Hit my "number" (I think)...now what?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Hit my "number" (I think)...now what?

Post by jjunk »

As part of my planning, I put together a spreadsheet a while back which did a simple math calculation for various stagnant withdrawal rates. Effectively =(monthly expenses x12)SWR. For example, for a 5k/mo expense retirement at a stagnant 3% WR I'd need (5000x12)33.3=1.998M. I dont plan on having a stagnant withdrawal rate personally but it was how I came up with my "number" for planning purposes. I've been using the 3% stagnant as my goal given it being conservative and I'd be retiring relatively young if I pulled the plug (currently 47).

Today I hit the "number" on my spreadsheet. Yay. But it got me to thinking what I should do from here and if I calculated the number correctly in the first place. For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.

I dont include social security in my planning and I dont have any backstop (inheritance, pension, etc). When I pull the plug, I wont be coming back to the workforce in a way which will come near the total comp I earn today. My current job is fine but my health is not. I've been burnt out for quite a while now. But if I quit, even to take a break from full time work, then I'd be doing so knowing my next job will pay 50-60% less than I make now (if not more). So I want to make sure I'm as right as I can be before considering retiring.

Questions for the forum are:

1. Did I miss anything in my calculations above?
2. Once you hit your number, what did you do and how did you approach final planning to actually retire?
RubyTuesday
Posts: 905
Joined: Fri Oct 19, 2012 11:24 am

Re: Hit my "number" (I think)...now what?

Post by RubyTuesday »

Some initial thoughts…

In today’s low-yield environment, 3% is not really all that conservative. It’s probably reasonably safe if you have ability to reduce expenses as necessary and aren’t hit with unexpected large expenses.

I would suggest taking a closer look at what taxes, healthcare, and large purchases really look like. In other words, create a retirement expense budget with assumptions around car / appliance replacement. Get an estimate of your healthcare costs (ACA?) at current age and go ahead and price as if you’re 10 years older to get feel for how it will grow over time.

If your 3% still provides for your estimated expenses with those items, and you have a reasonable asset allocation, you could probably pull the plug without concerns.

In any event, congrats!
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
User avatar
Wiggums
Posts: 4080
Joined: Thu Jan 31, 2019 8:02 am

Re: Hit my "number" (I think)...now what?

Post by Wiggums »

Congratulations on your savings.

Before you pull the plug, make sure that you have priced healthcare, dental and vision plans. If you do Roth conversions, it’s good to plan that now.

Being flexible with your discretionary expenses is helpful.

I retired at 56. No regrets.
flyingaway
Posts: 3472
Joined: Fri Jan 17, 2014 10:19 am

Re: Hit my "number" (I think)...now what?

Post by flyingaway »

Hitting your number means (financial) freedom. If you like working, continue working. If you don't like working, retire and find something else to spend your time.
dak
Posts: 49
Joined: Sat Feb 27, 2016 7:31 pm

Re: Hit my "number" (I think)...now what?

Post by dak »

I would consider taking a very close look at your expense estimates. You have quite a few years of paying for healthcare ahead of you and that needs some careful investigation.

I also discovered that once I retired the "large infrequent expenses" came up more often - through our years in our current home, there was a bit of deferred maintenance that needed attending to and that boosted our expenditures beyond my expectations. (Fortunately (?) the pandemic depressed our travel spending so that these offset each other pretty well, but I guess you can't count on a well times global health crisis to come along to balance your budget.)

Congratulations on hitting your number! That is quite an accomplishment at your age.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

Thanks for all the feedback so far, much appreciated.

Since most comments are about expense tracking, we've diligently tracked our spending for the last 10yrs. We're usually the same month to month within a few hundred dollars. So I feel like I have a good handle on how we spend money living the way we do today. Since I want us to maintain that quality of life, I took that number and added the buffer of 3.5k/mo to it.

I came to 3.5k/mo by amortizing things like car purchases, vacations, social memberships (zoo, gym, etc) and finally healthcare. That all seems to fit within that extra money. Healthcare was the trickiest to estimate so what we've done is create a spreadsheet and follow the ACA premium/out of pocket costs for our area over the last 5yrs. We've broken it out into with subsidy and without subsidy numbers to get an idea of the range and then further maxed out one adult on the middle cost plan as a way to come up with our number there. Thats definitely the scariest of the things to try and calculate.

Given I've tried to leave plenty of fat in the planning number, I'm hoping thats safe enough. Only one way to find out :D
THY4373
Posts: 1477
Joined: Thu Mar 22, 2012 3:17 pm

Re: Hit my "number" (I think)...now what?

