Author Topic: who has lived off of 4% swr for over 10 years and how is it going?  (Read 16358 times)

SAHD

  • 5 O'Clock Shadow
  • *
  • Posts: 53
  • Location: Washington State
I have been reading that a 4% swr is old school and does not work in todays environment.  Has anyone lived through the great recession withdrawing 4% and how is your savings holding out?

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #1 on: March 23, 2014, 10:42:11 PM »
I can find cases of it working (see Nord's post in this recent thread discussing it with multiple examples of long-time retirees) and cases of it not (look up Raddr's Y2K Retiree who is crashing and burning pretty hard).

I think the bottom line in ER is to be flexible with your WR, and not stick to a rigid one even when stuff is tanking.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #2 on: March 24, 2014, 12:59:07 AM »
I have been reading that a 4% swr is old school and does not work in todays environment.  Has anyone lived through the great recession withdrawing 4% and how is your savings holding out?

 I am a long way off from FIRE, but I never understood the fear of it 'not working out'. Worst cast scenario is the numbers aren't working out and you have to seek out some kind of income. At the levels of spending most of us are anticipating in ER, even a part time restaurant job or hobby income could completely cover some huge market shortfalls. The key would be to get that income starting as soon as you realize there might be an issue, and not wait a decade until your stash is tapped out and you suddenly have to cover ALL your expenses at once. But having to cover 500 or 1000 dollars a month for a few years really seems like a worst case scenario to me if you are paying attention.

1000 a month would cover about 50% of MMMs entire family budget, and that can be made with a McDonald's job.

if your spending estimates for  FIRE are honest and accurate, I wouldn't be too worried about it.


« Last Edit: March 24, 2014, 01:00:42 AM by The Money Monk »

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #3 on: March 24, 2014, 06:45:10 AM »
I have been reading that a 4% swr is old school and does not work in todays environment.  Has anyone lived through the great recession withdrawing 4% and how is your savings holding out?

 I am a long way off from FIRE, but I never understood the fear of it 'not working out'. Worst cast scenario is the numbers aren't working out and you have to seek out some kind of income. At the levels of spending most of us are anticipating in ER, even a part time restaurant job or hobby income could completely cover some huge market shortfalls. The key would be to get that income starting as soon as you realize there might be an issue, and not wait a decade until your stash is tapped out and you suddenly have to cover ALL your expenses at once. But having to cover 500 or 1000 dollars a month for a few years really seems like a worst case scenario to me if you are paying attention.

1000 a month would cover about 50% of MMMs entire family budget, and that can be made with a McDonald's job.

if your spending estimates for  FIRE are honest and accurate, I wouldn't be too worried about it.

I think it's more of a fear for older retirees, who spend a lot more, you can't imagine lowering their lifestyle, and couldn't see going back to work.

If you're locked in to spending 100k annually, are on the hedonic treadmill and think that lowering your spending would make you less happy, and have portfolio issues, are 65 (and have been ER'd for say a decade), you may be pretty worried.

I personally am with you.  I figure that if after 20 years of ER I have to go back to work a bit, I tell myself that means I'll be where everyone else is at (but likely still with a pretty decent stache), yet I got 20 years of freedom in the meantime.  That seems well worth it to me.  And the only situation I can see that happening is a weird system/catastrophic failure (economic collapse, revolution, etc. - see Bernstein's Retirement Calculator from Hell Pt. 3) where working a few extra years and having a larger buffer wouldn't have helped anyways.

As I said earlier, I think the key is being flexible in your spending, such that you can cut back a little if necessary in the bad years.  If you're on the hedonic treadmill though, you may see cutting back as failure.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10630
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #4 on: March 24, 2014, 06:57:31 AM »
I can find cases of it working (see Nord's post in this recent thread discussing it with multiple examples of long-time retirees) and cases of it not (look up Raddr's Y2K Retiree who is crashing and burning pretty hard).

I think the bottom line in ER is to be flexible with your WR, and not stick to a rigid one even when stuff is tanking.
See http://www.raddr-pages.com/forums/viewtopic.php?f=2&t=1208&sid=b6c8f6ee17dcf0d7c90db439491b2b24&start=390#p52998 for the latest on Raddr's Y2K Retiree.  Note that Raddr still has "him" (this is a fictional but illustrative case) 25% in Tbills, despite anemic returns in the past years - see arebelspy's last line in the quote above.

dude

  • Handlebar Stache
  • *****
  • Posts: 2373
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #5 on: March 24, 2014, 08:30:52 AM »
John Greaney has been tracking this for 19 years now (and I'm eagerly looking forward to this year's addition).  You can see for yourself exactly how a 4% SWR has been working for various portfolio mixes over that period right here:

http://www.retireearlyhomepage.com/reallife13.html

If that isn't encouraging, I don't know what is (assuming you are not 100% fixed income).

foobar

  • Pencil Stache
  • ****
  • Posts: 731
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #6 on: March 24, 2014, 09:02:19 AM »
The assumption is that you can go back to work.  That is a huge unknown.  Even the burger flipping jobs were hard to find in 2009.  The common case for this happening is career woman taking 10 years off to have kids. You can read a lot of complaints about them having to take jobs way down the pay grade (i.e. they go from being teachers to day care workers) even in decent work environments.

Personally I think it is easier to drop a 100k lifestyle to 50k than a 20k lifestyle to 10k but a lot depends on lifestyle choices. Lock your spending up by buying things like big houses, private school, expensive property taxes, pets, and so on and it is hard to cut back.  Having to skip the trip to autralia on the other hand is pretty easy to do.


I think it's more of a fear for older retirees, who spend a lot more, you can't imagine lowering their lifestyle, and couldn't see going back to work.

If you're locked in to spending 100k annually, are on the hedonic treadmill and think that lowering your spending would make you less happy, and have portfolio issues, are 65 (and have been ER'd for say a decade), you may be pretty worried.

