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

[GuitarStv]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

I guess they feel like if they work one more year now it might save five (or some higher number) of years of work in the future, and they've weighed the odds that it's more than 20% likelihood or whatever.

Right now I'm making pretty good money doing a job I'm pretty good at.  I don't think I'll ever make as much money doing something that I find so easy again.  I'm not paying for expensive childcare or severely burned out right now with my working scenario.  I have a variety of obligations outside of work, but could cancel or get out of most of them if I really needed do . . . that's my main motivation for retirement now, can't quite schedule all the stuff that I want to do each day.  While I enjoy my work right now, I have no intention of every touching anything like it again once retired.

If I die earlier than expected and have extra money left over . . . then I lose out on a few years of retirement.  But the good thing is, I'm dead (worst case I leave more money for my loved ones).  So I won't be daily kicking myself endlessly for being a dumbass like I would if I had to go back to work with a shitty job for lower wages because of my totally atrophied professional skills.

[Omy]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

[wageslave23]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

I guess they feel like if they work one more year now it might save five (or some higher number) of years of work in the future, and they've weighed the odds that it's more than 20% likelihood or whatever.

Right now I'm making pretty good money doing a job I'm pretty good at.  I don't think I'll ever make as much money doing something that I find so easy again.  I'm not paying for expensive childcare or severely burned out right now with my working scenario.  I have a variety of obligations outside of work, but could cancel or get out of most of them if I really needed do . . . that's my main motivation for retirement now, can't quite schedule all the stuff that I want to do each day.  While I enjoy my work right now, I have no intention of every touching anything like it again once retired.

If I die earlier than expected and have extra money left over . . . then I lose out on a few years of retirement.  But the good thing is, I'm dead (worst case I leave more money for my loved ones).  So I won't be daily kicking myself endlessly for being a dumbass like I would if I had to go back to work with a shitty job for lower wages because of my totally atrophied professional skills.

Not to mention that there are endless other things to spend "extra" money on if 10 or 20 years into retirement you realize you over saved. Buy a house on a lake, travel more, buy a boat, eat out more, give my kids or grandkids money for college or a house.  These are some of the many things I would spend my money on if I realized I had saved too much. I assure you none of it will go to waste. If things are still going well at my job I might work 10 or 15 extra years if the money is worth the time.  Being able to retire is one thing but it's not all the things that go into the calculation of how many more years to work.

[Villanelle]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

This is certainly how I view it. (Though, to be fair, my spouse is a SWAMI and will likely keep working well past when we hit even the fattest number, so for me it is all theoretical, which I acknowledge is easier than walking the walk.) 

I see a possible return to part time work as just a part of our plan, not sometimes we'd do if our plan fails.  And it doesn't sound unpleasant, especially after we've had time to decompress from working full-time (which I've already done, working very PT, from home, freelance now), and when it is at least partly on our own terms.  So I have to go the coffee shop and make drinks for 6 hours twice a week, or substitute teach on my preferred scheduled a few days a week for 9 months.  Meh.   The possibility of that seems much better than the certainty of DH continuing to grind full-time, once he no longer enjoys it, for OMY.

I know the argument tends to be that people can get paid more per hour now than they likely can at something they return to after a few years out of the workforce.  And that typically--though it's not the case for Bob--a down market also means a tough job market so work can be hard to find, right when you want to find it.  But I think the fact that we wouldn't need to make enough to live on--just enough to decrease the amount we need with withdraw, means that's fine.  I believe that for industrious people, there will be some work to being in some money.  Even a few thousand dollars will help round the edges off a scary looking graph. That, combined with a few thousand more from some temporary budget cuts?  Seems fine for 2-3 years until the market settles.

[Metalcat]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

[wageslave23]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

[GuitarStv]

The 4% rule is great for 30 year retirements.  If you plan on living longer than that while retired, you need to have contingencies.  This can take the form of a side hustle, a lower withdrawal rate, stockpiling cash for the start of retirement, a willingness/eagerness to work later in life, or a rock-solid suicide plan - but you need to have a plan for when it goes tits up.

[Metalcat]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

[wageslave23]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

[Metalcat]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

[Ozlady]

Hi all

We are in our third year of retirement...and our net worth is up 20%..

Unlike most of you, our investment allocation is NOT 100% equity..we have a majority in real estate and we have lived off rents, dividend income and term deposits income...not touching nest egg (in fact adding to it as our living costs is below passive income)

So far this year, the term deposits rate have been on  a tear...our "bond tent" feels snug and cosy...

If market plunges, boy oh boy! watch my glidepath spike!  The warchest of cash is READY!

[Omy]

We had reached our 25x fatFIRE number right around the time Trump was elected.  If Hillary had been elected, we would have retired in 2016.

My biggest concern back then was whether or not the ACA would survive. Since Republicans had been going after the ACA for as long as it had been enacted, a Trump presidency seemed dangerous for the ACA's future. Without the ACA (and being several years away from Medicare age), our monthly health insurance premiums would have skyrocketed and our preexisting conditions would not have been covered.

So we decided to work awhile longer to keep our health insurance coverage and to pad the stash. The political headlines got crazier and crazier and it just seemed easier to keep socking money away instead of pulling the trigger on FIRE.

In 2019, we concluded (with the help of a bunch of forum members) that we had more than enough to weather the crazy and we had padded the stash enough to deal with huge insurance premiums if that became necessary. We purchased a 2nd rental and our rental income and dividends covered much of our projected spend.

