Recession question and more

[hopetogetfi]

There are a couple of questions that I do not understand about the MMM theory of early retirement. I am new here. Suppose that I accumulated my desired $900K and FIREd with an annual income of 36K per year (assuming a conservative 4% rate of return and withdrawal). Then after some time there is a prolonged recession (maybe 10 years or more) where your amount drops to $400K or $300K or less. I know that eventually things are expected to go back to normal. How are you supposed to survive those years? I mean your remaining principal (which is already down to $400K) will last only a few years. Your savings will be depleted and you are back where you started, but now you are old and frail and cannot work anymore, your SS is very low due to not working for the last X years. Your pension (if any) is also low for the same reason. Could someone please help me to understand? Do you have something else (backup plan) in place? What is you plan? Recession and its length is not something that you can control. It can and will happen, and the next one can be much worse/longer than the last or any other in the history of this country. I know that many will say that the rates have never dropped below 4%, but nobody knows the future. Is it not true that bonds can also be volatile, maybe not as bad as stocks, but still nothing is guaranteed? I have seen awful things happen when I lived in Russia during the unstable “perestroyka” times. It only takes one political instability and all your savings go down in a toilet. I understand that this is the USA, and it is much more stable here, but still who knows? I am missing something here. I cannot move forward with this plan, I have been tossing and turning on this idea, but cannot move forward. All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early. I do not mean to upset anybody on this site, just trying to understand.

The other thing that I do not understand is why everyone is talking about savings rate ignoring the salary amount. Suppose there are two people who both have the same target of $900K to FIRE. One has salary of $40K per year, the other has $80 per year. Is it not true that the second person needs to save much less per year, than the first person to retire at the same time? Or, alternatively, if they both have the same savings rate of 50%, the second person will need much less time to get the target amount. In other words, the number of years to retirement should be defined not so much by your savings rate, as by the amount you need to deposit each month into your investment account. You could have a miserly savings rate of only 10% (with huge salary) and still retire just fine with the same target amount.

Sorry for my long post. Thanks!

[Cougar]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

[Louisville]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

Ignore this. It espoused timing the stock market and timing the real estate market.

[frugalnacho]

There are a couple of questions that I do not understand about the MMM theory of early retirement. I am new here. Suppose that I accumulated my desired $900K and FIREd with an annual income of 36K per year (assuming a conservative 4% rate of return and withdrawal). Then after some time there is a prolonged recession (maybe 10 years or more) where your amount drops to $400K or $300K or less. I know that eventually things are expected to go back to normal. How are you supposed to survive those years? I mean your remaining principal (which is already down to $400K) will last only a few years. Your savings will be depleted and you are back where you started, but now you are old and frail and cannot work anymore, your SS is very low due to not working for the last X years. Your pension (if any) is also low for the same reason. Could someone please help me to understand? Do you have something else (backup plan) in place? What is you plan? Recession and its length is not something that you can control. It can and will happen, and the next one can be much worse/longer than the last or any other in the history of this country. I know that many will say that the rates have never dropped below 4%, but nobody knows the future. Is it not true that bonds can also be volatile, maybe not as bad as stocks, but still nothing is guaranteed? I have seen awful things happen when I lived in Russia during the unstable “perestroyka” times. It only takes one political instability and all your savings go down in a toilet. I understand that this is the USA, and it is much more stable here, but still who knows? I am missing something here. I cannot move forward with this plan, I have been tossing and turning on this idea, but cannot move forward. All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early. I do not mean to upset anybody on this site, just trying to understand.

The other thing that I do not understand is why everyone is talking about savings rate ignoring the salary amount. Suppose there are two people who both have the same target of $900K to FIRE. One has salary of $40K per year, the other has $80 per year. Is it not true that the second person needs to save much less per year, than the first person to retire at the same time? Or, alternatively, if they both have the same savings rate of 50%, the second person will need much less time to get the target amount. In other words, the number of years to retirement should be defined not so much by your savings rate, as by the amount you need to deposit each month into your investment account. You could have a miserly savings rate of only 10% (with huge salary) and still retire just fine with the same target amount.

Sorry for my long post. Thanks!