I personally am with you.  I figure that if after 20 years of ER I have to go back to work a bit, I tell myself that means I'll be where everyone else is at (but likely still with a pretty decent stache), yet I got 20 years of freedom in the meantime.  That seems well worth it to me.  And the only situation I can see that happening is a weird system/catastrophic failure (economic collapse, revolution, etc. - see Bernstein's Retirement Calculator from Hell Pt. 3) where working a few extra years and having a larger buffer wouldn't have helped anyways.

As I said earlier, I think the key is being flexible in your spending, such that you can cut back a little if necessary in the bad years.  If you're on the hedonic treadmill though, you may see cutting back as failure.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #7 on: March 24, 2014, 09:07:43 AM »
Personally I think it is easier to drop a 100k lifestyle to 50k than a 20k lifestyle to 10k but a lot depends on lifestyle choices. Lock your spending up by buying things like big houses, private school, expensive property taxes, pets, and so on and it is hard to cut back.  Having to skip the trip to autralia on the other hand is pretty easy to do.

In theory, yes.

In other words, if you are willing to, sure, those cuts are easier.  The problem is that people in a 20k lifestyle are often happier with less and willing to cut, the people spending that much are often unwilling to cut. 

So I don't see that working out in the real world.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

DoubleDown

  • Handlebar Stache
  • *****
  • Posts: 2076
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #8 on: March 24, 2014, 09:10:32 AM »
Besides the flexibility being advocated here, which is definitely advisable, I like Nords' strategy of having a fixed income to cover your most basic living expenses (geez Nord, can you get any more shout-outs on this forum lately??!). That way if the shit hits the fan, you at least won't be worrying about the basics. Agreed that if you're on a pretty bare-bones budget it could be difficult to find places to cut, so having some safe income in a long retirement can be good for your portfolio and peace of mind.

I don't think I've ever heard anyone on this site advocate taking a constant 4% SWR like a drone, regardless of circumstances. So take that 4% SWR with a grain of salt.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #9 on: March 24, 2014, 09:11:44 AM »
Besides the flexibility being advocated here, which is definitely advisable, I like Nords' strategy of having a fixed income to cover your most basic living expenses

Pfau also recommends annuitizing a basic income level.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

hybrid

  • Handlebar Stache
  • *****
  • Posts: 1686
  • Age: 54
  • Location: Richmond, Virginia
  • A hybrid of MMM and thoughtful consumer.
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #10 on: March 24, 2014, 09:54:53 AM »
The biggest wildcard I see foir the elderly is medical bills. My mother is 73, retired, and doing OK financially but her health is lousy. My biggest worry for her are major medical bills down the road and she already is well beyond able to work any more.

It's difficult to know how much you need for retirement when those kinds of setbacks can be both huge and unpredictable.

 

sly

  • 5 O'Clock Shadow
  • *
  • Posts: 49
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #11 on: March 24, 2014, 11:27:43 AM »
The biggest wildcard I see foir the elderly is medical bills. My mother is 73, retired, and doing OK financially but her health is lousy. My biggest worry for her are major medical bills down the road and she already is well beyond able to work any more.

It's difficult to know how much you need for retirement when those kinds of setbacks can be both huge and unpredictable.

 

which is why I plan to start a HSA soon. These accounts are super tax efficient. Combine a HSA with bronze ACA (Obamacare) plan and you should be straight.

On a separate note, I am sure most people on here would roll their eyes at the idea of buying an annuity, but when I reach my FI goal I plan to buy a couple of annuities to hedge against longevity risk.

2527

  • Bristles
  • ***
  • Posts: 486
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #12 on: March 24, 2014, 05:05:04 PM »
I worked at Vanguard for about a year and a half.  There was a real difference in confidence between people who were 55-65 and still working, and people who were about 70, not working any more, and not having any real prospects of getting hired and working again. 

SAHD

  • 5 O'Clock Shadow
  • *
  • Posts: 53
  • Location: Washington State
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #13 on: March 24, 2014, 06:34:46 PM »
 I am a long way off from FIRE, but I never understood the fear of it 'not working out'. Worst cast scenario is the numbers aren't working out and you have to seek out some kind of income. At the levels of spending most of us are anticipating in ER, even a part time restaurant job or hobby income could completely cover some huge market shortfalls.

If you are young enough then yes you get a part time job, but if you are 70 and all of a sudden the market crashes and some unexpected expenses pop up getting a part time job to "replenish" the supply is out of the question and you are screwed for the next 20 years..


Nords

  • Magnum Stache
  • ******
  • Posts: 3303
  • Age: 60
  • Location: Oahu
    • Military Retirement & Financial Independence blog
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #14 on: March 24, 2014, 06:53:52 PM »
I have been reading that a 4% swr is old school and does not work in todays environment.  Has anyone lived through the great recession withdrawing 4% and how is your savings holding out?
My spouse and I ER'd in June 2002, just when the tech wreck was getting really interesting, and then rode our asset allocation through the Great Recession.

It's exciting when your anticipated 4% SWR means that your actual withdrawal spikes up to 6% in 2008 and then to nearly 8% in 2009, and you haven't even done anything to your portfolio... just watched it melt away like a shave ice on a hot sidewalk.  By the middle of 2009, even though the markets were beginning to recover, it was all too easy to believe the doom & gloom. 

Except that we had a few confidence-building tools on our side:  a military pension is an inflation-adjusted annuity, and we knew that we could cut our spending if we needed to.  We also had a 90% equity asset allocation (which turned out to be very volatile) with two years' spending in cash, so we were able to ride out the first two years without cashing in any of those equities.  Then the value of that portfolio came roaring back. 

It turns out that we were "simply" tracing one of the portfolio values that's a member of the 95% success rate, not the 5% failures.  It's just what FIRECalc and FinancialEngines.com predicted for us in 2002.  We might've been near the outside of the envelope, but we were still within the success rate.  Lots of other investors were probably still within the envelope, too, but they panicked at the bottom and cashed out-- then sat on the sidelines as the markets recovered.  That's definitely failure territory.

Raddr's hapless Y2K investor retired at the peak of the markets and blithely kept up his 4% SWR, boosting his spending every year for inflation.  These days he's spending so much of his portfolio each year that it may not be able to recover during this bull market (however long it lasts), so he's probably going to be one of the 5% failures.  In Raddr's world he goes bankrupt and ends eating at the soup kitchen while sleeping under a highway overpass.  In the real world?  He'd probably have cut his spending to the bone, found cheaper housing, taken a part-time job, and decided to live on his Social Security at age 62.

