"Being Done" Saving: White Coat Investor blog post

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RunningRad
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"Being Done" Saving: White Coat Investor blog post

Post by RunningRad » Fri Jun 27, 2014 8:27 am

I thought that this was an interesting blog posted by fellow boglehead and physician on his own website, The Whitecoat Investor, and I hope the bogleheads and emergdoc do not mind me sharing it on this forum. It should generate some good discussion.

http://whitecoatinvestor.com/the-concep ... ent-345367
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution

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Re: "Being Done" Saving: White Coat Investor blog post

Post by letsgobobby » Fri Jun 27, 2014 9:18 am

I have contemplated 'being done' saving as well, have even posted about it before here in which my goal is to have 25x expenses by age 45:

http://www.bogleheads.org/forum/viewtop ... 2&t=115312

The major problems I see, which EmergDoc did address in his post are:

1a. 5% real is not only not guaranteed, but unlikely in my opinion unless one is starting with a pretty aggressive portfolio. As you get larger portfolios and closer and closer to a 'being done saving' number, most should take less and less risk. For example while I am not yet 'done saving' in my opinion, I am now only 60/40 and it would be far too optimistic to assume 5% real from that kind of portfolio over the next 20+ years (given 30 year TIPS yields of 1.2% and PE ratios of 18).

1b. As a corollary to the above, if you decide to 'stop saving' and then find out your returns are not matching expectations, it's hard to change course midstream - going back to work more hours, spending less money, giving away less money, etc. So at the least this means that despite being 'done saving' one may not want to take on higher fixed costs such as boats, second homes, larger homes requiring larger tax/mortgage/utility/maintenance payments, as opposed to higher one-time costs such as vacations, charitable giving, dining out, etc., which at least are easier to back away from later.

2. There are only two ways to 'save less.' One is to spend more and that means you need more later in life if you don't expect to downgrade your lifestyle. The second is to earn less. That's appealing but if you are the primary provider for your family you may also be the primary provider of benefits and that tends to substantially reduce your flexibility to work half-time, etc. (ACA may change that going forward but right now, without subsidies, the private marketplace is expensive).

All that said I adopted his philosophy a bit in the last 2-3 years, and have consciously chosen to be less frugal and to spend a bit more. I'm not nearly as sanguine as he is about future investment returns, so despite feeling in pretty good shape I am nowhere near ready to quit saving entirely. In my thread above I am aspiring to being able to quit saving (not retire) by age 45, with 25x expenses saved. What options will be available then, we'll see.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by staythecourse » Fri Jun 27, 2014 9:27 am

letsgobobby wrote:I have contemplated 'being done' saving as well, have even posted about it before here in which my goal is to have 25x expenses by age 45:

http://www.bogleheads.org/forum/viewtop ... 2&t=115312

The major problems I see, which EmergDoc did address in his post are:

1a. 5% real is not only not guaranteed, but unlikely in my opinion unless one is starting with a pretty aggressive portfolio. As you get larger portfolios and closer and closer to a 'being done saving' number, most should take less and less risk. For example while I am not yet 'done saving' in my opinion, I am now only 60/40 and it would be far too optimistic to assume 5% real from that kind of portfolio over the next 20+ years (given 30 year TIPS yields of 1.2% and PE ratios of 18).

1b. As a corollary to the above, if you decide to 'stop saving' and then find out your returns are not matching expectations, it's hard to change course midstream - going back to work more hours, spending less money, giving away less money, etc. So at the least this means that despite being 'done saving' one may not want to take on higher fixed costs such as boats, second homes, larger homes requiring larger tax/mortgage/utility/maintenance payments, as opposed to higher one-time costs such as vacations, charitable giving, dining out, etc., which at least are easier to back away from later.

2. There are only two ways to 'save less.' One is to spend more and that means you need more later in life if you don't expect to downgrade your lifestyle. The second is to earn less. That's appealing but if you are the primary provider for your family you may also be the primary provider of benefits and that tends to substantially reduce your flexibility to work half-time, etc. (ACA may change that going forward but right now, without subsidies, the private marketplace is expensive).