Post by THY4373 »

On ACA don't forget it goes up with age. Assuming no subsidies in my neck of the woods at age 64 it is around a $1000 per month per person. I hit my number this year (a few years older than you) but I'll work until 55 to get retiree health benefits. In addition to expenses which you seem to have a handle on I'd also start modeling your withdrawals and Roth conversions to minimize RMDs. I am also taking the time to understand Medicare so I can better budget for that and hopefully minimize my IRMAAs.
Marseille07
Posts: 4698
Joined: Fri Nov 06, 2020 1:41 pm

Re: Hit my "number" (I think)...now what?

Post by Marseille07 »

Seems to me like you're all set. Congratulations.
Ramjet
Posts: 1007
Joined: Thu Feb 06, 2020 11:45 am
Location: Ohio

Re: Hit my "number" (I think)...now what?

Post by Ramjet »

RubyTuesday wrote: Wed Jun 16, 2021 11:10 am In today’s low-yield environment, 3% is not really all that conservative
A 3% withdrawal rate means that you can withdrawal 3% of assets every year for the next 33 years without ANY portfolio growth whatsoever. This is the definition of conservative
VT & HFEA
User avatar
novolog
Posts: 164
Joined: Tue Jan 30, 2018 6:24 pm

Re: Hit my "number" (I think)...now what?

Post by novolog »

RubyTuesday wrote: Wed Jun 16, 2021 11:10 am In today’s low-yield environment, 3% is not really all that conservative.
agreed - should aim for 1.5% w/d rate
Outer Marker
Posts: 1976
Joined: Sun Mar 08, 2009 8:01 am

Re: Hit my "number" (I think)...now what?

Post by Outer Marker »

I think you're more than fine with a very conservative withdrawal rate, large expense buffer, and not including SSI, which will be a substantial income stream. If you want to quit, you could do so tomorrow. I'd try to game it out, make sure I use all my vacation, maximize paid holidays, etc. Depending on whether you get an annual bonus, that might argue for quitting sometime 1Q 2022.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

novolog wrote: Wed Jun 16, 2021 12:20 pm
RubyTuesday wrote: Wed Jun 16, 2021 11:10 am In today’s low-yield environment, 3% is not really all that conservative.
agreed - should aim for 1.5% w/d rate
How did you come to this conclusion? Thats insanely low and would require another 10-15yrs of work (or maybe more) to save.
Outer Marker
Posts: 1976
Joined: Sun Mar 08, 2009 8:01 am

Re: Hit my "number" (I think)...now what?

Post by Outer Marker »

If anything, recent data indicates that the 4% Trinity study rule is too conservative. Further, this assumes that people will continue to spend blindly at the original inflation-adjusted initial retirement amount - which is not rational. If you simply cut back in lean or negative return years, and spend more in fat ones, you could probably go to 5% or more initial withdrawal.

A 70/30 portfolio has averaged 7% real return over the last 100 years. Of course, we can't count on "average" which is why withdrawal rates are more conservative - but the fact of the matter is that you're more likely to wind up with more money than you started with than go broke at a 4% SWR.
smithers
Posts: 40
Joined: Mon Sep 15, 2014 1:03 pm

Re: Hit my "number" (I think)...now what?

Post by smithers »

jjunk wrote: Wed Jun 16, 2021 12:31 pm
novolog wrote: Wed Jun 16, 2021 12:20 pm
RubyTuesday wrote: Wed Jun 16, 2021 11:10 am In today’s low-yield environment, 3% is not really all that conservative.
agreed - should aim for 1.5% w/d rate
How did you come to this conclusion? Thats insanely low and would require another 10-15yrs of work (or maybe more) to save.
Maybe it was supposed to be a [bad] joke. Either that or it's just a troll. 1.5% would last you for 66 years (until you're 113 years old) if all you did was keep up with inflation. Invest it all in gold and go hide in your bunker :oops:.
Random Poster
Posts: 2505
Joined: Wed Feb 03, 2010 10:17 am

Re: Hit my "number" (I think)...now what?

Post by Random Poster »

jjunk wrote: Wed Jun 16, 2021 11:01 am For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.
Are you saying that your actual monthly expenses are $1,500? And what does “required spending” mean?

And what is your asset allocation?

Personally, 3% doesn’t strike me as conservative, and your numbers are too low for my sense of safety.

For me, I generally did the math this way as a mid 40k’s person with a roughly 50/50 portfolio:

Take the average of the last 3 or 5 years of total annual spending, multiplied that by anywhere from 1.25 to 1.5, then multiplied that result by another 1.10 to 1.20 to get my spending number. Then multiplied that number by 50 to get the saving number.

So, $54k a year in real annual spending becomes $67,500 to $81k, which then becomes somewhere between $74,250 to 97,200 in presumed annual spending, which gives a saving number between $3,712,500 to $4,860,000.

I honestly think that only by significantly inflating your spending amount and lowering your withdrawal rate to something approaching the dividend/interest rate do you reach “conservative” status.