Wade Pfau was one of the first to show that the 4% SWR is a bad idea when asset valuations are very high (like 2000 and 2007).  However he's also one of the first to show how humans overcome the weaknesses of the 4% SWR with some common sense-- annuitizing a portion of our portfolio (longevity insurance, even if it's just Social Security), cutting spending during recessions (even if it's just for a year or two) and having a different asset allocation than the original Bengen & Trinity Study models that led to the 4% SWR (spending the cash first). 

What probably saved our own portfolio was retiring at the pit of the first bear market (30 months after Raddr's Y2K robot).  Valuations were pretty low when we ER'd so our portfolio rose dramatically during the next five years and was able to absorb the shock of 2008-09.  (It's recovered all of its value since then, despite some aggressive spending on home improvement.)  We also kept a high-equity portfolio (because the rest of it was annuitized) yet we were spending cash during the worst of the recession instead of cashing in those equities. 

The "problem" with the 4% SWR is that computer models don't adequately reflect how we humans really spend our assets.  Wade Pfau is probably going to be among the first to figure out how to build a better model, and it'll still look a lot like the original 4% SWR with some defenses to use during a recession. 
Here's more explanations & links:
http://the-military-guide.com/2011/11/16/is-the-4-withdrawal-rate-really-safe/
http://financialmentor.com/free-articles/retirement-planning/how-much-to-retire/are-safe-withdrawal-rates-really-safe

Guyton has a model that allows a higher SWR than the original 4% model, although Guyton's spending rules are pretty darn complicated so I'm not even going to get into them here.  Bob Clyatt (of "Work Less, Live More") built a model that cuts back spending by 5% during recessions, and that's enough to get past most of the failures.  Others have noted that almost all retiree spending declines with age, which has been true for us even after just 12 years.  It could be simply that it declines with age because old retirees run out of money, but it appears to be a combination of declining mobility (no more backpacking in Himalayan hostels) and having spent one's ER optimizing their spending with their values.  It could also reflect that ERs have the time to seek out the real bargains (even if it's just frequent flyer mileage arbitrage) and no longer need a lot of money to live the lives they choose.

So here's the reality:  when you hit your portfolio value for your 4% SWR, then 95% of the time you're going to have more money than you need.  You insure against the other 5% by annuitizing some of that portfolio (even if it's just SS) and then using common sense during recessions.

Another reality of being human is that your ER budget is going to turn out to be overly conservative generous.  You won't cut back your lifestyle, but you'll find a lot of discounts & bargains.  Your ER is also going to facilitate the discovery of some passion that you're going to turn into a paying hobby.  When I ER'd I didn't predict that I'd be installing a photovoltaic system that paid for itself in just six years, or buying a cheap Prius and slashing my driving miles, or spending lots of time surfing cheap longboards and doing my own home entertainment improvement, or pulling in the big blogger bucks.   

And if you're one of those ERs who enjoys landlording or who built a diversified portfolio of dividend-paying equities... then you're absolutely going to have more income than you need.  One of the ERs from Early-Retirement.org, ClifP, saw his dividend stock income cut by only 10% during the entire Great Recession despite the headline carnage.  A few of his equities cut their dividends by far more than that, but his portfolio is diversified.

Besides the flexibility being advocated here, which is definitely advisable, I like Nords' strategy of having a fixed income to cover your most basic living expenses (geez Nord, can you get any more shout-outs on this forum lately??!). That way if the shit hits the fan, you at least won't be worrying about the basics. Agreed that if you're on a pretty bare-bones budget it could be difficult to find places to cut, so having some safe income in a long retirement can be good for your portfolio and peace of mind.
I don't think I've ever heard anyone on this site advocate taking a constant 4% SWR like a drone, regardless of circumstances. So take that 4% SWR with a grain of salt.
Besides the flexibility being advocated here, which is definitely advisable, I like Nords' strategy of having a fixed income to cover your most basic living expenses
Pfau also recommends annuitizing a basic income level.
As Arebelspy points out, a lot of my game plan turns out to have come from Pfau's playbook.  I've had plenty of time to read everybody else's playbooks, too, and add them to our game plan.  After 12 years I guess survivor bias is working in my favor...

As for that bare-bones budget, I agree that there won't be much room to cut-- but it might be enough.  It also won't take much part-time employment to cover any gaps.  You can get to a $30K budget by cutting $20K of spending from your $50K budget, or by adding $5K of employment to your $25K income.  But it would really suck to have to get back to your $50K budget by adding $25K of employment to your $25K income.
« Last Edit: March 24, 2014, 06:55:50 PM by Nords »

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #15 on: March 24, 2014, 11:29:38 PM »

If you are young enough then yes you get a part time job, but if you are 70 and all of a sudden the market crashes and some unexpected expenses pop up getting a part time job to "replenish" the supply is out of the question and you are screwed for the next 20 years..

Well my point was to start getting the extra income BEFORE you start eating into principle. If the hypothetical 70 year-old was using a 4% withdrawal rate their stash should last at least 25 years of spending even if they don't earn a dime more from that point. True they might live past 95, but even earning only 2% or so and it will last several more years beyond that.

I think the standard assumption seems to be that income (other than that produced by the stash) ceases after FIRE, which doesn't have to be the case at all. I make most of my income online and reselling on eBay, and I don't intend to stop doing that after I get FIRE.

BTW even a bedridden 70 yr old could do what I do to make most of my money online, so a part time source of income is almost always an option.

I think the key is to not get bogged down in the 'what-if' game. Any plan can be defeated with what-ifs. Don't let perfect be the enemy of good.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #16 on: March 24, 2014, 11:37:27 PM »
The assumption is that you can go back to work.  That is a huge unknown.  Even the burger flipping jobs were hard to find in 2009.  The common case for this happening is career woman taking 10 years off to have kids. You can read a lot of complaints about them having to take jobs way down the pay grade (i.e. they go from being teachers to day care workers) even in decent work environments.