All that said I adopted his philosophy a bit in the last 2-3 years, and have consciously chosen to be less frugal and to spend a bit more. I'm not nearly as sanguine as he is about future investment returns, so despite feeling in pretty good shape I am nowhere near ready to quit saving entirely. In my thread above I am aspiring to being able to quit saving (not retire) by age 45, with 25x expenses saved. What options will be available then, we'll see.
Well articulated.

I would agree there are too many assumptions and you know what they say about assumptions. All I know in my young life is life has a way of throwing curveballs when you least expect it.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: "Being Done" Saving: White Coat Investor blog post

Post by TheTimeLord » Fri Jun 27, 2014 9:38 am

This is an issue I have started to wrestle with a lot over the past year. I have come to a conclusion and a personal solution. Instead of thinking it as being done saving, I think of as being done formally saving in an extremely goal driven way. In other words I still save because I have more than I need and have no real desire to upgrade my current lifestyle beyond the occassional item. My personal fix has been to use a mental accounting trick. I have recently setup a new account for the savings now that I am done saving. I am pretty sreadsheet driven calculating AA weekly and net worth monthly, I don't include this account in either calculation. For me out of sight out of mind works. Once I include it in my sporeadsheets it becomes part of "my precious" and me no like when my precious gets smaller.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: "Being Done" Saving: White Coat Investor blog post

Post by HomerJ » Fri Jun 27, 2014 10:04 am

My wife quit her job last year, because we are "mostly done" with savings.

For the last 10 years, our salaries continued to grow, but we kept our expenses fairly constant. We went from making $120k together, but living a $80k lifestyle, to making $200k+ together, but living a $100k lifestyle. So we were able to save a TON of money over the last few years...

She absolutely hated her job though, so once we got the house paid off, she was able to "retire"

So now we're living on just my salary and "only" saving $20k a year. But that's okay, because we are "mostly done" with savings.

We're shooting for $2 million in 10 years, and we have $1.2 million already.... I'll save $200k over the next 10 years, so I need less than a 4% NOMINAL annual return on my 50/50 portfolio to reach $2 million.

We used the freedom of "Being (mostly) done" with savings to let my wife quit a job she hated.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by MathWizard » Fri Jun 27, 2014 10:26 am

Yes, I've thought about 1b) from letsgobobby's post.

Ideally, your savings is at a rate at which you transition to basically the same
standard of living in retirement.
E.g. save 15% now, later live on 85% because you no longer need to save, and the 85% is
what you are used to now.
Two problems with that are
1) the set of expenses while working is different than in retirement
2) it is easy to fall short because of a stumble along the way (sick child, parent or spouse; layoffs, etc.)
3) Strangely it is even easier to overshoot if you are conservative with expected returns. I'm assuming 4% real,
if I earn 5% real instead, the amount extra is huge.

The only way I see to get there is to gradually increase % of savings as you age, which I think most people
can do naturally (increase savings with a portion of each raise in income).
This helps you with matching up a little easier, since once you are on the path to overshoot, you can decrease
savings, automatically increasing consumption until you match up again, or you just plan to retire early.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by KyleAAA » Fri Jun 27, 2014 10:37 am

I think a hybrid approach is most prudent. I currently save about 35% of my pre-tax income. When I hit a level where I think I'm "done," I might cut that back to 10-15%, which is still more than most people save. That way I'm still saving a reasonable about of money just in case my assumptions turn out to be too rosy but can ramp up my standard of living at the same time.

I think the vast majority of people who find they might be "done" in their 30s or 40s are probably saving 25%+ anyway, so I see this as a reasonable course of action for most in this situation.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Curlyq » Fri Jun 27, 2014 10:44 am

My hours at my job are being cut (again), now from 30 hours per week to 15 hours per week at the end of the year. Also by then, I won't have a mortgage and will have modest expenses. I'm considering not looking for another job, since I'm "mostly done" saving for retirement. My version of "mostly done" is that I've met my number for early retirement.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by RunningRad » Fri Jun 27, 2014 10:47 am

My career started in the mid-90's, and I have lived through two historic bear markets. I am far more pessimistic than many of the posters here, with regards to expected returns, early retirement, asset accumulation, etc. In fact, I get a kick out of the many newbies who post here that, in their mid-20's, are making plans to retire in 20 years in their mid-40's. Well, it is nice to dream, but life invariably adds obstacles and curveballs that get in the way of those dreams. That, and the 20% annualized returns that we have seen over the last five years will not go on indefinitely.