And, even then, I’m not entirely comfortable with things.
surfstar
Posts: 2689
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: Hit my "number" (I think)...now what?

Post by surfstar »

novolog wrote: Wed Jun 16, 2021 12:20 pm
RubyTuesday wrote: Wed Jun 16, 2021 11:10 am In today’s low-yield environment, 3% is not really all that conservative.
agreed - should aim for 1.5% w/d rate
-2% FTW
Can't be too safe, with SWR!!!

:oops:
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

Random Poster wrote: Wed Jun 16, 2021 1:05 pm
jjunk wrote: Wed Jun 16, 2021 11:01 am For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.
Are you saying that your actual monthly expenses are $1,500? And what does “required spending” mean?

And what is your asset allocation?

Personally, 3% doesn’t strike me as conservative, and your numbers are too low for my sense of safety.

For me, I generally did the math this way as a mid 40k’s person with a roughly 50/50 portfolio:

Take the average of the last 3 or 5 years of total annual spending, multiplied that by anywhere from 1.25 to 1.5, then multiplied that result by another 1.10 to 1.20 to get my spending number. Then multiplied that number by 50 to get the saving number.

So, $54k a year in real annual spending becomes $67,500 to $81k, which then becomes somewhere between $74,250 to 97,200 in presumed annual spending, which gives a saving number between $3,712,500 to $4,860,000.

I honestly think that only by significantly inflating your spending amount and lowering your withdrawal rate to something approaching the dividend/interest rate do you reach “conservative” status.

And, even then, I’m not entirely comfortable with things.
From a numbers perspective, my current monthly expenses average ~5.5k. Our planning number was 9k and we're just over 3.6M across our accounts. Of the 5.5k we spend today, more than half is rent. We live outside of Seattle so its VHCOL area. One thing we're considering once we retire is to move to a slightly less expensive area outside of the city which will cut down on our rent a little (~200-500/mo). Using your formula above, I'd need almost 6M to be able to retire. Thats way more than I'll need.

A few things I didnt mention here but have mentioned in previous posts. I dont have children. I dont have a need to leave a legacy. And past history tells me living past 80-85 is very unlikely. I usually do planning and Monte Carlo scenarios using a 40yr horizon just to be even more conservative, but I doubt I'm alive 30 years from now. My wife will likely be around for a couple more than me, hard to say. So I'm perfectly fine leaving this existence with zero to my name....in many ways, thats the goal.
User avatar
Meg77
Posts: 2714
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX

Re: Hit my "number" (I think)...now what?

Post by Meg77 »

Congratulations! Hitting your number is no small thing. I would probably want to wait until I was at/over my number for at least 6 months to ensure it's "real" but that's just splitting hairs. The reality is you can do what you like. Your "number" includes a big cushion, you've tracked expenses diligently for a decade so we know the figures are accurate, you live in a VHCOL area and are willing to move if necessary, and you haven't even included social security. What's more, you can always opt to work more and still earn some money if there's a market dip or you end up wanting more monthly income or any other reason.

Retire already! :beer
"An investment in knowledge pays the best interest." - Benjamin Franklin
Greentree
Posts: 173
Joined: Sun Jul 28, 2013 9:34 am

Re: Hit my "number" (I think)...now what?

Post by Greentree »

Your numbers all seem conservative, even by bogleheads standards. I'm in your ballpark, but have two young children and don't know what surprises could come as they age so I'm happy to keep working. You have no kids and rent, two things that make adjusting your budget easier when necessary if/when the market tanks. In your position and not enjoying work, I'd pull the plug.

If your health is not ideal, it also seems like that is now your bigger risk (not money). I'm also in my 40s and have seen two friends our age get cancer this year. We're getting to be that age.

Congratulations on accumulating and keeping your expenses reasonable.
Random Poster
Posts: 2505
Joined: Wed Feb 03, 2010 10:17 am

Re: Hit my "number" (I think)...now what?

Post by Random Poster »

jjunk wrote: Wed Jun 16, 2021 1:14 pm Of the 5.5k we spend today, more than half is rent. We live outside of Seattle so its VHCOL area. One thing we're considering once we retire is to move to a slightly less expensive area outside of the city which will cut down on our rent a little (~200-500/mo).
Health insurance is the new rent.
jjunk wrote: Wed Jun 16, 2021 1:14 pm Using your formula above, I'd need almost 6M to be able to retire. Thats way more than I'll need.
Well, you don’t really know that to be true, do you? At least, not until you die.
jjunk wrote: Wed Jun 16, 2021 1:14 pm A few things I didnt mention here but have mentioned in previous posts. I dont have children. I dont have a need to leave a legacy. And past history tells me living past 80-85 is very unlikely. I usually do planning and Monte Carlo scenarios using a 40yr horizon just to be even more conservative, but I doubt I'm alive 30 years from now. My wife will likely be around for a couple more than me, hard to say. So I'm perfectly fine leaving this existence with zero to my name....in many ways, thats the goal.
Same here, but I think saying that you’d be okay “leaving this existence with zero to my name” and actually doing it is something else altogether.