My assumption is not necessarily that you can or should 'go back to work' per se, but that you can find SOME source of income. And that at mustachian levels of spending almost ANY income can make a big difference. Hell you can get about 200 bucks a month in my town donating blood plasma if you want.

Having to take a job 'way down the pay grade" doesn't really matter (except to the ego maybe), because all you need to do is cover 10 to 50% of your expenses to make a huge difference in your withdrawal rate. If there is a situation where you really can't even get a part time minimum wage job anywhere, then we're likely in an economic collapse scenario, and there is not really anything you could have done anyway (other than physically prepare with stored food, water, etc).

I think the key for anybody who is worried about their withdrawal rate failing is to get a paid off house. If you have a paid off house, then in the worst case scenario the only money you would REALLY need is for property taxes and food. You wouldn't even have to turn the lights on. You could just eat ramen noodles in the dark.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9538
  • Registered member
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #17 on: March 24, 2014, 11:46:47 PM »
You could just eat ramen noodles in the dark.

Current favorite MMM forum quote.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3521
  • Age: 83
  • Location: The oubliette.
  • Ghouls Just Wanna Have Funds!
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #18 on: March 25, 2014, 12:31:19 AM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short. So the examples so far have been encouraging to me.

It does help that I would be willing to take on a minimum wage job or waiting tables part time anywhere I could find if we needed to make up a short fall year or two. I worked both types during college and I wouldn't have a problem doing either, especially if it was for a short term income gap.

I know that the spending less as you are older seems to be common as well, so the SWR could and probably will be much less. I know my father told me he spend less than half of his pension and SS, and my mom just told me the same thing recently. I figure the same thing will happen with my husband and myself as we're also homebodies that have pretty simple hobbies and won't be spending a large amount in any case, let alone during down years.

Squirrel away

  • Handlebar Stache
  • *****
  • Posts: 1042
  • Location: United Kingdom
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #19 on: March 25, 2014, 05:14:22 AM »
I worry about this issue as well but as others on here have said we would work a small part time job in that case.

In the UK you can earn 10k a year without paying any tax (I think that is correct) so if I and my husband both took a little job each we would still have enough to live on even if the market dropped a lot.

rusty

  • 5 O'Clock Shadow
  • *
  • Posts: 76
  • Location: North Carolina
    • My Medigap Consultant
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #20 on: March 25, 2014, 06:26:30 AM »
The biggest wildcard I see foir the elderly is medical bills. My mother is 73, retired, and doing OK financially but her health is lousy. My biggest worry for her are major medical bills down the road and she already is well beyond able to work any more.

It's difficult to know how much you need for retirement when those kinds of setbacks can be both huge and unpredictable.

 
if she is on Medicare with a supplement and Part D, she only has to worry with premium increases.  The exposure is reduced considerably if she has access to Medicare.  For the rest of us younger ones, it could be a different story.

fallstoclimb

  • Handlebar Stache
  • *****
  • Posts: 1084
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #21 on: March 25, 2014, 07:07:30 AM »
The biggest wildcard I see foir the elderly is medical bills. My mother is 73, retired, and doing OK financially but her health is lousy. My biggest worry for her are major medical bills down the road and she already is well beyond able to work any more.

if she is on Medicare with a supplement and Part D, she only has to worry with premium increases.  The exposure is reduced considerably if she has access to Medicare.  For the rest of us younger ones, it could be a different story.


That's not entirely true.  Medicare doesn't cover long term facility stays / long term care, which is one of the largest medical expenses the elderly may incur (Of course, supplemental insurance may, but I would imagine it would be limited).  A very common scenario is that the elderly wind up in a nursing home and spend down their assets paying for their care until they are eligible for Medicaid. 

oldtoyota

  • Magnum Stache
  • ******
  • Posts: 3171
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #22 on: March 25, 2014, 07:17:54 AM »
The assumption is that you can go back to work.  That is a huge unknown.  Even the burger flipping jobs were hard to find in 2009.  The common case for this happening is career woman taking 10 years off to have kids. You can read a lot of complaints about them having to take jobs way down the pay grade (i.e. they go from being teachers to day care workers) even in decent work environments.


I think the above is important to take into consideration. On this board, I see a lot of people mention that they could "just get a job" if they need to later. While I agree 20 years of freedom is worth it even if one has to get a job later, I do not agree that it will necessarily be easy to get a job once you are old and ageism is rampant. I have seen talented friends unable to get jobs due to their age.

To solve for this in my own projections, I take a "worst case" scenario approach. For instance, I do not count social security at all. That will be a "bonus" income for me when the time comes. The disadvantage is that I might work longer than I must. The advantage is that it'll take a lot for my plan not to work. We each approach our projections differently based on our goals and comfort levels, and my way is just one of many ways to go about it.





« Last Edit: March 25, 2014, 07:20:11 AM by oldtoyota »

oldtoyota

  • Magnum Stache
  • ******
  • Posts: 3171
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #23 on: March 25, 2014, 07:24:42 AM »
The biggest wildcard I see foir the elderly is medical bills. My mother is 73, retired, and doing OK financially but her health is lousy. My biggest worry for her are major medical bills down the road and she already is well beyond able to work any more.

It's difficult to know how much you need for retirement when those kinds of setbacks can be both huge and unpredictable.


Yep. I am glad you brought this up. I started a whole thread about this very topic--last year, I think. Thanks to our current healthcare system, we can really be messed up financially by a health issue!


stuckinmn

  • Stubble
  • **
  • Posts: 109
  • Location: Minneapolis
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #24 on: March 25, 2014, 08:45:36 AM »
As someone who is contemplating FIRE in the near future, this thread brings up one of the things I've been worrying about.

I understand the charts and historical analysis stating that an x% withdrawal rate would work unless you were unlucky enough to have retired in a few of the very worst years (e.g 1966, 2000, 2008) so you have a 95% chance of making it.  This works fine in a traditional career model where you work until you are 65 and then quit, so whether or not you retire in one of those bad years is determined purely by luck.