From a realist standpoint, despite that my wife and I have earned more than we expected over the last 15-20 years, saved more than we expected, invested in a responsible manner, paid off the house, nearly saved enough for college education for our 12 and 15 year old, lived below our means, and have no debt, I feel far from financially secure and have nowhere near as much accumulated as some of the pie-in-the-sky projections from calculators along the way. Perhaps this is a reflection of my generally pessimistic outlook on our finances and obligations (children, inlaws, taxes, medical, etc.), but I often get the feeling that the goalposts are moving further back and at the same time, someone is taking the air out of the football.
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution

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Re: "Being Done" Saving: White Coat Investor blog post

Post by RadAudit » Fri Jun 27, 2014 11:07 am

RunningRad wrote: I often get the feeling that the goalposts are moving further back and at the same time, someone is taking the air out of the football.
There's a lot of that going around. Has been for years. Been there, done that.

I started my career in the early 1970's. The only advice I can give - from personal experience - is stay the course and one day you'll get to where you want to be. Things shall look a whole lot better from that point of view.
FI is the best revenge. LBYM. Invest the rest. Stay the course.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by prudent » Fri Jun 27, 2014 11:28 am

My biggest concern with "being done" is making that call comparatively early in one's working years (let's say any time when a 35+ year retirement is expected) when we've been enjoying years of fair and sunny weather in the markets. It can be very tempting to extrapolate many more years of positive returns even if one adjusts expectations to a more "average return" level. As was mentioned, once you adjust to a more costly lifestyle, it can be difficult and unpleasant to dial it down if you have to boost savings once again when things aren't going as hoped. And the longer the time horizon, the more chance that something is going to negatively affect the hoped-for results.

I don't think I could be done saving AND continue working. If I am done saving, I want to be done working as well. Once I hit the showers, it's extremely unlikely I would find work again in my field (or want to), so I am not counting on un-retirement as a Plan B beyond some low-paying job.

And I find that for me, it's not that the goalposts are moving further back, I'm moving away from the goalposts. I make the number larger as time goes on. At some point, the market will take care of letting the air out of the football. :)

I'm probably worse than you, RunningRad, in using pessimistic (but not apocalyptic) assumptions at every turn. At some point the cumulative effect of so many pessimistic assumptions has to make the projections unrealistic. I'm hoping it allows for enough of a cushion in case things we see another big recession right after I retire.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by drzzzzz » Fri Jun 27, 2014 12:08 pm

I would actually suggest that the issue might not be saving too much, but where are you placing those savings; if you have enough or too much in retirement accounts, it doesnt make as much sense to me to keep shoveling money into a pre-tax retirement account (unless it is a roth ira or roth 401k), if when you ultimately retire, you are required to withdraw very large RMD's (required minimum distribution) that place you in the same or a higher tax bracket.

in his article he mentions that he is doing the following - ($401K/Profit-sharing plan: $52K; Defined Benefit/Cash Balance plan: $30K; Backdoor Roth IRAs: $11K; HSA: $6,450; Individual 401(k) for The White Coat Investor: ~$40,000 (might be optimistic but book sales are going well); 529s: $11,160 (that’s just the tax deductible amount in my state for the three kids) - Total: $150,610)

these numbers are enormous and it is the rare individual that has the income to be able to defer that much on a yearly basis to tax advantaged accounts or to even have all those methods of tax deferral available - someone could well have a RMD that will be as high if not higher than their current tax rate when using the above deferrals - I realize that one might use retirement accounts for other estate planning purposes - charitable donations, leaving it to children as inherited IRAs, etc, but if one saves $50,000 yearly (which is also a large amount for most people) for 30 years in retirement accounts and the account grows for 30 or 40 years, the RMD will most likely end up being huge - why not just use some of the money now or retire earlier?