I don’t want to be 85, or 90, or even 100 with only a few thousand left in my accounts. And drawing down one’s balances can be emotionally draining. Even without kids or any desire to leave a legacy, I want to always feel safe and comfortable, and that means always having more than what I think that I need—or, for that matter, more than what some calculators indicate.

It sounds to me like you’ve already made up your mind and are just looking for confirmation, which is fine, so I guess all that I have left to say is good luck.
User avatar
Kenkat
Posts: 7438
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Hit my "number" (I think)...now what?

Post by Kenkat »

Now that you’ve hit your number, the next step is to agonize about what to do about it. I am in similar circumstances and it’s a daily ritual - at least on work days :wink:
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

Random Poster wrote: Wed Jun 16, 2021 1:36 pm It sounds to me like you’ve already made up your mind and are just looking for confirmation, which is fine, so I guess all that I have left to say is good luck.
I actually havent made up my mind, thus the post. I'm terrified of getting this wrong if I'm honest. But working another 10yrs isnt appealing, which is what you're likely detecting in my response. You're correct, I dont know that I dont need 6M++ to be safe. I'm assuming that based on historical mathematics. So I do appreciate your response and additional talking points. It's something I'll need to consider.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

Kenkat wrote: Wed Jun 16, 2021 1:40 pm Now that you’ve hit your number, the next step is to agonize about what to do about it. I am in similar circumstances and it’s a daily ritual - at least on work days :wink:
LOL definitely. I think my company's direction on WFH will play a large part in how 'swayed' I am towards one side or the other. Congrats on hitting your number btw.
User avatar
BogleFanGal
Posts: 728
Joined: Mon Mar 20, 2017 6:59 pm

Re: Hit my "number" (I think)...now what?

Post by BogleFanGal »

Random Poster wrote: Wed Jun 16, 2021 1:05 pm
jjunk wrote: Wed Jun 16, 2021 11:01 am For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.
Are you saying that your actual monthly expenses are $1,500? And what does “required spending” mean?

And what is your asset allocation?

Personally, 3% doesn’t strike me as conservative, and your numbers are too low for my sense of safety.

For me, I generally did the math this way as a mid 40k’s person with a roughly 50/50 portfolio:

Take the average of the last 3 or 5 years of total annual spending, multiplied that by anywhere from 1.25 to 1.5, then multiplied that result by another 1.10 to 1.20 to get my spending number. Then multiplied that number by 50 to get the saving number.

So, $54k a year in real annual spending becomes $67,500 to $81k, which then becomes somewhere between $74,250 to 97,200 in presumed annual spending, which gives a saving number between $3,712,500 to $4,860,000.

I honestly think that only by significantly inflating your spending amount and lowering your withdrawal rate to something approaching the dividend/interest rate do you reach “conservative” status.

And, even then, I’m not entirely comfortable with things.
To achieve these metrics, 99% of the US population would have to work until they died - pretty grim. Be great to have this much financial cushion...but short of winning the lottery or running drugs, most people will never have that kind of earning or savings power - no matter how much they LBYM.
Last edited by BogleFanGal on Thu Jun 17, 2021 7:42 am, edited 3 times in total.
"Life would be infinitely happier if we could only be born at the age of eighty and gradually approach eighteen." Mark Twain
sailaway
Posts: 3355
Joined: Fri May 12, 2017 1:11 pm

Re: Hit my "number" (I think)...now what?

Post by sailaway »

Random Poster wrote: Wed Jun 16, 2021 1:05 pm
jjunk wrote: Wed Jun 16, 2021 11:01 am For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.
Are you saying that your actual monthly expenses are $1,500? And what does “required spending” mean?

And what is your asset allocation?

Personally, 3% doesn’t strike me as conservative, and your numbers are too low for my sense of safety.

For me, I generally did the math this way as a mid 40k’s person with a roughly 50/50 portfolio:

Take the average of the last 3 or 5 years of total annual spending, multiplied that by anywhere from 1.25 to 1.5, then multiplied that result by another 1.10 to 1.20 to get my spending number. Then multiplied that number by 50 to get the saving number.

So, $54k a year in real annual spending becomes $67,500 to $81k, which then becomes somewhere between $74,250 to 97,200 in presumed annual spending, which gives a saving number between $3,712,500 to $4,860,000.

I honestly think that only by significantly inflating your spending amount and lowering your withdrawal rate to something approaching the dividend/interest rate do you reach “conservative” status.

And, even then, I’m not entirely comfortable with things.