The problem with FIRE is that we are working toward a dollar amount and not an age.  And when are we most likely to hit that magical dollar figure?  Exactly at the top end of a bull market, sometime like 1966, 2000, or 2008.  Absent an inheritance or other windfall, none of us are going to hit that figure at the bottom of a bear market where the analysis says you would actually grow your stache in retirement.  So we are all going to be naturally inclined to retire at the worst possible time, financially speaking.

So I think this goes to what MMM and all the others are talking about- have some flexibility.  Either stay in the workforce a couple of years more for some cushion or be prepared to cut back or work again if the market crashes.   
   

meadow lark

  • Walrus Stache
  • *******
  • Posts: 5611
  • Location: Louisiana
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #25 on: March 25, 2014, 10:05:55 AM »
Good point.  Hadn't thought of it that way.  On the other hand, the easiest time to go back to similarity paid work for a couple years would be right after FIRE.  That would also be the easiest time (because of age) to really drop the budget by spending a year in Thailand, the Philippines, Guatemala.  It's easier to be flexible when you are young. 
  Also, while we are planning on delaying social security, it makes sense that this could depend on the economy.

raleigh_mustache

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #26 on: March 25, 2014, 10:11:08 AM »
From this thread I see 3 types of ER people. 1.) IS NOT worried because they have a year by year steady/low stream of income from side job or hobby. 2.) IS NOT worried because if they need to get a PT job later down the road they will/can 3.) IS worried because they are unsure of how the 4% will work out over time given medical/govt/market unknowns and unsure of future PT job

Congrats to person #1, I think this would be ideal when I reach ER (still a long ways off), but I will not count on it. For Person #3 (and potentially #2), I pose this question:

Would you rather not just work  2 extra years once you reach your "Savings Goals" to provide the necessary buffer? This would be when your income should be at its peak. This would allow your "Savings Goal" to hopefully accrue another 7%/year untouched, and also be able to bank your typical savings rate up to that point in time.

I generally have worries along the lines of #3, especially since I would rather not have to wait tables when I'm 64. So my plans would be to not just hit the "Savings Goal"  and call Quits, but establish some sort of buffer that should be able to weather any storm or allow a random splurge down the road if things are going well on the 4% front.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #27 on: March 25, 2014, 10:29:10 AM »
From this thread I see 3 types of ER people. 1.) IS NOT worried because they have a year by year steady/low stream of income from side job or hobby. 2.) IS NOT worried because if they need to get a PT job later down the road they will/can 3.) IS worried because they are unsure of how the 4% will work out over time given medical/govt/market unknowns and unsure of future PT job

Congrats to person #1, I think this would be ideal when I reach ER (still a long ways off), but I will not count on it. For Person #3 (and potentially #2), I pose this question:

Would you rather not just work  2 extra years once you reach your "Savings Goals" to provide the necessary buffer? This would be when your income should be at its peak. This would allow your "Savings Goal" to hopefully accrue another 7%/year untouched, and also be able to bank your typical savings rate up to that point in time.

I generally have worries along the lines of #3, especially since I would rather not have to wait tables when I'm 64. So my plans would be to not just hit the "Savings Goal"  and call Quits, but establish some sort of buffer that should be able to weather any storm or allow a random splurge down the road if things are going well on the 4% front.

You'll always run into the question though: How much buffer is enough?

There's a name for what you're suggesting in the early retirement communities: One More Year (OMY) Syndrome.

How many levels of safety do you need?  How many times are you going to say "I'll work one more year"?  What percent on cFIREsim is enough?

I'll just leave this link here without further comment: http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

soccerluvof4

  • Walrus Stache
  • *******
  • Posts: 6683
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #28 on: March 25, 2014, 11:47:38 AM »
This is a good thread as it hits home to things I find myself thinking about constantly and working different formulations. And as Arebelspy said " How much buffer is enough". I think for me at least for now is to do what makes me happy while adding to that buffer. Just depends on what situation you are in.  For me the number one concern as well is health/costs/issues etc.. I don't fear down-spending or turns in the market as I can still control those items i feel enough to get through the leaner times as Nord shared. But alot of good points being made on here. And i do feel i need at least one more safety net.

Nords

  • Magnum Stache
  • ******
  • Posts: 3303
  • Age: 60
  • Location: Oahu
    • Military Retirement & Financial Independence blog
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #29 on: March 25, 2014, 12:18:44 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3521
  • Age: 83
  • Location: The oubliette.
  • Ghouls Just Wanna Have Funds!
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #30 on: March 25, 2014, 12:44:44 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

And I have cats, so there's that. :)


I can see the positive results running FIREsim and read about what others have done in their ER, and still worry that I'm going to end up screwing up somehow, so yeah, the cat lady homeless piece speaks to me. It really sucks when the rational/logical part of the brain can't shut up the stupid emotional/impulse part...

« Last Edit: March 25, 2014, 12:46:30 PM by Frankies Girl »

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #31 on: March 25, 2014, 01:09:28 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

You leave Brewer out of this!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28420
  • Age: -999
  • Location: Seattle, WA
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #32 on: March 25, 2014, 01:10:11 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

And I have cats, so there's that. :)


I can see the positive results running FIREsim and read about what others have done in their ER, and still worry that I'm going to end up screwing up somehow, so yeah, the cat lady homeless piece speaks to me. It really sucks when the rational/logical part of the brain can't shut up the stupid emotional/impulse part...

Do you not trust yourself to see it coming though, and make the necessary changes?
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3521
  • Age: 83
  • Location: The oubliette.
  • Ghouls Just Wanna Have Funds!
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #33 on: March 25, 2014, 01:34:59 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

And I have cats, so there's that. :)


I can see the positive results running FIREsim and read about what others have done in their ER, and still worry that I'm going to end up screwing up somehow, so yeah, the cat lady homeless piece speaks to me. It really sucks when the rational/logical part of the brain can't shut up the stupid emotional/impulse part...

Do you not trust yourself to see it coming though, and make the necessary changes?