Then the pandemic hit. I was spooked because we had no idea how that was going to turn out. However, I was very happy we had FIREd six months earlier, because I would definitely have been too jittery to FIRE during a worldwide pandemic.

We have SO many hedges built in - paid off houses, rental income, future Social Security income, likely inheritances. If we fail at FIRE, something has gone horribly wrong and we will regret not spending a bit of it on an underground bunker...

[wageslave23]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

[Metalcat]

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

Uh...a lot of those are *my* examples and I have read a bunch of ERN. Doesn't it matter A LOT how much the person is spending?

Let's take the travel example, when I brought that up I was referring to a real person here on the forums who has a very low spend and even then, half of it is international travel. She could cut her travel budget in half and make $5000 per year and radically reduce her WR.

Again, I'm not saying I don't value the analysis of Bob, but where I always get stuck is generalizing Bob to a population that he doesn't really represent very well and drawing conclusions that probably wouldn't actually apply to the majority of people here.

The messaging is "omg, look how fucked a retiree during this time period would be" when I'm wondering "okay, but how fucked would an average Mustachian actually be?" Because every single actual early retiree I've seen here is not dumb and has SORR hedges.

What I'm wondering is if those typical mustachian hedges would actually hold up under these conditions? Again, stipulating that we can't actually know for 10 years.

I guess I'm just trying to make sense of which hedges would have held up best so far?

[2Birds1Stone]

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

Uh...a lot of those are *my* examples and I have read a bunch of ERN. Doesn't it matter A LOT how much the person is spending?

Let's take the travel example, when I brought that up I was referring to a real person here on the forums who has a very low spend and even then, half of it is international travel. She could cut her travel budget in half and make $5000 per year and radically reduce her WR.

Again, I'm not saying I don't value the analysis of Bob, but where I always get stuck is generalizing Bob to a population that he doesn't really represent very well and drawing conclusions that probably wouldn't actually apply to the majority of people here.

The messaging is "omg, look how fucked a retiree during this time period would be" when I'm wondering "okay, but how fucked would an average Mustachian actually be?" Because every single actual early retiree I've seen here is not dumb and has SORR hedges.

What I'm wondering is if those typical mustachian hedges would actually hold up under these conditions? Again, stipulating that we can't actually know for 10 years.

I guess I'm just trying to make sense of which hedges would have held up best so far?

You have to remember, OP is not your average mustachian.....some people are naturally pessimistic and driven by fear. Some people even get off on stirring the pot of negative soup.

[Metalcat]

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

Uh...a lot of those are *my* examples and I have read a bunch of ERN. Doesn't it matter A LOT how much the person is spending?

Let's take the travel example, when I brought that up I was referring to a real person here on the forums who has a very low spend and even then, half of it is international travel. She could cut her travel budget in half and make $5000 per year and radically reduce her WR.

Again, I'm not saying I don't value the analysis of Bob, but where I always get stuck is generalizing Bob to a population that he doesn't really represent very well and drawing conclusions that probably wouldn't actually apply to the majority of people here.

The messaging is "omg, look how fucked a retiree during this time period would be" when I'm wondering "okay, but how fucked would an average Mustachian actually be?" Because every single actual early retiree I've seen here is not dumb and has SORR hedges.

What I'm wondering is if those typical mustachian hedges would actually hold up under these conditions? Again, stipulating that we can't actually know for 10 years.

I guess I'm just trying to make sense of which hedges would have held up best so far?

You have to remember, OP is not your average mustachian.....some people are naturally pessimistic and driven by fear. Some people even get off on stirring the pot of negative soup.

IDK that it's fear. I think it's more that folks who make good money doing work they really don't mind doing see working extra years during uncertain economic times to be so unbelievably obvious that any alternative sounds reckless or stupid.

[wageslave23]

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

Uh...a lot of those are *my* examples and I have read a bunch of ERN. Doesn't it matter A LOT how much the person is spending?

Let's take the travel example, when I brought that up I was referring to a real person here on the forums who has a very low spend and even then, half of it is international travel. She could cut her travel budget in half and make $5000 per year and radically reduce her WR.

Again, I'm not saying I don't value the analysis of Bob, but where I always get stuck is generalizing Bob to a population that he doesn't really represent very well and drawing conclusions that probably wouldn't actually apply to the majority of people here.

The messaging is "omg, look how fucked a retiree during this time period would be" when I'm wondering "okay, but how fucked would an average Mustachian actually be?" Because every single actual early retiree I've seen here is not dumb and has SORR hedges.

What I'm wondering is if those typical mustachian hedges would actually hold up under these conditions? Again, stipulating that we can't actually know for 10 years.

I guess I'm just trying to make sense of which hedges would have held up best so far?

You have to remember, OP is not your average mustachian.....some people are naturally pessimistic and driven by fear. Some people even get off on stirring the pot of negative soup.

IDK that it's fear. I think it's more that folks who make good money doing work they really don't mind doing see working extra years during uncertain economic times to be so unbelievably obvious that any alternative sounds reckless or stupid.

This is very true.  Before the pandemic, I was willing to accept a 4% withdrawal and willing to go back to work if need be because I hated my job. Now it's 10x better and I would hate to work any other job. Comparing working part time as a Walmart greeter to my current job, I work less than the Walmart greeter and earn 10x as much. Or a part time position in my field,  I work less now than I would at a similar part time position and earn 3x more. Others here are in similar positions, if not as extreme.  So to us the thought of going back to work is very much a failure and working an extra year or two with a 50%+ savings rate is a no brainer.