The idea is that you earn MORE (on average) than you take out for living expenses.  Some years your portfolio will actually drop, but some years you will see a 10% gain, but then only take out 4%.  Overall you should have enough gain to weather the recession.  That is the whole point of the trinity study and 4% rule.  It's baked right in that 4% is safe even when you experience a recession.  It's a worst case scenario.

As for your second question...no.  It's all about the savings rate.  If you make $40k and save 50%, and I make $80k and save 50%, that means I am saving twice as much as you, but it also means I am spending twice as much as you which means my stash needs to be twice as big.   If you are only saving 10% of your salary, that means you are spending 90% of it, which means no matter how big your salary is you can't hit your FIRE quickly, unless you change your spending habits. 

[frugalnacho]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

Ignore this. It espoused timing the stock market and timing the real estate market.

+1

[odput]

DOOOOOOOOOOOOOOOOOOOOOOM!!!!!!!!!!!!

Start here and here

Once you have internalized those, really truly internalized them, start thinking about your assumptions...the 4% rule is based on a starting withdrawal amount, then increasing it annually with inflation, no exceptions.  If you have even a little bit of safety margin built in to your expenses, you will be fine to lower your withdrawal a little bit during the down years.

The other thing that I do not understand is why everyone is talking about savings rate ignoring the salary amount. Suppose there are two people who both have the same target of $900K to FIRE. One has salary of $40K per year, the other has $80 per year. Is it not true that the second person needs to save much less per year, than the first person to retire at the same time? Or, alternatively, if they both have the same savings rate of 50%, the second person will need much less time to get the target amount. In other words, the number of years to retirement should be defined not so much by your savings rate, as by the amount you need to deposit each month into your investment account. You could have a miserly savings rate of only 10% (with huge salary) and still retire just fine with the same target amount.

Regarding the bolded statement: no it is not true...they both need to save the same $900k in whatever time frame you choose.

Regarding the italics: you are over-specifying the system.  If your $40k person has a 50% savings rate, that means their expenses are $20k, and their stash only needs to be $500K.  Your $80k person with a 50% savings rate has annual expenses on $40k, which means they need a million to retire.  The amounts are different, but the time will be the same because the savings rate is the same.  See this for more info.

All the best

[GuitarStv]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

Ignore this. It espoused timing the stock market and timing the real estate market.

+1

+2

[Cougar]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

Ignore this. It espoused timing the stock market and timing the real estate market.

no, i did not. i espoused finding a strategy or someone with a strategy you believe in on how to manage your money over time. using the 200 day average is a widely held indicator that some people live by to manage their money. if you want to shovel money in every week and ride it out on the hope that you wont lose 1/2 the year you go fire; then go ahead; my goal is to conserve principal; not try and make 10% yearly.

[slugline]

If the United States enters a deep and prolonged recession, I seriously doubt you will regret not buying the extra toy for your child. Think about it.

[frugalnacho]

 You have to learn the market or find a good advisor. you are not going to avoid loses, but you can minimize them. for instance, if you own an index etf and the s and p goes below its 200 day average, its might be worth selling some and seeing if the mkt comes back or continues a downturn; but you'll have to figure that out for you. if youre 30, you might not care, but 60; it would be better to sit on a lot of cash and miss a couple of percent comeback versus a 10 percent drop.


 and you cannot prepare for the worst. my greatest fear is the usa has some sort of major economic collapse and the govt siezes all assets of anyone that has them to stay afloat; there's nothing you can do in that situation. my only hope against that it there's a lot more with more money than me and they're going to right the economic ship before that happens because they dont want to give it up either and can pull the strings to stop it.

 best thing you can do is save and keep a low living standard maybe real estate. if it truly looks like things are going to crumble i'm buying two rentals and letting those tenants pay my living expenses.

Ignore this. It espoused timing the stock market and timing the real estate market.

no, i did not. i espoused finding a strategy or someone with a strategy you believe in on how to manage your money over time. using the 200 day average is a widely held indicator that some people live by to manage their money. if you want to shovel money in every week and ride it out on the hope that you wont lose 1/2 the year you go fire; then go ahead; my goal is to conserve principal; not try and make 10% yearly.