Why do you multiply by two random numbers? Why didn't you just pick a bigger random number in the first place?

There are degrees of conservative. The level you describe is pretty extreme.
KlangFool
Posts: 21570
Joined: Sat Oct 11, 2008 12:35 pm

Re: Hit my "number" (I think)...now what?

Post by KlangFool »

OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
User avatar
anon_investor
Posts: 7579
Joined: Mon Jun 03, 2019 1:43 pm

Re: Hit my "number" (I think)...now what?

Post by anon_investor »

KlangFool wrote: Wed Jun 16, 2021 2:02 pm OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
+1, these actions make sense for someone once they hit their number.
Random Poster
Posts: 2505
Joined: Wed Feb 03, 2010 10:17 am

Re: Hit my "number" (I think)...now what?

Post by Random Poster »

sailaway wrote: Wed Jun 16, 2021 1:59 pm Why do you multiply by two random numbers? Why didn't you just pick a bigger random number in the first place?
I don’t think that they are random numbers.

The first calculation is to say, “well, what if my spending increases by 25 to 50 percent—what would that mean?”, mostly to account for things that either I’ve overlooked, never had to experience (big health costs, house maintenance, etc) or one-off but reoccurring expenses (new car, mostly).

The second calculation is to take that new, higher number, and inflate it by 10 to 20 percent to provide a margin of safety.

You could just use a single, larger multiplier and get to the same result, but by using two numbers it is easier for me to break out the math and how I got to the final estimated number. Basically it helps me figure out the cushion and assists with the mental accounting.
User avatar
bligh
Posts: 1412
Joined: Wed Jul 27, 2016 9:13 pm

Re: Hit my "number" (I think)...now what?

Post by bligh »

jjunk wrote: Wed Jun 16, 2021 11:01 am As part of my planning, I put together a spreadsheet a while back which did a simple math calculation for various stagnant withdrawal rates. Effectively =(monthly expenses x12)SWR. For example, for a 5k/mo expense retirement at a stagnant 3% WR I'd need (5000x12)33.3=1.998M. I dont plan on having a stagnant withdrawal rate personally but it was how I came up with my "number" for planning purposes. I've been using the 3% stagnant as my goal given it being conservative and I'd be retiring relatively young if I pulled the plug (currently 47).

Today I hit the "number" on my spreadsheet. Yay. But it got me to thinking what I should do from here and if I calculated the number correctly in the first place. For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.

I dont include social security in my planning and I dont have any backstop (inheritance, pension, etc). When I pull the plug, I wont be coming back to the workforce in a way which will come near the total comp I earn today. My current job is fine but my health is not. I've been burnt out for quite a while now. But if I quit, even to take a break from full time work, then I'd be doing so knowing my next job will pay 50-60% less than I make now (if not more). So I want to make sure I'm as right as I can be before considering retiring.

Questions for the forum are:

1. Did I miss anything in my calculations above?
2. Once you hit your number, what did you do and how did you approach final planning to actually retire?
Congratulations! In my opinion, that is about as bullet proof as you are going to get. You have multiple layers of buffer built into your calculations. From using what has historically been a perpetual withdrawal rate, to ignoring Social security, building a buffer in your monthly expenses allowing them to go up, (I am assuming you also have the ability to tighten your belt and maintain a lower level of expenses if needed to prevent portfolio depletion if needed) and considering the possibility of a return to work if all else fails.

My answer to your two questions:
1) I dont see anything there. You can always answer a situation such as yours with even MORE safety. There are different ways of doing this, from "save up and buy an annuity to provide an income floor" to "Add an additional 2 years of cash to your portofolio" but they are all variants of adding even more safety. Which is all well and good if you have infinite time, but once you take the trade off into account you realize you dont really need all that additional safety. You have the very real risk of dying 8 years into your retirement even if you retired today. Keep that in mind.

2) Personally, I am getting close to my number as well (a few more years to go), and a couple of things I want to knock out before I retire would be to put off major expenses once I enter retirement. This would mean getting fully paid off brand new car(s) that I would be happy using for the next 10 to 15 years and doing any major home improvements/upgrades I had been planning to do (New roof? New A/C? New appliances?) so that I do not have to deal with "lumpy" expenses for a long time. I would also want a paid off house with no mortgage so I can sleep well at night. However all of these items are just nice to haves, and I wouldn't consider it a mistake to retire without having checked them off.
fatcoffeedrinker
Posts: 362
Joined: Mon Mar 23, 2020 2:03 pm

Re: Hit my "number" (I think)...now what?