[wageslave23]

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

Uh...a lot of those are *my* examples and I have read a bunch of ERN. Doesn't it matter A LOT how much the person is spending?

Let's take the travel example, when I brought that up I was referring to a real person here on the forums who has a very low spend and even then, half of it is international travel. She could cut her travel budget in half and make $5000 per year and radically reduce her WR.

Again, I'm not saying I don't value the analysis of Bob, but where I always get stuck is generalizing Bob to a population that he doesn't really represent very well and drawing conclusions that probably wouldn't actually apply to the majority of people here.

The messaging is "omg, look how fucked a retiree during this time period would be" when I'm wondering "okay, but how fucked would an average Mustachian actually be?" Because every single actual early retiree I've seen here is not dumb and has SORR hedges.

What I'm wondering is if those typical mustachian hedges would actually hold up under these conditions? Again, stipulating that we can't actually know for 10 years.

I guess I'm just trying to make sense of which hedges would have held up best so far?

Here's my thinking. The difference between a 4% withdrawal and a 3.5% withdrawal is usually about 150k in stache. That's the difference between a safe safe withdrawal and a safe withdrawal.  So if a 4% withdrawal fails its probably at least 100k short or at least could be that short. When you cut expenses in order to make up the deficit, you would need to cut 5k for 20 years or 10k for 10 years. Or if you take a fun part time job earning 20k,you would need to work 5 yrs. These are all longer than some of the people posting seem to assume.  I don't think if a portfolio tanks because of SORR, it's going to be because they are 30k short. Or if you are going back to work for psychological reasons, I don't think earning 20k for 3 years is going to matter if your portfolio is down $300k. So as you said, it's important to follow through and determine the mitigating effects of one's contingencies, instead of handwavy contingency plans.  And I'm most definitely not referring to you Metalcat. 

[Metalcat]

This is very true.  Before the pandemic, I was willing to accept a 4% withdrawal and willing to go back to work if need be because I hated my job. Now it's 10x better and I would hate to work any other job. Comparing working part time as a Walmart greeter to my current job, I work less than the Walmart greeter and earn 10x as much. Or a part time position in my field,  I work less now than I would at a similar part time position and earn 3x more. Others here are in similar positions, if not as extreme.  So to us the thought of going back to work is very much a failure and working an extra year or two with a 50%+ savings rate is a no brainer.

Whereas I would rather work part time for the next 20 years than do a single additional year of full time work. With my health I literally cannot have optimal work-life balance working full time, but it's fun ato have a work project a 1-3 days a week.

It's really too bad more professional level jobs don't have flexible part time options.

[nereo]

[snip]…
 Some people even get off on stirring the pot of negative soup.

I think “Negative Soup” would be an awesome name for a band.

[Metalcat]

[snip]…
 Some people even get off on stirring the pot of negative soup.

I think “Negative Soup” would be an awesome name for a band.

Facts.

[Villanelle]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

I've dabbled in ERN, but am far from hard-core.

Are you telling me that reducing WR by ~20% during very-down markets won't make a meaningful difference?  (Let's say a $50k withdraw base, then getting $5k in income and reducing spend my another $5k, thus bringing $50k down to $40k?) 

You later post mentioned $10k for ten years, but that's to put an extra $100k in the bank (and doesn't account for growth at all).  But that's not someone actually needs.  If we are talking about SORR, they just need the ability to reduce withdraws during those first few years, if the SHTFan right as their retirement begins. 

Even if the SHTFan 10 years in, they still only really need to just address the years with the most fan-hitting, decreasing withdraws when those withdraws will have an undue effect on the overall portfolio, so a 2-3 years of reduced withdraws (let's say -15%) seems like it would make a big difference.  After all, the models all have these down markets accounted for.  So anything one does to  move away from a strict "4% +inflation" makes a difference.  The models assume that you just robotically follow the algorithm, and they still almost always work.  If you step slightly away from that algorithm during the times where that choice will have the biggest effect, it will be meaningful. 

[mistymoney]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

sad to see the tech bubble retirees recover so little prior to the most recent downturn....

[wageslave23]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

I've dabbled in ERN, but am far from hard-core.

Are you telling me that reducing WR by ~20% during very-down markets won't make a meaningful difference?  (Let's say a $50k withdraw base, then getting $5k in income and reducing spend my another $5k, thus bringing $50k down to $40k?) 

You later post mentioned $10k for ten years, but that's to put an extra $100k in the bank (and doesn't account for growth at all).  But that's not someone actually needs.  If we are talking about SORR, they just need the ability to reduce withdraws during those first few years, if the SHTFan right as their retirement begins. 

Even if the SHTFan 10 years in, they still only really need to just address the years with the most fan-hitting, decreasing withdraws when those withdraws will have an undue effect on the overall portfolio, so a 2-3 years of reduced withdraws (let's say -15%) seems like it would make a big difference.  After all, the models all have these down markets accounted for.  So anything one does to  move away from a strict "4% +inflation" makes a difference.  The models assume that you just robotically follow the algorithm, and they still almost always work.  If you step slightly away from that algorithm during the times where that choice will have the biggest effect, it will be meaningful.

In summary, ERN concludes that the "adjustments" need to be for more and longer than most people would think.  You can back test different failures and see how much of an adjustment you would need to make.  If you avoid withdrawing that extra 10k when the market is down 20% you are only saving yourself $2k in locked in losses or in total 1.2% of a $1 million dollar portfolio.

