubble and rising inflation.  To many unknowns for me at least!

[maizefolk]

To the original post title - while it may not (yet) be the worst, it’s certainly not good!

And it’s a lot more than looking at the % correction to stocks and shrugging off 20-30% losses.
It’s a 20-30% loss of assets + 20-30% increase to cost of goods (inflation).

At 30%, the 1M/40k/4% retiree now has 700k/52k/7.4%. 
From 4%SWR to 7.2%SWR.

Looking at the change in the CPI fro February of 2020 (right before the effects of the lockdown kicked in) to today, prices are up about 11.4% and the S&P is up 15.4% in that same time period.

Looking at just time the fall from the top in December, the stock market has returned ~ -19% and prices are only up about 3%

I wouldn't be surprised if a year from now we're looking at a 20+% total increase in costs since the start of the pandemic, and maybe even negative return since the start of the pandemic, but the average american isn't seeing quite that large an increase in costs or a decrease in assets yet.

I think I understand that middle sentence, but I'm not positive. Can you clarify, please @maizefolk?

I think I left a couple of extra words in that sentence when editing, sorry about that.

bryan was saying the stock market is down 20-30% and prices were up 20-30%. I wasn't sure if they meant during the current correction/bear market or since the start of the pandemic. So I looked at the time frame which would give the biggest price increase first (since the start of the pandemic) and prices are up, but not up by even 20% let alone 30%, and stocks are up about as much as prices.

Then (and this is that confusing middle sentence) I looked at the time frame would could give the biggest stock market decrease: December of 2021 to present. And stocks are down, but not even down by 20% yet. And prices are up since December of 2021, but they're only up 3% in that time frame, not the 20-30% bryan was talking about in their post.

[maizefolk]

What’s wrong with the math? Granted it was 3am for me as I was up with the baby. But even pre/coffee it looks good.

The 30% was a nice round number to make the point. Not exactly as things are today, but close I’d say.  Inflation rates are more so a personal thing. Ie Anyone renting in HCOL for the past 24 months is sure to agree with the 30% COL increase on their single largest budget line item.

The first problem is that over the past 24 months the stock market is up 30%, not down 30%. And that is even after the big decline so far this year.

A second problem is that, while I don't know about all HCOL cities, at least in San Francisco rents still haven't recovered to their prepandemic levels. It looks like you can rent a 1 bedroom apartment for about 12% less than you could 24 months ago. (Source)

[bryan995]

What’s wrong with the math? Granted it was 3am for me as I was up with the baby. But even pre/coffee it looks good.

The 30% was a nice round number to make the point. Not exactly as things are today, but close I’d say.  Inflation rates are more so a personal thing. Ie Anyone renting in HCOL for the past 24 months is sure to agree with the 30% COL increase on their single largest budget line item.

The first problem is that over the past 24 months the stock market is up 30%, not down 30%. And that is even after the big decline so far this year.

A second problem is that, while I don't know about all HCOL cities, at least in San Francisco rents still haven't recovered to their prepandemic levels. It looks like you can rent a 1 bedroom apartment for about 12% less than you could 24 months ago. (Source)

The 20-30% was an example. The point was that it was both a decrease in assets and a increase in expense which pushes SWR higher to keep the same lifestyle.

In just the past few months it’s not looking so great, I think we can all agree there. And you can’t only look X months back for inflation. Inflation is sticky. If that’s the case then inflation never truly increases !

https://www.zumper.com/rent-research/san-diego-ca

[maizefolk]

https://www.zumper.com/rent-research/san-diego-ca
And if you focus on the areas that have all of the good jobs are in SD - there are zero 1 bed apartments for 2450. More like 3450.

Yes, more desirable areas of cities tend to have higher rents than less desirable areas. I hear you telling me that your personal rent has gone up 30% in the last 24 months and I believe you. My speculation based on market trends is that your invested net worth is up by an equal or greater percentage over the past 24 months as your rent has increased. Would that be an accurate assessment?

I think we're talking past each other to some extent. I'm trying to communicate two ideas:

The first is that I think you are drawing broad conclusions (first about everyone and later to everyone renting in a high cost of living area) from your personal experience that are neither consistent with that either my personal experience nor consistent the broad data we have about the USA generally or HCOL cities specifically.

The second is that it is misleading to mix and match inflation from one time period with stock market price changes from another and that doing so can lead to deceptive conclusions about how risky retirement actually is.