Post by fatcoffeedrinker »

Random Poster wrote: Wed Jun 16, 2021 1:05 pm
jjunk wrote: Wed Jun 16, 2021 11:01 am For starters, we chose a number thats higher than our currently monthly expenses by a fairly large amount (~3.5k/mo extra over required spending) to account for things like healthcare, vehicle purchases, taxes, etc. I feel that is done correctly but wonder if I missed something. Then given I'm using a 3% WR, I feel thats pretty conservative as well and serves as an additional safety buffer. Assuming I've calculated this all correctly, I could retire today if I really wanted to.
Are you saying that your actual monthly expenses are $1,500? And what does “required spending” mean?

And what is your asset allocation?

Personally, 3% doesn’t strike me as conservative, and your numbers are too low for my sense of safety.

For me, I generally did the math this way as a mid 40k’s person with a roughly 50/50 portfolio:

Take the average of the last 3 or 5 years of total annual spending, multiplied that by anywhere from 1.25 to 1.5, then multiplied that result by another 1.10 to 1.20 to get my spending number. Then multiplied that number by 50 to get the saving number.

So, $54k a year in real annual spending becomes $67,500 to $81k, which then becomes somewhere between $74,250 to 97,200 in presumed annual spending, which gives a saving number between $3,712,500 to $4,860,000.

I honestly think that only by significantly inflating your spending amount and lowering your withdrawal rate to something approaching the dividend/interest rate do you reach “conservative” status.

And, even then, I’m not entirely comfortable with things.
To be blunt, this is insane. You are talking about 90x of expenses on the high side of your estimate, and that is without SS. No one other than the ultra-rich or ultra-frugal would ever retire.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

KlangFool wrote: Wed Jun 16, 2021 2:02 pm OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
Thank you. My AA is currently 60/40 which I'm comfortable with and plan to maintain the remainder of my life. I dont carry an EF at all. I have RIRA I can draw from if needed but I've been planning on using the intermediate bond fund I have in my taxable account to pay for expenses in the first few years. I guess thats effectively my EF.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

bligh wrote: Wed Jun 16, 2021 2:15 pm 2) Personally, I am getting close to my number as well (a few more years to go), and a couple of things I want to knock out before I retire would be to put off major expenses once I enter retirement. This would mean getting fully paid off brand new car(s) that I would be happy using for the next 10 to 15 years and doing any major home improvements/upgrades I had been planning to do (New roof? New A/C? New appliances?) so that I do not have to deal with "lumpy" expenses for a long time. I would also want a paid off house with no mortgage so I can sleep well at night. However all of these items are just nice to haves, and I wouldn't consider it a mistake to retire without having checked them off.
Good call out here. We actually bought a new vehicle last year during the pandemic and its something we plan to drive until its dead. I account for another three potential vehicle purchases in my currently planning (based on a 45k purchase price in today's dollars). Luckily we arent homeowners and will likely rent the remainder of our lives. However I do have a line item for 1500/yr in potential moving costs even though we generally live in our apartments for 5+yrs. Never know when you might need to get out of a bad apartment though.

Thanks for your feedback.
User avatar
anon_investor
Posts: 7579
Joined: Mon Jun 03, 2019 1:43 pm

Re: Hit my "number" (I think)...now what?

Post by anon_investor »

jjunk wrote: Wed Jun 16, 2021 2:19 pm
KlangFool wrote: Wed Jun 16, 2021 2:02 pm OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
Thank you. My AA is currently 60/40 which I'm comfortable with and plan to maintain the remainder of my life. I dont carry an EF at all. I have RIRA I can draw from if needed but I've been planning on using the intermediate bond fund I have in my taxable account to pay for expenses in the first few years. I guess thats effectively my EF.
At 60/40, you look pretty set. :beer
audioengr
Posts: 34
Joined: Thu Dec 17, 2020 10:44 am
Location: Knoxville

Re: Hit my "number" (I think)...now what?

Post by audioengr »

Have you thought about what post retirement looks like?
Are you retiring to something, or just trying to walk away from something?

Given your age, I wonder if spending might increase slightly to account for things you'll do to occupy the time work currently uses.

Regardless, congratulations on your accomplishment. I hope to be in your shoes one day. :sharebeer
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

audioengr wrote: Wed Jun 16, 2021 2:43 pm Have you thought about what post retirement looks like?
Are you retiring to something, or just trying to walk away from something?

Given your age, I wonder if spending might increase slightly to account for things you'll do to occupy the time work currently uses.

Regardless, congratulations on your accomplishment. I hope to be in your shoes one day. :sharebeer
Short answer, no...not really. I plan to spend a lot of my new found free time (whenever I retire) doing the same things I do today. I'm autistic, so my special interests effectively rule my life when I'm not at work and will take up even more time when I'm retired. Lucky for me, my interests are generally pretty boring (music, movies, reading) so the additional costs with retiring to them wont make much of a change in my bottom line expenses. I know my wife would like to take a couple of trips so I've accounted for that in my annual budget as best I can estimate.
KlangFool
Posts: 21570
Joined: Sat Oct 11, 2008 12:35 pm

Re: Hit my "number" (I think)...now what?