[mistymoney]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

I guess they feel like if they work one more year now it might save five (or some higher number) of years of work in the future, and they've weighed the odds that it's more than 20% likelihood or whatever.

Right now I'm making pretty good money doing a job I'm pretty good at.  I don't think I'll ever make as much money doing something that I find so easy again.  I'm not paying for expensive childcare or severely burned out right now with my working scenario.  I have a variety of obligations outside of work, but could cancel or get out of most of them if I really needed do . . . that's my main motivation for retirement now, can't quite schedule all the stuff that I want to do each day.  While I enjoy my work right now, I have no intention of every touching anything like it again once retired.

If I die earlier than expected and have extra money left over . . . then I lose out on a few years of retirement.  But the good thing is, I'm dead (worst case I leave more money for my loved ones).  So I won't be daily kicking myself endlessly for being a dumbass like I would if I had to go back to work with a shitty job for lower wages because of my totally atrophied professional skills.

Similar here. Peak earning years are a delicate thing, and I'm lucky to have bucked the trend and be mid 50's+, whereas women tend to have their peak earnings decade in their 40s. I don't want to give that up if I'm just going to have to troll for work down the line.

I wouldn't even mind working! But the thought of putting together resumes, cover letter, interviewing, negotiating compensation....lol I'm so done with that!

staying put just seems easier and less stressful.

[mistymoney]

For example, the 2000 tech bubble ER would've been scrambling back to work about 9 years after ER having less than 10 years of retirement remaining funded... 

The 2000 ER is hanging in there. To your point, it wasn't pretty and it would've been very stressful, leading most people to work at least an hourly job to reduce their withdrawals. Even if they didn't or couldn't, they'll still almost certainly reach 2030 with >$0.00.

It doesn't look that way from Maize's graph....

If there's another 20% drop ? where will they be?

[maizefolk]

sad to see the tech bubble retirees recover so little prior to the most recent downturn....

Keep in mind that the tech bubble really was that. A bubble. In the 48 months leading up to September 2000, the market had a CAGR of >20%/year before considering dividends. ~130% returns in that four year period, before even considering dividends.

That's not much consolation to a hypothetical retiree who hit 25x expenses and retired right at the peak of the bubble. But a lot of other hypothetical retirees only required 1, 2, or 3 years of 20+% investment returns to hit their 25x number. They're doing substantially better today, despite retiring only a year or two before the tech crash and being hypothetically very worried at the time.
 

Bubbles appear to be something of a special case, different from regular recessions or bear markets. It takes much longer to regain the highs at the peak of a bubble market because those highs weren't tied to anything in particular. Hence the very long timelines required for Japanese markets to recover (Japan's lost decades) or the American markets to recover from great depression (both of which are proceeded by meteoric runups in stock valuations). In both cases "recovering" means the economy has grown enough to justify a high water mark valuation that wasn't justified at the time.

[farmecologist]

If you are truly Mustachian, you will find a way to cheat inflation.
I retired in 2021, as I could not take it any more.
Looked at cutting more expenses, I have recently decided to cut the the cable, to save more money.
I chucked the TV into a neighbour's dumpster.

There is no beating inflation.....your portfolio keeps up or better or it doesn't.   If you're cutting things that's adjusting, not beating.  Granted cable is not one to argue about but for some that may be important to them.  I could adjust for inflation by reducing travel or lowering what I plan to pay for kids college but that would not be beating inflation, it would be adjusting (maybe smartly so) by reducing things important to me.

I guess it depends on your definition of "beating" inflation.   

Note that housing, autos, fuel, etc...are large components of the reported inflation numbers.  If you do not participate in them, your "personal rate" of inflation is likely much lower than the reported numbers.

For instance, we are completely debt free.   We own our house, our vehicles have been paid off since 2015 or so, we don't drive nearly as much as we used to ( kids are out of the house ), etc...  Because of this, we are feeling the pinch much less than others.   I don't classify this as adjusting.

About the only thing we have adjusted to is cutting back on foods that we fine insanely priced.   There are usually alternatives.

The point here is that while nobody can totally escape inflation, your "personal rate of inflation" can be much, much less that what is being reported.

[farmecologist]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

sad to see the tech bubble retirees recover so little prior to the most recent downturn....

While this is interesting data, I think the 4% rule is a little dated.  The best way to go is a "withdrawal rate with goalposts" methodology.  In other words, be ready to spend less, possibly drastically less, in downmarket years.   Basically common sense....and I think many people follow this methodology without thinking about it.

[mistymoney]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

sad to see the tech bubble retirees recover so little prior to the most recent downturn....

While this is interesting data, I think the 4% rule is a little dated.  The best way to go is a "withdrawal rate with goalposts" methodology.  In other words, be ready to spend less, possibly drastically less, in downmarket years.   Basically common sense....and I think many people follow this methodology without thinking about it.

I think so! but the graph says tech bubble retirees counting on 4% never got to put big european blowout vacay back on their bucket lists....

A cautionary tale for sure!

[Freedomin5]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

I've dabbled in ERN, but am far from hard-core.

Are you telling me that reducing WR by ~20% during very-down markets won't make a meaningful difference?  (Let's say a $50k withdraw base, then getting $5k in income and reducing spend my another $5k, thus bringing $50k down to $40k?) 