No you totally did.  You said you could minimize your losses, and also you sell your stocks after a drop to help stop losses.  Then you said you if it crumbles you could dump it into real estate.  This is classic market timing.  What I believe, and probably most other people on this board believe, is that what you are claiming is flat out wrong.  You can't know where the market will move tomorrow, regardless of what it has done the past week, or month, or year.  If you sell your shares to minimize losses, it might work, but statistically it is more likely that you will actually lose money long term because you will also be missing out on gains when you are wrong, and wrong you will be most of the time.

If you are approaching retirement and are worried about the volatility of the market, and can't handle the swings, then you need to switch to a lower risk asset allocation in order to conserve principal (and accept lower return for it) that matches your desired risk level.  What you don't want to do is stay in high risk assets and try to jump in and out and time the market.  It's a mugs game.

[nereo]

There are a couple of questions that I do not understand about the MMM theory of early retirement. I am new here. Suppose that I accumulated my desired $900K and FIREd with an annual income of 36K per year (assuming a conservative 4% rate of return and withdrawal). Then after some time there is a prolonged recession (maybe 10 years or more) where your amount drops to $400K or $300K or less.

I'm just going to post on your above statement. 
This is a doomsday-scenario you've outlined above.  It would be much, much, much worse than anything we experienced in the last 100 years, including the great depression and 2008.  Going from $900k to under $400k would be a 70% drop.  The worst annual drop in 50 years was -37% in 2008, and this was followed by 6 consecutive years of positive gains.
Likewise, your idea of a recession that lasts 10 years would be an extreme outlier.  Data before 1900 is pretty unreliable (in part because we don't have good metrics, but also because there was no 'global economy' and so it's hard to equate), but since 1900 there have been at least 14 recessions.  The 'Great Depression' lasted 3 years, 6 months, and every other recession has lasted 18 months or less.  The 2008 'great recession' lasted 18 months. 

If we experience a 70% drop in the market followed by a recession that lasts 10 years or more every one of us is in serious, serious trouble.  I can't even begin to describe how horrible it would be for the entire global economy.  Retirement would become a pipe dream for virtually everyone on the planet, huge corporate bankruptcies, dogs and cats sleeping together....

[boarder42]

Yep dont market time

2 solutions to your questions. 

1. use cfiresim.com to see how often throughout history you money would have lasted until you were dead
2. find a percentage you're comfortable with
3. if that percentage is 100% then you just need to lower your SWR and increase your savings or lower your expenses more.

Most budgets on here are fat not everyone trims to the gnats ass ... i assume at 36k maybe you have some travel in there. so you could cut your expenses when the market is down

solution 2 is to understand that the first 5 years of fire are essential.  if you retired in 2007 or 2008 you may have to severly cut expenses.  if you retired in 2012 or 2013.  you are now lush with cash and have no issue probably the rest of your years.  so if 2008 happens in that first 5 years you may need to go back to work or come up with some alternate income or buckle down on those expenses.  i mean you have to look at both extremes if you're going to look at the down side.  2013 happens and your 900k is now 1.125MM minus your 36k you now have an SWR of .034 which hasnt ever failed i'm pretty sure ... CFireSim is down right now. 

[Eric]

Is it not true that bonds can also be volatile, maybe not as bad as stocks, but still nothing is guaranteed?

Nope, nothing is guaranteed.  You can forgo early retirement in exchange for a more stable regular retirement, and drop dead on your first day.

I cannot move forward with this plan, I have been tossing and turning on this idea, but cannot move forward. All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early. I do not mean to upset anybody on this site, just trying to understand.

Whoa there!  You should definitely not attempt to do this if you are only accomplishing it through deprivation.  However, most of us are very happy with the amount we choose to spend, and don't feel like we're depriving ourselves or our families of anything at all.  That's why we're on this path.  Because it's wonderful.

I think this recent post by MMM is pretty spot on in case you missed it:
http://www.mrmoneymustache.com/2014/11/23/not-extreme-frugality/


I also agree with all of the others that Cougar's market timing scheme is for the birds.

