Author Topic: When is the best time to retire?  (Read 2229 times)

wageslave23

  • Handlebar Stache
  • *****
  • Posts: 1752
  • Location: Midwest
When is the best time to retire?
« on: May 29, 2019, 10:36:05 AM »
Market timing discussion aside.  Would it theoretically be better to FIRE when the economy is booming like it is right now or when we are in a recession?  The pro for FIRE'ing while its booming is that the extra income you would earn while working during a hot economy would be invested in a market that is also high, so may end up losing the extra money you put in when the recession hits.  If you wait until a recession to FIRE then you would be losing the opportunity to invest more money while the market is down.   Another consideration is that it is harder to find a well paying job during a recession.  I'm leaning towards (if you had a crystal ball) it would be best to FIRE after riding out a recession with a good job and then quitting as the economy reached breakeven and started moving into a boom.

rantk81

  • Pencil Stache
  • ****
  • Posts: 905
  • Age: 42
  • Location: Chicago
Re: When is the best time to retire?
« Reply #1 on: May 29, 2019, 10:39:25 AM »
Today.

dandarc

  • Walrus Stache
  • *******
  • Posts: 5454
  • Age: 41
  • Pronouns: he/him/his
Re: When is the best time to retire?
« Reply #2 on: May 29, 2019, 10:44:52 AM »
The downside with waiting to retire, for any reason, is that you've worked longer than you presumably wanted to. The last recession in the US ended 10 years ago. That's a long time to wait.

The other thing is, if you're going with something like the 4% rule, then that is already going to survive all but the worst times to retire in history. There's also layers and layers of other safety margins - even during a recession, you can probably get a job. Maybe not as good of a job as you had pre-recession, but when you've got mustache-level spending, even minimum wage goes a pretty long way. Then eventually you get to where you can collect social security. And damn near everyone has some fat they can trim from the budget if needed.

Suppose you could go with something like "retire at 4% if during a recession, 3% if not", but that's not for me personally. Once I hit 4% I'm pulling the plug. Maybe 5% - check out the broke/dead charts - we have an awful lot of angst over an overall unlikely outcome of "broke".

Fishindude

  • Magnum Stache
  • ******
  • Posts: 3075
Re: When is the best time to retire?
« Reply #3 on: May 29, 2019, 11:36:27 AM »
When you have enough -or- When you've had enough.

SuperSecretName

  • Bristles
  • ***
  • Posts: 353
Re: When is the best time to retire?
« Reply #4 on: May 29, 2019, 12:00:05 PM »
As soon as the recession is over.  You've bought at the bottom, and get to enjoy the ride up.

Good luck timing that though.  IIRC, most recessions last 18-24 months, so you could try to time that from when it starts.

In fact, this is sorta what I plan on doing.  I could mostly FIRE now, but am a bit nervous about the economy the next few years.  So, I'll wait for the next recession to start (6 months before it's even called one) and add a year or so to that.  Or another 5 years.  Whichever comes first (since another 5 would give me substantial padding to avoid sequence of return risks).
« Last Edit: May 29, 2019, 12:11:25 PM by SuperSecretName »

wageslave23

  • Handlebar Stache
  • *****
  • Posts: 1752
  • Location: Midwest
Re: When is the best time to retire?
« Reply #5 on: May 29, 2019, 03:07:16 PM »
I get the 4% rule factors in recession.  I'm talking from a purely hypothetical, where every extra dollar is as valuable as the last, when would be the optimal time to retire?

zolotiyeruki

  • Walrus Stache
  • *******
  • Posts: 5603
  • Location: State: Denial
Re: When is the best time to retire?
« Reply #6 on: May 29, 2019, 03:12:29 PM »
When you have enough -or- When you've had enough.
Heh, I have a BIL who asks three questions when people talk about retiring:
1) Do you have enough (money)?
2) Have you had enough? (i.e. are you ready to be done working for a living?)
3) Will you have enough to do (in retirement)?

FIREstache

  • Pencil Stache
  • ****
  • Posts: 638
Re: When is the best time to retire?
« Reply #7 on: May 29, 2019, 04:32:04 PM »
Then eventually you get to where you can collect social security.

Uhh.... SS is not some unexpected bailout money for when your stash is failing you.  It should already be factored in to your retirement as neglecting it would be like disregarding other savings/income in retirement as if it's a backup plan you're not expecting when it comes time to tap into it.  If you're excluding it from your calculations, you are either working too long or withdrawing less than you could otherwise.  The retirement calculators like cFIREsim, FireCalc, Rich-Broke-or-Dead, and Flexible Retirement Planner allow you to add SS or additional retirement income beginning in a specific year so that you can calculate your best SWR or best success percentage.  For me, SS after 10 years allows me to reduce my WR from the stash significantly - it's not going to be some surprise bonus cash that I'm not expecting.  One caveat is that due to potential SS funding issues, it would not be unreasonable to reduce your expected SS benefit to be about 25% less than currently promised/calculated, although I personally calculate using the full benefit since I expect to receive that much as the most likely scenario and have a large discretionary budget that I can cut back on if I really need to in the unlikely case that the benefit comes up less than currently calculated, so I've got nothing to lose by sticking with the promised benefit.  If was cutting it close with much less flexibility, I would probably reduce the calculated benefit by 25%.  But I certainly wouldn't negate it completely from my FIRE calculations.

Quote
Suppose you could go with something like "retire at 4% if during a recession, 3% if not"

Depending on how much of a drop in stocks there is, 4% during a recession could easily be less than 3% at the previous peak prior to the recession.

HBFIRE

  • Handlebar Stache
  • *****
  • Posts: 1311
  • Age: 45
  • Location: Huntington Beach, CA
Re: When is the best time to retire?
« Reply #8 on: May 29, 2019, 05:20:21 PM »
From a psychological perspective, I'd much rather retire at the end of a recession and watch the stash grow.  Retiring at the end of a bull market would be a bit harder to handle watching the portfolio get hammered while not working.  No matter how stoic you are, these phases make even the best investor nervous.

MaaS

  • Stubble
  • **
  • Posts: 243
Re: When is the best time to retire?
« Reply #9 on: May 29, 2019, 05:47:26 PM »
The clear answer here is during a recession. If you've hit your safe withdrawal rate after a few years of negative returns, your odds of success go up dramatically.

But, life doesn't tend to unfold so neatly that this is really a practical choice.

With that said, I'd probably add a little more cushion than planned upon if I were close to retiring at the end of a historically long bull run.

 

Wow, a phone plan for fifteen bucks!