You later post mentioned $10k for ten years, but that's to put an extra $100k in the bank (and doesn't account for growth at all).  But that's not someone actually needs.  If we are talking about SORR, they just need the ability to reduce withdraws during those first few years, if the SHTFan right as their retirement begins. 

Even if the SHTFan 10 years in, they still only really need to just address the years with the most fan-hitting, decreasing withdraws when those withdraws will have an undue effect on the overall portfolio, so a 2-3 years of reduced withdraws (let's say -15%) seems like it would make a big difference.  After all, the models all have these down markets accounted for.  So anything one does to  move away from a strict "4% +inflation" makes a difference.  The models assume that you just robotically follow the algorithm, and they still almost always work.  If you step slightly away from that algorithm during the times where that choice will have the biggest effect, it will be meaningful.

In summary, ERN concludes that the "adjustments" need to be for more and longer than most people would think.  You can back test different failures and see how much of an adjustment you would need to make.  If you avoid withdrawing that extra 10k when the market is down 20% you are only saving yourself $2k in locked in losses or in total 1.2% of a $1 million dollar portfolio.

I’ve also dabbled in ERN, and my understanding is that ERN suggests that there are ways to mitigate SORR that work pretty well, including starting with a lower SWR of 3.25-3.5% and starting your retirement with a 2-3 year cash cushion so you don’t have to touch your stash. I’m referencing this article.

My eyes kind of glaze over when ERN gets into all the nitty gritty math details though, so I suppose I’m one of those hand wavy folks who plan to do all the strategies (3.5% SWR, 3-year cash cushion in a GIC ladder, part-time work in my lucrative field to cover basic expenses, househacking) and hope for the best. I would love to hear from more mathematically minded folks if my understanding is not correct or if there are any big blind spots that I haven’t considered.

[kpd905]

@Freedomin5 are the three years of cash in addition to or part of the portfolio with the 3.5% withdrawal rate? 

[Freedomin5]

@Freedomin5 are the three years of cash in addition to or part of the portfolio with the 3.5% withdrawal rate?

I think ERN was talking about them separately in their article, so either a cash cushion or a lower SWR. I plan to do both.

[wageslave23]

Our thinking at the time was "one more year" of making tons of money at our cushy jobs was so much easier to deal with than the remote possibility of being old and being forced to get a job as a Walmart greeter to make ends meet.

My contingency plans had contingency plans - in hindsight being so risk averse cost us a few years of freedom. But on the other hand, those years bought us a lot of peace of mind.

It also depends on what you are adding OMY to.

I've rarely seen a savings goal here of just 25X with no plan for SORR, SORR mitigation is usually baked into most folks' retirement savings goals around here. So are we talking about people doing OMY after already building a bunch of security into their plan, or just after reaching 25X, because that makes the OMY conversation very different.

I would say the person in your example already worked their OMY or two. They just account for it in a different way. Working until you are 120% past 4% stache, or working until you are at 3.5% swr, or working until you have 20% fat in your fire budget, or planning to work a part time job, or not counting ss income in your fire plans, are all one in the same. They are all cushion beyond a 4% withdrawal plan with no contingencies.

That's an interesting take because I've never seen it used that way here in threads where people are saying they're considering doing OMY.

The people saying they're considering OMY that I've seen have almost always said they're considering working a little longer past their retirement savings goal, not past 25X, mostly because I've seen it very rarely here that someone saves to just 25X with no additional buffer, because we're all generally pretty anxious about SORR around here.

So when I see OMY, I don't conceptualize it as being based on reaching 25X only, I see it as choosing to work past the point of a savings goal that you already decided was enough to quit.

I guess I just so rarely see an actual 25X only retiree around here that it never occured to me that many people here actually retire with no cushion at all. I mean, I don't think I've ever seen a 25X retiree around here who doesn't at least also have a paid off house.

Whereas some people seem to be saying OMY synonymously with saving anything above 25X. Which, if that's the case, I've been misunderstanding what people have been saying here for years.

I've always understood OMY to mean working longer to save more than you had planned to for retirement. However fat or lean that plan was in the first place.

I'm sure you are correct about what people mean when they say OMY. I was only pointing out that from a failure rate perspective, all of those strategies above and beyond a lean 4% rule with no contingencies will have similar effects.  I think the important thing is to figure out your drop dead number that you are comfortable with and then figure out how you are going to either reach that amount or have contingencies in place to effectively reach that amount. I.e if you think 30x is the risk level you are comfortable with, you either need to wait to reach 30x, or retire at 25x but know that you have enough fat in your budget to reach 30x if you need to make cuts, or 25x but willing to go back to work in order to supplement up until the shortfall I'd need be etc. I think it's helpful when discussing probabilities to reduce the number of variables. I'm trying to define the terms for the discussion so that one person isn't saying it's important to have 30x and another person says no 25x is fine (but implying that they have contingencies in place to effectively put them in a similar financial situation as the 30x person).

That's where I always get stuck with talk about what individuals should do based on models because the models don't really account for what people actually do.

Don't get me wrong, I get the math and I love that there are a bunch of mathy types here to make great graphs for me to understand. I devoured ERN's material for months when I first discovered FIRE.

But the model doesn't account for what a human would actually do. At least not a human here in this forum. Folks almost universally have hedges against SORR, it's so common that to me it's a given.

And we can't look at the model of outcomes for people who don't have hedges and then generalize it to a population that overwhelmingly does.

I'm probably the most hedged person on the forum. I deeply value the discussion of the importance of SORR and mitigation strategies. But I find it less useful to not incorporate those assumptions into the discussion.