I tend to be pretty pessimistic about my success compared to general success. I have high hopes, but it's easy to slide back into pessimism and start doubting myself. I'm still technically a noob at all of this. I was doing the living below my means and saving and investing, but the really paying attention and getting the investments working hard is just in the last year and figuring out that I might be able to live off of those investments now rather than later was a happy shock. But I worry that I'm a total lightweight and probably am fooling myself - you know like a little knowledge is a dangerous thing? I've learned just enough to be a danger. ;)

That's one of the reasons I would like to read about other people already ER and how they're dealing with the ups and downs. Anecdotal evidence is very reassuring. If other regular people can do it, then why can't I?


« Last Edit: March 25, 2014, 01:36:43 PM by Frankies Girl »

Nords

  • Magnum Stache
  • ******
  • Posts: 3303
  • Age: 60
  • Location: Oahu
    • Military Retirement & Financial Independence blog
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #34 on: March 25, 2014, 03:00:11 PM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

And I have cats, so there's that. :)


I can see the positive results running FIREsim and read about what others have done in their ER, and still worry that I'm going to end up screwing up somehow, so yeah, the cat lady homeless piece speaks to me. It really sucks when the rational/logical part of the brain can't shut up the stupid emotional/impulse part...

Do you not trust yourself to see it coming though, and make the necessary changes?

I tend to be pretty pessimistic about my success compared to general success. I have high hopes, but it's easy to slide back into pessimism and start doubting myself. I'm still technically a noob at all of this. I was doing the living below my means and saving and investing, but the really paying attention and getting the investments working hard is just in the last year and figuring out that I might be able to live off of those investments now rather than later was a happy shock. But I worry that I'm a total lightweight and probably am fooling myself - you know like a little knowledge is a dangerous thing? I've learned just enough to be a danger. ;)

That's one of the reasons I would like to read about other people already ER and how they're dealing with the ups and downs. Anecdotal evidence is very reassuring. If other regular people can do it, then why can't I?
Which thought do you prefer:
"Crap, I wish I'd worked for just one more year!"
or
"Crap, I wish I'd retired a year ago!!"

I've never heard anyone express the former sentiment.  But then this is a financial independence forum, and there might be considerable self-selection bias in favor of the latter statement.

My impression is that "Just one more year" never really ends.  Every year it's always another issue, until you find yourself agonizing over the price of canned tuna in your grocery budget or cursing the Bureau of Labor Statistics website for not updating their CPI numbers every morning or trying to decide whether it's safe to round up your SWR of 2.783946%.  The only thing that pushes these sufferers over the line is a personal health issue or a family emergency or a layoff or some other externally-imposed calamity.  Nothin' like starting your ER in crisis mode and at a time NOT of your own choosing.

OTOH if you feel that you've covered all of the bases, and your anonymous Internet "friends" concur, then you should do what makes you happy.  Keep working because you love the job, or give notice because your BS bucket is full.  If you decide to ER then you'll have white knuckles on the purse strings for the first 12-18 months, especially if the stock market has a down year.  But after a year or two you'll start to feel better about your choice ("Crap, I wish I'd retired a year ago!!"), after a few years you'll stop fretting about the finances, and after five years you'll start to relax the purse strings.

Every year after that is a bonus... especially if it's just one more year of freedom. 

RootofGood

  • Handlebar Stache
  • *****
  • Posts: 1361
  • Age: 41
  • Location: North Carolina
  • Retired at age 33. 5 years in, still loving it!
    • Root of Good
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #35 on: March 25, 2014, 03:02:01 PM »
Our plan is more like "spend <3% of today's portfolio, and if the shit hits the fan, try not to spend more than 4% of whatever we have left in any given year".  :) 

In rough terms, we plan to spend $32,000/yr which is just under 3% of a $1.2 million portfolio (setting aside some earmarks for specific uses).  If the Great Recession #2 ever happens, we can probably cut to $24,000/yr pretty easy (just stop discretionary spending like international vacations and start eating ramen by moonlight).  $24,000 is only 4% of $600,000.  In other words, if our portfolio gets cut in half, we'll still be totally fine.  And $24k is roughly our annual dividend income, so probably a decent floor on our spending.  Dividends don't get cut as much as stock prices in a recession.

And I can always hustle a bit to make $5000 per year or so.  That way we can enjoy our ramen with the lights on.  :)

Allow me to shamelessly self-promote an article I wrote a couple months ago.  http://rootofgood.com/running-out-of-money-in-early-retirement/ 

My assertion in that article is that it's nearly impossible to run out of money in early retirement as long as you remain a little flexible.  You can always earn a little to cover portfolio short falls, or spend a little less.  You'll have dividend income.  And you'll have SS (in some amount at some point). 

RootofGood

  • Handlebar Stache
  • *****
  • Posts: 1361
  • Age: 41
  • Location: North Carolina
  • Retired at age 33. 5 years in, still loving it!
    • Root of Good
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #36 on: March 25, 2014, 03:06:49 PM »
OTOH if you feel that you've covered all of the bases, and your anonymous Internet "friends" concur, then you should do what makes you happy.  Keep working because you love the job, or give notice because your BS bucket is full.  If you decide to ER then you'll have white knuckles on the purse strings for the first 12-18 months, especially if the stock market has a down year.  But after a year or two you'll start to feel better about your choice ("Crap, I wish I'd retired a year ago!!"), after a few years you'll stop fretting about the finances, and after five years you'll start to relax the purse strings.

Every year after that is a bonus... especially if it's just one more year of freedom.

+1

Glad my employer decided they were done with me.  :)  It gave me the nice push out of the comfort of a full time paycheck.  Next up will be giving Mrs. RoG the gentle nudge to quit.

Now that I'm out of the full time work game, I realize it wouldn't be that hard to get back in and make more money if I (a) wanted to cure boredom or (b) needed more money to fund our desired lifestyle. 

Eudo

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #37 on: March 25, 2014, 03:20:43 PM »
I'd like to second what stuckinmn said. I think this is a subtle, but large hole in most people's thinking about FireCalc. They mentioned that most of us have magical number in mind, but statistically we are most likely to hit that number during a bubble or at least after a long run-up in the market. But those times are precisely the 5% of times that the 4% rule fails. So in reality if you got 1000 mustachions and watched them after they retired, far more than 5% of them would see their plan fail (or at least would have to move to plan B)

I've been thinking about this too, and think that one way to deal with it is to not have a magical number for your total stache, but rather a number for your annual passive income. You don't retire when your costs equal 4% of your stache. You retire when your costs equal your dividends.

