quote author=nereo link=topic=26866.msg464298#msg464298 date=1416935903]
I've liked this discussion and have been thinking a fair bit about the points raised against saving less.
One thing that's been rattling around my brain is simply that there's a law of diminishing returns when it comes to retirement savings. At 6% there's a 50/50 shot that a portfolio survive several decades. At 5% it sits around 70%, at 4% it sits in the low 90s, and to hit the 'magical' 100% mark we need to go down to about 3.5% All will most likely suffice, but each level requires $100k+ and likely a few more years of working and saving, yet it results in a lesser increase in success than the level before it. Each person has their own comfort zone - but I'm just surprised how many are shooting for a '100% historical certainty even with no adaptability'. To get those few extra % points from 4% to 3.5% might take several years.
The earning money now while while we have a high-paying job is the response that resonates most to me. I can understand not wanting to turn that spigot off, knowing there might not be another time when I'll be able to make that kind of money automatically. For me it's less of an issue, since we don't have those $100k+ incomes I hear about from other posters.
Regarding the need raise money at all - this seems to be one area where discussion has focused like flies to honey. earning money is just one potential strategy in a dynamic ER. Spending less (in all its various forms) is another obvious one - we've probably over-padded what we need in retirment, and if research is to believed most people already over-estimte what they'll want when they retire. What's important is that these changes wouldn't even be permanent - they would be infrequent if they occurred at all.
the finding work in your 50s/60s is certainly an argument that gives me pause. However, I will conjecture that most of the people who've found it difficult to get work is because they are looking for a 'job', instead of something that will pay money. Most of the stories I've heard of 50+ people not being able to get (any) employment seem to have a common thread - they had an internal standard that they would only take a job that paid mroe than X$/hr or X$/year. I know personal experience differs, but from what there has always been a need for substitute teachers, tutors, and jobs in the service industry. the work may be sporadic but that's the great thing about being FI - you can pick and choose, and if you'd rather cut spending instead of working, so be it. if you'd rather find work once a recovery is in place, that will work too.
Finally, after looking through countless scenarios one conclusion that I've drawn is that portfolios which fail are almost always in trouble within the first 5-6 years. It isn't a matter of adjusting expenses/finding part-time work 20 years down the road. It's about making adjustments in the first decade. Conversely, even at 5% SWR, a large number of sample portfolios show large gains after two or three decades - if your 'stach increases in value in the first decade the likelihood of failure is almost nil (or at least hasn't historically happened before).
[/quote]
That is a very good post and I agree with much of it. There is absolutely a point of diminishing returns. On the early retirement forum, we see a lot of people who could have withdraw rates under 3%, who even if they don't loath their job, certainly don't like them and are putting in the extra year working for the extra .5% success rate. I don't get it. I agree with Bernstein and others who say anything above 95% is basically silly, the world changes too much in 30 years for that to make sense to think you can predict what will happen.
I will also say in my 14 years reading retirement forums, I have yet to meet a single actual retiree who dutifully stuck to withdrawing 4% of their initial portfolio, adjust for inflation, and rebalance.
Actual retirees adjust, a lot.
I would also say that plenty of early retirees (certainly including myself) discount social security to much. At age 40. I laugh at collecting SS and said,well if I am lucky I'll collect some. At 55, while SS is not part of planning spending it is an important part of my back up plan in case my investments go really south or expense go up a lot. Social Security represents more than 1/2 the income for 52% of married couples and 74% of singles and 47% of single rely on it for more than 90% of their income. If all these folks can get buy sure the smart frugal folks can do it also.
That said there is good reasons to be conservative. The 70% figure at 5% is for a 30 year retirement, that is too short a period for anybody who is planning on retiring in their 50s needs to be looking at 35-40 year retirement. The 5% success rate for 37 year retirement is 60%. Those of you in your 20 or 30s, life expectancy is increasing at rate slightly under 1 year/decade so a 25 year old planning on retiring in his early 40s is really looking at 50 year long retirement.
There is good reason to fear that investment returns in the next 30-40 years will be lower than in the past. Bond yields are several points below historical averages, and the P/E 10 ratio for stocks is near historical highs. Of course those of your 10 or 20 years from retirement that doesn't matter that much.
I'd also a little suspicious of the studies of the spending habits of the old. While it is absolutely true that older folks are less excited about buying stuff, it just needs to dusted, stored, and most importantly you have to learn how to use the damn thing. I suspect that a lot reason spending is down as you get older because they don't have a lot of money. If SS is more than 1/2 the income for more than 1/2 the people they just don't have that much. Observing my almost 90 year old mom,and friends with similar aged parents, you really want to have a enough money for a good retirement/nursing home. Those aren't cheap.
The one area where I don't agree is how quickly portfolio. The Y2K retiree $1 million portfolio was looking pretty bad in 2007 ($520K in real terms) before being devastated by the 2008/9 crash. However a person who retired only 1or 2 year early portfolio was looking ok in 2006/2007, but the great recession has put their portfolio in serious risk