I would love to have the ability to look at those graphs and quantify: how much percent of spending or how much income (as a percent of annual spend) would that person have to engage in to come through such a period unscathed?

5%? 10? 30? More?

What impact would a bond tent have had? What about a cash reserve?

I've read all of the ERN stuff analyzing these various hedges in general, but what outcomes could they have had during this period so far?

I think that is the kind of discussion that would be most valuable to our members because it really helps us look at what option is more appealing: just working more and saving more vs alternative hedges?

I don't know how easy that stuff is to model or if anyone cares to do it, but I think it would be a great analysis to see what SORR mitigation strategy might come out ahead during this time, of course knowing that we can't really know for 10 years.

But I can't help but feel like this dichotomy of success or failure based on parameters that aren't reality for the overwhelming majority here prevents us from digging into really practically important shit in trying to understand what the risk of retiring at a time like 21-22 really is for the members here.

I personally would love to see if what some of us think would make someone safe actually would vs just how many multiples of annual spend one would have to add to the 'stache in advance to achieve the same safety.

Now, for folks with high incomes at decent jobs and low spend, adding a few multiples to the 'stache might be a no brainer. For lower income folks who can easily pick up enjoyable part time work, the calculus on which is more comfortable will be very different.

So yeah, I'm super, super curious to understand the relative impact of these various hedges during this specific period, based on the data we have so far.

I just don't have the mathy skills that you folks have to do that on my own. My smarts are blood, puss, and feelings. I couldn't make a graph like these to save my life.

So contrary to how it might seem sometimes, I really do value the analysis, I just pick at it like a scab because my non math model brain says "But what about what people actually do???"

All of those contingencies are just very hard to quantify. Hence ERNs endless blog posts.  In some ways, I think thread is focusing more on the psychological aspect of FIRE by narrowly defining the case study to a simplistic hypothetical.  Once you see the risks involved with this narrow definition, it allows myself for one to delve into how I would feel and what contingencies I would want to have if I were "Bob". This then turns into a launching point to explore the other contingencies and the "math" behind them. And which ones are most palatable.  And also which ones are more realistic.  (Hint- the people on here saying that a few years of cash reserve, or part time walmart greeter for a couple years, or cutting out travel for a couple years will make a difference have not done the math or read ERN's analysis).

I've dabbled in ERN, but am far from hard-core.

Are you telling me that reducing WR by ~20% during very-down markets won't make a meaningful difference?  (Let's say a $50k withdraw base, then getting $5k in income and reducing spend my another $5k, thus bringing $50k down to $40k?) 

You later post mentioned $10k for ten years, but that's to put an extra $100k in the bank (and doesn't account for growth at all).  But that's not someone actually needs.  If we are talking about SORR, they just need the ability to reduce withdraws during those first few years, if the SHTFan right as their retirement begins. 

Even if the SHTFan 10 years in, they still only really need to just address the years with the most fan-hitting, decreasing withdraws when those withdraws will have an undue effect on the overall portfolio, so a 2-3 years of reduced withdraws (let's say -15%) seems like it would make a big difference.  After all, the models all have these down markets accounted for.  So anything one does to  move away from a strict "4% +inflation" makes a difference.  The models assume that you just robotically follow the algorithm, and they still almost always work.  If you step slightly away from that algorithm during the times where that choice will have the biggest effect, it will be meaningful.

In summary, ERN concludes that the "adjustments" need to be for more and longer than most people would think.  You can back test different failures and see how much of an adjustment you would need to make.  If you avoid withdrawing that extra 10k when the market is down 20% you are only saving yourself $2k in locked in losses or in total 1.2% of a $1 million dollar portfolio.

I’ve also dabbled in ERN, and my understanding is that ERN suggests that there are ways to mitigate SORR that work pretty well, including starting with a lower SWR of 3.25-3.5% and starting your retirement with a 2-3 year cash cushion so you don’t have to touch your stash. I’m referencing this article.

My eyes kind of glaze over when ERN gets into all the nitty gritty math details though, so I suppose I’m one of those hand wavy folks who plan to do all the strategies (3.5% SWR, 3-year cash cushion in a GIC ladder, part-time work in my lucrative field to cover basic expenses, househacking) and hope for the best. I would love to hear from more mathematically minded folks if my understanding is not correct or if there are any big blind spots that I haven’t considered.

That would be sufficient from my understanding.

[GuitarStv]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

sad to see the tech bubble retirees recover so little prior to the most recent downturn....

While this is interesting data, I think the 4% rule is a little dated.  The best way to go is a "withdrawal rate with goalposts" methodology.  In other words, be ready to spend less, possibly drastically less, in downmarket years.   Basically common sense....and I think many people follow this methodology without thinking about it.

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

[maizefolk]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

[tooqk4u22]

You have to remember, OP is not your average mustachian.....some people are naturally pessimistic and driven by fear. Some people even get off on stirring the pot of negative soup.

IDK that it's fear. I think it's more that folks who make good money doing work they really don't mind doing see working extra years during uncertain economic times to be so unbelievably obvious that any alternative sounds reckless or stupid.

Fear is normal, Managing fear is not but we all can do it.  Regardless of the 4% "rule" we all are operating with imperfect information as the future is unknown, our personal circumstances can fluctuate wildly, and a lot of the financial market stability that we seek is highly influenced/determined by a bunch f'tards in Washington that wouldn't survive without a government paycheck and inside information to trade on (both in terms of market investments and payoffs).   Throw in a heaping of crazy economic uncertainty and volatility and its no wonder that anyone would be comfortable FIREing at any SWR rate.