[DoubleDown]

I also suggest reading up on "sequence of return risk." Like @boarder42 said, the early years of retirement are important. Bad market returns up front will do a lot more damage than bad returns in the middle or at the end of retirement. There are ways to mitigate that risk, though, such as through portfolio diversification, being flexible in spending or earning some extra income here and there, and considering having some income streams that won't be affected by downturns (for example, through a pension, annuity, or collecting rents on owned real estate).

[nereo]

I cannot move forward with this plan, I have been tossing and turning on this idea, but cannot move forward. All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early. I do not mean to upset anybody on this site, just trying to understand.

Whoa there!  You should definitely not attempt to do this if you are only accomplishing it through deprivation.  However, most of us are very happy with the amount we choose to spend, and don't feel like we're depriving ourselves or our families of anything at all.  That's why we're on this path.  Because it's wonderful.

I agree with Eric - what's wonderful about this path is the incredible freedom that comes with it.  Even long before you reach a level where you never have to work again (heck, with as little as a few month's worth of savings) you realize that you'll be ok even with a job-loss, sickness or prolonged recession.  You get to make decisions based on what adds the most value to your life - not what is popular or what you must do to pay off debt.
As for your son - my father worked 60 hours weeks to support us, give us an education and pursue our dreams.  He is my hero.  He bought me and my siblings many things growing up but what I treasured was the time I spent with him on family trips.  Many, many of us here choose this way of life because it allows us to maximize experiences and spend time with the people we care about doing the things we like doing. 

[J Boogie]

[/quote]
Many, many of us here choose this way of life because it allows us to maximize experiences and spend time with the people we care about doing the things we like doing.
[/quote]

Amen

[Indexer]

Then after some time there is a prolonged recession (maybe 10 years or more) where your amount drops to $400K or $300K or less. I know that eventually things are expected to go back to normal.

Well there is no such thing as a 10 year recession.  That would be called a depression ;).  For an account to go from 900k to 300k you are talking about a 67% drop.  Unless you only own a couple individual stocks that is highly unlikely.

Lets look at a 60% stock, 40% bond portfolio.  Using low cost broad index funds of course.  Lots of diversification, low costs, no 'my manager is an idiot' surprises.

Worst year:  down 26.6%.  Your 900k turns into 660k. 
Average returns for said portfolio:  around 8%.  Now thats not what you will see every year.  It might be -26.5%, 20.33%, 13.31%, 0.26%, 11.76%, 15.04%, 7.07%.  (Those are the actual returns 2008-2014 for VSMGX, a 60/40 fund using broad index funds)

So if you are withdrawing 4% the 8% annual growth is likely to keep it growing.  Now we can't predict the future, and 8% might be a high return expectation in the future.  However the above portfolio came out of 2008 just fine.  It came out of 2000 just fine, 1987.. same thing.  Even 1929 which was a true nightmarish depression... it came out just fine... eventually.

And if 60/40 is too volatile for you there are more conservative portfolios.  They will likely earn less, but they won't bounce around as much either.  An 80% bond, 20% stock portfolio might only grow 3-5%, but historically a worst case scenario looks like a 10% drop.

As noted 900k dropping to 300k would require a near complete collapse of the world economy.  Retirement would be the least of your concerns.

[kathrynd]

Having retired 4 1/2 years ago, at age 50, not one penny comes from the stock market or pensions.

We decided our money would come from rental properties. (we have 40 units)
Might not be the best way, but it is the best way for us.

We have more control.
People will always need accommodation.

I do believe a global  depression, not a recession, will  be upon us within 25 years.

[nereo]

Having retired 4 1/2 years ago, at age 50, not one penny comes from the stock market or pensions.

We decided our money would come from rental properties. (we have 40 units)
Might not be the best way, but it is the best way for us.

Just curious... how challenging is it to deal with 40 rental units?  I promise I'm not a member of the IRP (internet retirement police)... I've just pondered having 2 or maybe 3 rentals - 40 is so off the scale to me I can't begin to fathom it.

[Eric]

Then after some time there is a prolonged recession (maybe 10 years or more) where your amount drops to $400K or $300K or less. I know that eventually things are expected to go back to normal.