Post by KlangFool »

jjunk wrote: Wed Jun 16, 2021 2:19 pm
KlangFool wrote: Wed Jun 16, 2021 2:02 pm OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
Thank you. My AA is currently 60/40 which I'm comfortable with and plan to maintain the remainder of my life. I dont carry an EF at all. I have RIRA I can draw from if needed but I've been planning on using the intermediate bond fund I have in my taxable account to pay for expenses in the first few years. I guess thats effectively my EF.
jjunk,

No as per my opinion. Only CASH and CASH equivalent can be considered as EF. Unless you can predict the future, it is a bad idea to exclude CASH as part of your asset allocation. Especially when you are preparing for early retirement.

CASH is a separate asset class on their own. Can you predict that short-term deflation is not possible? Then, you should hold CASH as part of your EF.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
deltaneutral83
Posts: 1927
Joined: Tue Mar 07, 2017 4:25 pm

Re: Hit my "number" (I think)...now what?

Post by deltaneutral83 »

Assuming no debt, when your monthly expenses are that low which was stated at conservatively $5k (probably lower), and you have 33x, you could get a fun part time gig that gets you $1k-$2k a month with little effort if things got skinny for an unforeseen reason, and that constitutes 20-40% of your needs which is huge. It's nice to have 33x expenses but it's a different animal to me if monthly/annual expenses are $5k/$60k vs $20k/$240k for a high NW/earner in VHCOL. Once you're out of the workforce for a year it's going to be tougher to mitigate the latter if something comes up 10 years down the road and you're over 55.
Outer Marker
Posts: 1976
Joined: Sun Mar 08, 2009 8:01 am

Re: Hit my "number" (I think)...now what?

Post by Outer Marker »

KlangFool wrote: Wed Jun 16, 2021 3:15 pm
jjunk wrote: Wed Jun 16, 2021 2:19 pm
KlangFool wrote: Wed Jun 16, 2021 2:02 pm OP,

1) Adjust your AA to be more conservative. Keep at least 10 years of expense in Fixed Income/Bond. Wealth preservation should be your primary goal.

2) Increase your EF to 2 years of expense. Aka, keeping 2 years of expense in CASH or CASH equivalent.

3) I am assuming that your EF is not part of your portfolio.

KlangFool
Thank you. My AA is currently 60/40 which I'm comfortable with and plan to maintain the remainder of my life. I dont carry an EF at all. I have RIRA I can draw from if needed but I've been planning on using the intermediate bond fund I have in my taxable account to pay for expenses in the first few years. I guess thats effectively my EF.
jjunk,

No as per my opinion. Only CASH and CASH equivalent can be considered as EF. Unless you can predict the future, it is a bad idea to exclude CASH as part of your asset allocation. Especially when you are preparing for early retirement.

CASH is a separate asset class on their own. Can you predict that short-term deflation is not possible? Then, you should hold CASH as part of your EF.

KlangFool
OP, I agree with you. Once you reach a substantial level of wealth, there is no need for a separate "emergency fund." You don't want to be forced to sell equities in a flash crash to be paying for a transmission repair, so I keep a reasonable amount of cash on hand and just count it as part of fixed income.
makeitcount
Posts: 47
Joined: Wed Aug 01, 2018 8:07 pm

Re: Hit my "number" (I think)...now what?

Post by makeitcount »

"you are so money and you don't even know it"
enjoy :D
rule of law guy
Posts: 5
Joined: Mon Jun 07, 2021 9:35 pm

Re: Hit my "number" (I think)...now what?

Post by rule of law guy »

do you want to leave your kids (and grandkids) a monetary legacy? if so you may want to increase your number
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

rule of law guy wrote: Wed Jun 16, 2021 4:43 pm do you want to leave your kids (and grandkids) a monetary legacy? if so you may want to increase your number
I dont have children so this is not a concern. Appreciate you bringing it up though.
User avatar
Topic Author
jjunk
Posts: 451
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Hit my "number" (I think)...now what?

Post by jjunk »

makeitcount wrote: Wed Jun 16, 2021 4:36 pm "you are so money and you don't even know it"
enjoy :D
:sharebeer wonderful movie
jump4joy
Posts: 8
Joined: Sat May 15, 2021 1:17 pm

Re: Hit my "number" (I think)...now what?

Post by jump4joy »

Congratulations! This is so awesome and inspiring. I can't really contribute to the #s aspect, but I had some thoughts/rhetorical questions that hopefully help as you reflect on this situation.

Is there an option to drop down to part-time for what you do? That way you can buy some time, but hopefully allow yourself some rest and recovery.
If you left your job and took a break, could you come back and work part-time if you needed to? Would that be an option? And could you make a reasonable amount doing so?
If not in the exact same career category or position, could you do something similar or something else to earn money?