I have posted elsewhere, I FIREd in 2019 and things were pretty good then in 2022 hit and I decided to go back to work for a variety of reasons but mostly due to:

- our sub 3.5% wr went to a 4% and climbing due to falling equities AND bonds (and I was in mostly short duration) further impacted by increased spending.
- wanted to pad college accounts (what a shit ton and f'ing scam, but I digress).
- wanted to pad travel accounts (realized I deeply under estimated cost and desire to travel).

There were some other factors but thos are the majors...combo of fear and revised planning. 

I had an offer and took it, bc I am one of those that I would rather make a 10x multiple now for a year than a 1x in the future for 10 years.

And like Metalcat indicates (and I said above) I didn't plan on 25x, I planned for a bit more .   But I also had other hedges:
-excluded accounts for health deductible (sizeable HSA), capex/car fund/travel that probably allows for another 15% spending (I realize this is nothing more than mental gymnastics for wr)
-  fairly significant kid expenses (activities, food, clothes, their travel) that I think will go away at some point.
- budget includes full unsubsidized health care including a deductible ( vs actual ACA when not working that is a fraction). Oh, and bc I am nearing 50 it only needs to last for 15bmore years before Medicare vs.  3.5% wr forever.   Oh and kids are still on our care.   
- social security even at 75% will surely cover most or much of added health care costs or long term care for DW and I. 
- paid off house w high property taxes (so downsizing or relo would ave an impact)

As for going back to work.....it served its purpose and who knows if it was necessary or not. It WILL not be long term....goal was a year to 15 months and I am coming up on a year next month. Probability of meaningful bonus will dictate duration.   

As odd as it may be, I think we may be coming up on one of those goldilocks periods for retirement.....if at the end of this rising rate cycle combined with the yet to completely play out decline in equities (could stay flattish for a whole as an alternative) one has a 4% wr or less it will be great!   I mean 4%+ bonds and reasonably priced equities (17x) and growing.....it will be one of those periods people will say yeah but you were lucky to FIRE in 2024/2025.

[Wolfpack Mustachian]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

Seriously! I've never heard of success rates that low, especially low 30% for 50 years. I'm very interested in where those numbers come from, as that would be a huge paradigm shift for my idea of early retirement.

[2Birds1Stone]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

Seriously! I've never heard of success rates that low, especially low 30% for 50 years. I'm very interested in where those numbers come from, as that would be a huge paradigm shift for my idea of early retirement.

someone pulled numbers out of their budunkadunk

[GuitarStv]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

I pulled both out of Vanguard's document here: https://corporate.vanguard.com/content/dam/corp/research/pdf/Fuel-for-the-F.I.R.E.-Updating-the-4-rule-for-early-retirees-US-ISGFIRE_062021_Online.pdf.  This was using 50/50 stocks/bonds.

[mistymoney]

- social security even at 75% will surely cover most or much of added health care costs or long term care for DW and I. 

Can you explain this? Do you mean LTC insurance? Because actual LTC would greatly outpace soc security, and medicare does not cover that.

As odd as it may be, I think we may be coming up on one of those goldilocks periods for retirement.....if at the end of this rising rate cycle combined with the yet to completely play out decline in equities (could stay flattish for a whole as an alternative) one has a 4% wr or less it will be great!   I mean 4%+ bonds and reasonably priced equities (17x) and growing.....it will be one of those periods people will say yeah but you were lucky to FIRE in 2024/2025.

This is the most optimistic thing I've seen in quite some time! I hope it works out for all of us that way :)

[mistymoney]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

I pulled both out of Vanguard's document here: https://corporate.vanguard.com/content/dam/corp/research/pdf/Fuel-for-the-F.I.R.E.-Updating-the-4-rule-for-early-retirees-US-ISGFIRE_062021_Online.pdf.  This was using 50/50 stocks/bonds.

lol, there's the issue, boglehead!

;)

[mistymoney]

- social security even at 75% will surely cover most or much of added health care costs or long term care for DW and I. 

Can you explain this? Do you mean LTC insurance? Because actual LTC would greatly outpace soc security, and medicare does not cover that.

As odd as it may be, I think we may be coming up on one of those goldilocks periods for retirement.....if at the end of this rising rate cycle combined with the yet to completely play out decline in equities (could stay flattish for a whole as an alternative) one has a 4% wr or less it will be great!   I mean 4%+ bonds and reasonably priced equities (17x) and growing.....it will be one of those periods people will say yeah but you were lucky to FIRE in 2024/2025.

This is the most optimistic thing I've seen in quite some time! I hope it works out for all of us that way :)

but checking rich broke dead at 5050 - sitll gives better numbers...

[mistymoney]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

This is certainly how I view it. (Though, to be fair, my spouse is a SWAMI and will likely keep working well past when we hit even the fattest number, so for me it is all theoretical, which I acknowledge is easier than walking the walk.) 

I see a possible return to part time work as just a part of our plan, not sometimes we'd do if our plan fails.  And it doesn't sound unpleasant, especially after we've had time to decompress from working full-time (which I've already done, working very PT, from home, freelance now), and when it is at least partly on our own terms.  So I have to go the coffee shop and make drinks for 6 hours twice a week, or substitute teach on my preferred scheduled a few days a week for 9 months.  Meh.   The possibility of that seems much better than the certainty of DH continuing to grind full-time, once he no longer enjoys it, for OMY.