Well there is no such thing as a 10 year recession.  That would be called a depression ;).  For an account to go from 900k to 300k you are talking about a 67% drop.  Unless you only own a couple individual stocks that is highly unlikely.

Lets look at a 60% stock, 40% bond portfolio.  Using low cost broad index funds of course.  Lots of diversification, low costs, no 'my manager is an idiot' surprises.

Worst year:  down 26.6%.  Your 900k turns into 660k. 
Average returns for said portfolio:  around 8%.  Now thats not what you will see every year.  It might be -26.5%, 20.33%, 13.31%, 0.26%, 11.76%, 15.04%, 7.07%.  (Those are the actual returns 2008-2014 for VSMGX, a 60/40 fund using broad index funds)

So if you are withdrawing 4% the 8% annual growth is likely to keep it growing.  Now we can't predict the future, and 8% might be a high return expectation in the future.  However the above portfolio came out of 2008 just fine.  It came out of 2000 just fine, 1987.. same thing.  Even 1929 which was a true nightmarish depression... it came out just fine... eventually.

And if 60/40 is too volatile for you there are more conservative portfolios.  They will likely earn less, but they won't bounce around as much either.  An 80% bond, 20% stock portfolio might only grow 3-5%, but historically a worst case scenario looks like a 10% drop.

As noted 900k dropping to 300k would require a near complete collapse of the world economy.  Retirement would be the least of your concerns.

Even the OP's extremely pessimistic outlook is not as pessimistic as you're portraying.  He would have to withdrawal $360K to live on ($36K for 10 years) so the actual drop envisioned is closer to 30% with a long stagnant non-recovery.

[kathrynd]

Having retired 4 1/2 years ago, at age 50, not one penny comes from the stock market or pensions.

We decided our money would come from rental properties. (we have 40 units)
Might not be the best way, but it is the best way for us.

Just curious... how challenging is it to deal with 40 rental units?  I promise I'm not a member of the IRP (internet retirement police)... I've just pondered having 2 or maybe 3 rentals - 40 is so off the scale to me I can't begin to fathom it.

Well, like anything, you need to enjoy it.
I had always wanted to own rental properties.

With us, we bought all the properties within 2 towns (Canada). One that we live in, and the other is  120 kms away.
In our 'other town' we own a multi family building and we have a live in building super,and he lives in one apt  in exchange for free rent.
He works under our direction, and is not a  manager.

In the town where we live, we are hands on. When we travel for 7-8 months a year, we have a property super (similar to the building super in our other town, except this person doesn't rent from us, and we pay them a flat salary.

No one will look after your property and interests better than you.
That is why we don't hand over our properties to a property managment company.

When we travel, we keep in contact with our 'team' and advise, as problems present themselves.

In a few years, we may slow down our travel, and then we may  be more hands on again.

[DollarBill]

All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early.

My guess is they never saved any of their money and always live above their means. Now that they "have" to cut back their standard of living on just the pension alone it makes them feel poor and angry.

[lizzie]

All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early.

My guess is they never saved any of their money and always live above their means. Now that they "have" to cut back their standard of living on just the pension alone it makes them feel poor and angry.

I don't think this is accurate. The OP mentions seeing what happened with perestroika in Russia, so I'm assuming he was raised in the Soviet Union. I am certainly no expert, but my understanding is that the economic upheaval caused by the breakup of the Soviet Union was incredible and left many people completely destitute. I think it would be very hard to have experienced that and then put your trust in saving for the future, so I have some sympathy for the OP.

[hopetogetfi]

No, you are wrong. They have been saving all their lives, religiously. All their earnings (minus basic necessities) went to the bank to earn interest. They only spent some minimal amounts on food, utilities, etc. They considered themselves wealthy. Then one day a political catastrophe called "perestroyka" happened. You wake up and your government tells you that all your money that you had in that bank are gone, you are poor. That is what happened. They NEVER lived above their means, far below as a matter of fact. Then years later they tried to invest in some stocks of some Russian companies, they lost everything, of course.     

[nycstash]

All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early.