Best wishes! I'm hoping you get to retire or at least pull back.
EddyB
Posts: 1623
Joined: Fri May 24, 2013 3:43 pm

Re: Hit my "number" (I think)...now what?

Post by EddyB »

[delete]
Last edited by EddyB on Wed Jun 16, 2021 5:39 pm, edited 1 time in total.
sandan
Posts: 196
Joined: Wed Apr 03, 2013 12:48 pm

Re: Hit my "number" (I think)...now what?

Post by sandan »

Just brainstorming here.

I'm 40 and don't fully subscribe to a universal magic number. Overall I think the 3% withdraw rate is very safe for some but not most.

A few important factors come to mind.
-Are both parties past the 2nd bend in SS?
-Can both parties adjust to a lifestyle where SS is enough to live a happy life? (Most people that can live this way already live this way. The location of a home might be an exception.)
User avatar
sergeant
Posts: 1749
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

Re: Hit my "number" (I think)...now what?

Post by sergeant »

Looks like you are all set, congratulations! Enjoy your retirement.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.
MindBogler
Posts: 1174
Joined: Wed Apr 17, 2013 12:05 pm

Re: Hit my "number" (I think)...now what?

Post by MindBogler »

Ignore the hyper-conservative 50 - 100x comments. Theirs may be a way but it isn't the way. You will be just fine. It sounds like you've already chosen a relatively conservative AA. The next thing you should do is plan for Roth conversions where possible and when to put in your notice.

Congratulations and enjoy your retirement!

:sharebeer
Normchad
Posts: 2745
Joined: Thu Mar 03, 2011 7:20 am

Re: Hit my "number" (I think)...now what?

Post by Normchad »

Your age and numbers are super close to mine. I’ve been looking at this hard for the last 8 months, to see if I could pull the plug.

My conclusion, I am 100% comfortable from a financial standpoint point quitting today. So I also think you are good to go.
Every way I look at it, I’m comfortable with the range of possible outcomes.

My numbers account for a lot of discretionary spending, which I can back on if needed. I also don’t think my spending will keep up with inflation, although the plan allows for it.

*AND* you will eventually get something from SS which will be just icing on the cake.

Congratulations! You have a lot of options now!
User avatar
Kenkat
Posts: 7438
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Hit my "number" (I think)...now what?

Post by Kenkat »

jjunk wrote: Wed Jun 16, 2021 1:52 pm
Kenkat wrote: Wed Jun 16, 2021 1:40 pm Now that you’ve hit your number, the next step is to agonize about what to do about it. I am in similar circumstances and it’s a daily ritual - at least on work days :wink:
LOL definitely. I think my company's direction on WFH will play a large part in how 'swayed' I am towards one side or the other. Congrats on hitting your number btw.
I will add that part of my issue is that I hit my number a little earlier than I was planning and so now my question becomes whether or not a couple of extra years of withdraws will matter. My conclusion is they will not, but it still leaves a little nagging doubt. More money is always better than less. What if I retire and my portfolio drops 20%? I’d be ok, but not as ok if it didn’t or if I had even more.

In addition to that, I had an idea of what age I would probably retire at and that’s still 18+ months out as well - and I’m not 100% on that either. I did pick a date and start a countdown clock at the advice of a now retired co-worker, but that date is only known to me. I think I started somewhere above 1150 days and now am below 600. He (my co-worker) said it would go fast and he’s been right.

At this point, I tell people I am either retiring in 5 years or tomorrow - it just depends on the day. Like you, a lot really does depend on how things go. Will I realize the commute just isn’t worth it anymore when I return to the office? How will I feel about it if it’s just 2-3 days a week? How about getting on a plane and traveling again for work? Not something I do a lot (2-3x year) but it’s tiring at my age - but also I have to admit it breaks up the routine and there is a bit of it I do look forward to as well. Will the job go smoothly or will something happen to make it a living h....well, you get what I mean.

The nice thing is I feel I have options and I am pretty much in control of my own fate work-wise. That’s a really great feeling.
Pinotage
Posts: 463
Joined: Sat Nov 12, 2011 6:02 am
Location: Springfield

Re: Hit my "number" (I think)...now what?

Post by Pinotage »

OP, I think you are golden.

You have done as much as you reasonably can to forecast expenses, and you are very well resourced. Now you just need to figure out if you are ready to retire, and what you’ll retire to.

Following this conversation with interest, as the question “hit my number early, what to do?” is interesting to me. We are getting close to ours, but a little bit younger than the OP. I have a sense that this milestone gives us options, but inherently different options than if the same milestone is hit when 5-10 years older.
Last edited by Pinotage on Wed Jun 16, 2021 6:24 pm, edited 1 time in total.
Post Reply