I know the argument tends to be that people can get paid more per hour now than they likely can at something they return to after a few years out of the workforce.  And that typically--though it's not the case for Bob--a down market also means a tough job market so work can be hard to find, right when you want to find it.  But I think the fact that we wouldn't need to make enough to live on--just enough to decrease the amount we need with withdraw, means that's fine.  I believe that for industrious people, there will be some work to being in some money.  Even a few thousand dollars will help round the edges off a scary looking graph. That, combined with a few thousand more from some temporary budget cuts?  Seems fine for 2-3 years until the market settles.

My situation is vastly different. I am single, and there isn't any family/friend that I could rely on for anything (excepting my children, who I prefer very strongly to not burden with indigent myself). So I feel enormous pressure to get it right. Feels like this place is strongly tilted towards couples sometimes. I think it's pretty easy to be nanchalant when there is someone else providing backup. Even just 2 social security checks in the future rather than one seems like such a luxury to me!

In terms of PT work after fire, I would really like it to be just because I want to, not because I need to. If the portfolio were in a situation where failure was becoming more rather than less probable, I would be dealing with a lot of negative emotions.

The other thing that occurred to me is how we are always hearing about the time value of money. From that POV withdrawing 40k in a down market vs adding 40k in a down market (lets call that OMY) would have far reaching effects on the overall portfolio. Add another year of 40 in vs 40 out and its possibly that earning 10k a year PT will never catch up.

[ixtap]

The reason I would tend to prefer continuing to work now vs return to work later is due to having seen the difficulty folks have reentering the job market. A bad sequence of returns is likely affecting others and even minimum wave jobs can become hard to find, much less anything approaching a career.

This, it is hard to balance this reality with excessive OMY.

[RWD]

The 4% rule succeeds 81% of the time if are dead in 30 years.  For early retirement of 50+ years, it has never really made sense (low 30% success rate).  That's why all of us have contingencies.

I get 92% success over 30 years and 86% over 50 based on a quick visit to the Rich Dead Broke calculator and setting stocks to 100%

Where are you seeing such low success rates?

I pulled both out of Vanguard's document here: https://corporate.vanguard.com/content/dam/corp/research/pdf/Fuel-for-the-F.I.R.E.-Updating-the-4-rule-for-early-retirees-US-ISGFIRE_062021_Online.pdf.  This was using 50/50 stocks/bonds.

I'm having a hard time imagining the early retiree looking at a 50-year horizon that is aggressive enough to target a 4% SWR while also choosing a conservative 50/50 portfolio.

[maizefolk]

Looking at the Vanguard report they didn't use historical data on investment returns but instead assume future 2.4% real US stock market returns (historical stock real stock market returns were 7.5%/year) and future -0.3% real US bond market returns (historical stock real stock market returns were 2.4%/year). With assumptions that pessimistic, plus the heavy bond allocation, I'm actually shocked a 4% portfolio held up as well as it did in their analysis.

But it is true that high bond allocations are a very real danger over super-long retirement windows. It won't be as exciting as a crash. But years of spending 4% (inflation adjusted) while earning 0-2% can lead to porfolio failure just as effectively as a major stock market crash. And unlike stock heavy portfolios where the failures are obvious relatively early on, portfolio failure in bond heavy portfolios can sneak up on you 20-30 years in when returning to work, or radically changing your lifestyle to cut expenses are both going to be much harder.

Don't over-invest in bonds, folks!

[mistymoney]

The reason I would tend to prefer continuing to work now vs return to work later is due to having seen the difficulty folks have reentering the job market. A bad sequence of returns is likely affecting others and even minimum wave jobs can become hard to find, much less anything approaching a career.

This, it is hard to balance this reality with excessive OMY.

it this equivalent of the bunny slope but for surf lessons?

[Wolfpack Mustachian]

Looking at the Vanguard report they didn't use historical data on investment returns but instead assume future 2.4% real US stock market returns (historical stock real stock market returns were 7.5%/year) and future -0.3% real US bond market returns (historical stock real stock market returns were 2.4%/year). With assumptions that pessimistic, plus the heavy bond allocation, I'm actually shocked a 4% portfolio held up as well as it did in their analysis.

But it is true that high bond allocations are a very real danger over super-long retirement windows. It won't be as exciting as a crash. But years of spending 4% (inflation adjusted) while earning 0-2% can lead to porfolio failure just as effectively as a major stock market crash. And unlike stock heavy portfolios where the failures are obvious relatively early on, portfolio failure in bond heavy portfolios can sneak up on you 20-30 years in when returning to work, or radically changing your lifestyle to cut expenses are both going to be much harder.

Don't over-invest in bonds, folks!

Thanks for the analysis. I was very confused, as I hadn't seen anything near that poor of a success rate from ERN to really anywhere.

[Metalcat]

The reason I would tend to prefer continuing to work now vs return to work later is due to having seen the difficulty folks have reentering the job market. A bad sequence of returns is likely affecting others and even minimum wave jobs can become hard to find, much less anything approaching a career.

This, it is hard to balance this reality with excessive OMY.

Yeah, which we talked about earlier in the thread as well. It really depends on the industry. I'm currently retraining in a skill that I'll always be able to tap into for part time work no matter how old I am.

It's a lot easier to upskill once you're retired if you want to preserve your human capital.