A lot of people might not like that rule because the S&P is currently yielding about 2% right now. But I'd remind you that when FireCalc gives you a failure rate, it's being run on decades and decades of data when the S&P dividend rate was over 4%! It's not surprising that a 4% withdrawal is safe most of the time when the dividend rate is higher than that!

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9538
  • Registered member
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #38 on: March 25, 2014, 03:48:06 PM »
OTOH if you feel that you've covered all of the bases, and your anonymous Internet "friends" concur, then you should do what makes you happy.  Keep working because you love the job, or give notice because your BS bucket is full.  If you decide to ER then you'll have white knuckles on the purse strings for the first 12-18 months, especially if the stock market has a down year.  But after a year or two you'll start to feel better about your choice ("Crap, I wish I'd retired a year ago!!"), after a few years you'll stop fretting about the finances, and after five years you'll start to relax the purse strings.

Every year after that is a bonus... especially if it's just one more year of freedom.

+1

Glad my employer decided they were done with me.  :)  It gave me the nice push out of the comfort of a full time paycheck.  Next up will be giving Mrs. RoG the gentle nudge to quit.

Now that I'm out of the full time work game, I realize it wouldn't be that hard to get back in and make more money if I (a) wanted to cure boredom or (b) needed more money to fund our desired lifestyle.

I'm envisioning retiring when I hit 4% AND get laid off.  In theory, this will happen during a recession -- thereby addressing the issue of retiring at the peak of the market. 

As an alternative, I may continue to get a series of lower paying and less demanding jobs over time until I'm either retired or happy going to work every day.

Breaker

  • Stubble
  • **
  • Posts: 200
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #39 on: March 25, 2014, 04:28:43 PM »
Wow!  A lot of thoughts about a buffer for your retirement stash.  There seems to me to be two things that need mentioning. 

1.  Besides unexpected medical and care expenses eating up your savings early there are a lot of mundane little things that many of you younger people are forgetting. 

Cars and appliances wear out and have to be replaced.  Your retirement budget should include replacement of at least one of these things every 7-8 years.  You will probably feel more comfortable with a newer more reliable car too.

As you get older you will either not be physically able or mentally willing to do some of the things that you do for yourself today.  (Although I know that some of you young people will not listen/believe this.)  At some point you will need or want to hire these things done for you.

1.  You have reached the limit of times that you will ever scrub another toilet bowl.  So you'll hire a housekeeper to come in at least twice a month.

2.  You will be unable to drive yourself anymore.  That leaves you with the choice of public transportation or hiring a taxi.  It may be possible to bum a ride with friends but if they are as old as you, maybe not. 

3.  You have done your last oil change/mowed your last lawn.  You must pay someone else to do it. 

4.  Clean your own gutters or do roof repairs?  Not possible, not safe, not desirable. 

So I think that everyone should build a safety net of savings to cover these kinds of services.  HINT:  Don't expect your kids to do them for you.

OTOH  at some point in your life there is no real need to preserve capital .  Say 75-80 years old.  If you have 500K in your savings that is 50 years of an extra 10K per year of living expenses that are not dependent on any kind of earnings.  You will have to figure out how that will effect the income that you are getting from those savings. 

Just a couple of thoughts on things to consider before FIRE.

Jan 

Cassie

  • Walrus Stache
  • *******
  • Posts: 6923
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #40 on: March 25, 2014, 06:19:26 PM »
I totally agree Jan that as you age you may need to pay for more things. Your kids may not live by you or be willing to help.  However, many times people travel less as they age so maybe the costs will equal out.  Also you will not always be able or want to ride a bike instead of driving.  I definitely agree that you have to plan for car replacement.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #41 on: March 25, 2014, 06:24:34 PM »
2.  You will be unable to drive yourself anymore.  That leaves you with the choice of public transportation or hiring a taxi.  It may be possible to bum a ride with friends but if they are as old as you, maybe not. 

By the time I'm that old, I'll have a Google car to do the driving for me.  They're already on the highways out here in the Bay Area.  They'll be everywhere in 30 years.  I'll make sure to set aside some $ in my budget for (a used) one.  The future will be grand!

Breaker

  • Stubble
  • **
  • Posts: 200
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #42 on: March 25, 2014, 10:20:56 PM »

By the time I'm that old, I'll have a Google car to do the driving for me.  They're already on the highways out here in the Bay Area.  They'll be everywhere in 30 years.  I'll make sure to set aside some $ in my budget for (a used) one.  The future will be grand!

Hey Eric,

That's my plan too but the laws governing auto-driving are going to be the hold up.  Are they already on the Highways?  I thought they were on the Google Campus and on public streets in some small place near Sacramento.

Jan

bacchi

  • Walrus Stache
  • *******
  • Posts: 5704
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #43 on: March 25, 2014, 10:32:36 PM »
Hey Eric,

That's my plan too but the laws governing auto-driving are going to be the hold up.  Are they already on the Highways?  I thought they were on the Google Campus and on public streets in some small place near Sacramento.

Jan

They're legal in Nevada, California, and Florida. They also have lower accident rates

dude

  • Handlebar Stache
  • *****
  • Posts: 2373
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #44 on: March 26, 2014, 06:56:00 AM »
Wow!  A lot of thoughts about a buffer for your retirement stash.  There seems to me to be two things that need mentioning. 

1.  Besides unexpected medical and care expenses eating up your savings early there are a lot of mundane little things that many of you younger people are forgetting. 

Cars and appliances wear out and have to be replaced.  Your retirement budget should include replacement of at least one of these things every 7-8 years.  You will probably feel more comfortable with a newer more reliable car too.

As you get older you will either not be physically able or mentally willing to do some of the things that you do for yourself today.  (Although I know that some of you young people will not listen/believe this.)  At some point you will need or want to hire these things done for you.