My guess is they never saved any of their money and always live above their means. Now that they "have" to cut back their standard of living on just the pension alone it makes them feel poor and angry.

I don't think this is accurate. The OP mentions seeing what happened with perestroika in Russia, so I'm assuming he was raised in the Soviet Union. I am certainly no expert, but my understanding is that the economic upheaval caused by the breakup of the Soviet Union was incredible and left many people completely destitute. I think it would be very hard to have experienced that and then put your trust in saving for the future, so I have some sympathy for the OP.

This.  Plenty of people have lived through catastrophic financial collapse that was no fault of their own.  People on these boards would do well to remember this. When badassity turns into judgment of others, of whose lives and personal circumstances you know little, it's no longer badass.  It's just ass.

[hopetogetfi]

Hi lizzie and nycstash, Thank you very much for your response. You posted it just before I typed my response to DollarBill. I am still trying to figure out how to post a reply to a specific post. I am new here. I grew up in Soviet Union/Russia. And what my family (as well as millions of other people) went through was absolutely awful. We actually experienced hunger. It was not my parent's fault. They did everything they could to build wealth, they worked hard. They were robbed by their government of their savings. When people in this country invest in stocks, they know it is risky, they know that they can lose money. My parent played it "safe". They put their earnings into a government bank, the only bank available in the country. 

[JLR]

Definitely check out cfiresim.com  when it is back online.

From my basic understanding, if you retire earlier, your withdrawal rates should be lower. My numbers might be out, but it is something like, if you want your money to last for 20 years of retirement then go for a 4% withdrawal, to last for 40 years go for a 3% withdrawal, to last for 60 years go for a 2% withdrawal. People have run the numbers on cfiresim and have found that with the lower rates of withdrawal, you would not run out of money with those low withdrawal rates based on the last 100 years of economic conditions, even with the bad years in the mix. Of course, this would depend on what you had invested in. If you put everything into the one company and it went bad, then you could lose all of your money. An index fund might be better, but I'm not someone to be giving financial advice.

For some people, rather than having a consistently lower rate of withdrawal, they vary their withdrawal percentage based on the markets. If it is a bad year for returns, they will reduce their expenses/withdrawal rate, and perhaps pick up a little part time work to close the gap.

On your question about time to retirement for a lower income, I think it has been answered above, with the reply that said a person on a lower income saving the same percentage will have a lower dollar expense, so they will need a lower total dollar amount to retire. The maths works.

It is very sad to hear about your parents losing their savings. This possibility was something I was speaking with my husband about last night. It could happen to any of us. You can't see into the future to know what is coming. It is all a risk and a worry.

[DollarBill]

All I see is that I will be pouring my hard earned money into this investment account, depriving myself of everything and my son of an extra toy (like my parents did), to only end up poor and angry (like my parents did).  They live on my father’s military pension, but you cannot get that by quitting job early.

My guess is they never saved any of their money and always live above their means. Now that they "have" to cut back their standard of living on just the pension alone it makes them feel poor and angry.

I don't think this is accurate. The OP mentions seeing what happened with perestroika in Russia, so I'm assuming he was raised in the Soviet Union. I am certainly no expert, but my understanding is that the economic upheaval caused by the breakup of the Soviet Union was incredible and left many people completely destitute. I think it would be very hard to have experienced that and then put your trust in saving for the future, so I have some sympathy for the OP.

This.  Plenty of people have lived through catastrophic financial collapse that was no fault of their own.  People on these boards would do well to remember this. When badassity turns into judgment of others, of whose lives and personal circumstances you know little, it's no longer badass.  It's just ass.

I apologize hopetogetfi. I didn't see that it took place in Russia. Living above ones needs in the US military is very rampant.
~Tucking my tail between my legs~

[lizzie]

Hi hopetogetfi, and welcome to the United States! Thank you for sharing your experiences. I just recently happened to have read a biography of a Russian writer called "Limonov," and it touched very briefly on the collapse of the Soviet Union and what things were like at that time. It sounded like the Wild West to me, with hucksters stealing millions and ordinary people totally unprotected. I am also very sorry for what happened to your family. I hope things work out better for you here.