1.  You have reached the limit of times that you will ever scrub another toilet bowl.  So you'll hire a housekeeper to come in at least twice a month.

2.  You will be unable to drive yourself anymore.  That leaves you with the choice of public transportation or hiring a taxi.  It may be possible to bum a ride with friends but if they are as old as you, maybe not. 

3.  You have done your last oil change/mowed your last lawn.  You must pay someone else to do it. 

4.  Clean your own gutters or do roof repairs?  Not possible, not safe, not desirable. 

So I think that everyone should build a safety net of savings to cover these kinds of services.  HINT:  Don't expect your kids to do them for you.

OTOH  at some point in your life there is no real need to preserve capital .  Say 75-80 years old.  If you have 500K in your savings that is 50 years of an extra 10K per year of living expenses that are not dependent on any kind of earnings.  You will have to figure out how that will effect the income that you are getting from those savings. 

Just a couple of thoughts on things to consider before FIRE.

Jan

True, but the Life Cycle Theory shows that people's expenses (on the whole) decline as they age.  So in all likelihood, the money you were once spending on eating out, traveling, etc., gets diverted toward paying for those things you mention, because you stop spending it on the things I mentioned.

Squirrel away

  • Handlebar Stache
  • *****
  • Posts: 1042
  • Location: United Kingdom
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #45 on: March 26, 2014, 07:06:45 AM »
From this thread I see 3 types of ER people. 1.) IS NOT worried because they have a year by year steady/low stream of income from side job or hobby. 2.) IS NOT worried because if they need to get a PT job later down the road they will/can 3.) IS worried because they are unsure of how the 4% will work out over time given medical/govt/market unknowns and unsure of future PT job

Congrats to person #1, I think this would be ideal when I reach ER (still a long ways off), but I will not count on it. For Person #3 (and potentially #2), I pose this question:

Would you rather not just work  2 extra years once you reach your "Savings Goals" to provide the necessary buffer? This would be when your income should be at its peak. This would allow your "Savings Goal" to hopefully accrue another 7%/year untouched, and also be able to bank your typical savings rate up to that point in time.


When my husband retires at 55 I will only be 50 years old so I might get a part time job then anyway just to add some more money to the stache, knowing he is at home doing the housework hopefully.:) We are planning to have his pension kick in at 60 so we won't need to worry after that age as his company has a final salary scheme so you get money to live on each year until death.


oldtoyota

  • Magnum Stache
  • ******
  • Posts: 3171
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #46 on: March 26, 2014, 09:34:42 AM »
I'm actually glad I saw this thread, as the subject of ER in the very near future has been on my mind quite a bit lately. I am one of those types that just can't help worrying that while things work out on paper, that real world application might fall far short.
"Bag Lady With Cats" is a recognized behavioral-psychology syndrome. 

http://www.washingtontimes.com/news/2006/aug/23/20060823-122252-7667r/?page=all

I'm not sure what the guy equivalent would be, but I'm pretty sure it would involve alcohol and firearms...

And I have cats, so there's that. :)


I can see the positive results running FIREsim and read about what others have done in their ER, and still worry that I'm going to end up screwing up somehow, so yeah, the cat lady homeless piece speaks to me. It really sucks when the rational/logical part of the brain can't shut up the stupid emotional/impulse part...

Do you not trust yourself to see it coming though, and make the necessary changes?

I tend to be pretty pessimistic about my success compared to general success. I have high hopes, but it's easy to slide back into pessimism and start doubting myself. I'm still technically a noob at all of this. I was doing the living below my means and saving and investing, but the really paying attention and getting the investments working hard is just in the last year and figuring out that I might be able to live off of those investments now rather than later was a happy shock. But I worry that I'm a total lightweight and probably am fooling myself - you know like a little knowledge is a dangerous thing? I've learned just enough to be a danger. ;)

That's one of the reasons I would like to read about other people already ER and how they're dealing with the ups and downs. Anecdotal evidence is very reassuring. If other regular people can do it, then why can't I?

Maybe you have "Imposter Syndrome" instead of Bag Lady Syndrome?? ;-)


DoubleDown

  • Handlebar Stache
  • *****
  • Posts: 2076
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #47 on: March 26, 2014, 10:49:39 AM »
If you decide to ER then you'll have white knuckles on the purse strings for the first 12-18 months, especially if the stock market has a down year. 

Ha, glad to know I'm not alone! Thanks for that. I'm in month 5 of ER, and trying to be careful about spending this first year or two as I get a feel for things. I've found that my spending has remained stable (as expected), and has even gone down, particularly in gas/commuting expenses.

Interestingly, I see a parallel in the "enough" and "one more year syndrome" issues, and spending in ER. For example, I forecast ending up with a ridiculous surplus when I die, but would be reluctant to spend too much over the years for fear of having "enough" to last all the years or deal with potentially big ticket items later in life. If we have a kick-ass year in the markets this year and my stash grew by 50%, would I feel it's now "enough" to loosen the purse strings a bit and, say, take a nice international trip with the family?

No matter what, let me shout as loud as I can to everyone worrying about "enough" and "one more year": I WOULD NOT TRADE THIS TIME I'VE ALREADY HAD IN ER FOR ANYTHING, IT IS FREAKIN' AWESOME!!

aclarridge

  • Guest
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #48 on: March 26, 2014, 10:56:04 AM »
No matter what, let me shout as loud as I can to everyone worrying about "enough" and "one more year": I WOULD NOT TRADE THIS TIME I'VE ALREADY HAD IN ER FOR ANYTHING, IT IS FREAKIN' AWESOME!!

Thanks for this.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: who has lived off of 4% swr for over 10 years and how is it going?
« Reply #49 on: March 26, 2014, 11:24:54 AM »

You'll always run into the question though: How much buffer is enough?



I guess for the people who are that worried, it should be possible to calculate right? I mean if Firecalc says the 4% withdrawal rate fails 5% of the time, just find the withdrawal rate that works over 99% of the time.

I think the key would still  be to make the decision ahead of time about what amount of money you are working towards, or like you said, the "one more year' syndrome could keep you working forever out of fear.