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Re: "Being Done" Saving: White Coat Investor blog post

Post by EddyB » Fri Jun 27, 2014 12:32 pm

RunningRad wrote:My career started in the mid-90's, and I have lived through two historic bear markets. I am far more pessimistic than many of the posters here, with regards to expected returns, early retirement, asset accumulation, etc. In fact, I get a kick out of the many newbies who post here that, in their mid-20's, are making plans to retire in 20 years in their mid-40's. Well, it is nice to dream, but life invariably adds obstacles and curveballs that get in the way of those dreams. That, and the 20% annualized returns that we have seen over the last five years will not go on indefinitely.

From a realist standpoint, despite that my wife and I have earned more than we expected over the last 15-20 years, saved more than we expected, invested in a responsible manner, paid off the house, nearly saved enough for college education for our 12 and 15 year old, lived below our means, and have no debt, I feel far from financially secure and have nowhere near as much accumulated as some of the pie-in-the-sky projections from calculators along the way. Perhaps this is a reflection of my generally pessimistic outlook on our finances and obligations (children, inlaws, taxes, medical, etc.), but I often get the feeling that the goalposts are moving further back and at the same time, someone is taking the air out of the football.
I started my career just before the close of the twentieth century, having finished school in my mid-20s, with a plan to retire in 20 years in my mid-40s. I'm now 2/3 of the way down that road, have seen the same historic bear markets you've seen, and have seen obstacles and curveballs (though, to be sure, no more than my fair share), but also some unexpected tailwinds. While I do grow somewhat more nervous as I draw nearer to my "goal," I am on track to reach it. Of course, events over the next several years could change that, but I'm sure I'll be far better off for having not only had the "dream," but also having made the "plans" and having followed through on them.

I respect what you're saying, but, one, wanted to encourage those newbies in their mid-20s, and two, wanted to raise the possibility that you're the one moving your own goalposts, whether because they were initially misplaced or because of subsequent events.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by ratesguy » Fri Jun 27, 2014 1:20 pm

One can also shift the goal post and plan on savings going to kids, charities, grand kids

Also build into planning the idea of social security and Medicare means-testing as a strong possibility in the next 10-20 years - the fiscal path is unsustainable as boomers retire

Or a wealth tax! #piketty

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Re: "Being Done" Saving: White Coat Investor blog post

Post by RunningRad » Fri Jun 27, 2014 1:27 pm

I respect what you're saying, but, one, wanted to encourage those newbies in their mid-20s, and two, wanted to raise the possibility that you're the one moving your own goalposts, whether because they were initially misplaced or because of subsequent events

Here are some ways that the goal posts have moved...

1) Tax rates have increased across the board--Federal, ACA-related surcharges, property tax (rate increase and increase in property value)
2) Expected cost for college tuition has more than doubled from $25-30k/year/child to up to $65k/year/child
3) Uncertainty of social security payments and/or greater means testing
4) Possible financial dependence of sister and in-laws

Next post, how the ball is deflating...
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Bacchus01 » Fri Jun 27, 2014 1:31 pm

Interesting perspectives.

I'm 40, having left college in the mid/late 90's. We are clearly on track to move to our "second career" (haven't settled on retirement, per se) by 50. Realistically, it could probably happen by 45 but have put 50 as the yard stick right now.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by RunningRad » Fri Jun 27, 2014 1:33 pm

Bacchus01 wrote:Interesting perspectives.

I'm 40, having left college in the mid/late 90's. We are clearly on track to move to our "second career" (haven't settled on retirement, per se) by 50. Realistically, it could probably happen by 45 but have put 50 as the yard stick right now.
I am also beginning to set the stage for Act II, in the 50-54 age range.
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Random Walker » Fri Jun 27, 2014 2:10 pm

RunningRad wrote "but I often get the feeling that the goalposts are moving further back and at the same time, someone is taking the air out of the football". I couldn't agree more. I think Bill Bernstein once wrote that the goal of retirement planning was to avoid eating cat food in our later years. And I'm inclined to agree. I'm seeing my lawyer father living beyond his means at age 85 and now becoming dependent on me. With decreased future expected returns, increased taxes, longer lifespans, defined contribution plans instead of defined benefits, instability of social security and Medicare, lack of wage growth, and what I believe is an inevitable inflation to come, I feel like I'm fighting to avoid cat food 30 years from now rather than a retirement in Boca.

Dave

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Re: "Being Done" Saving: White Coat Investor blog post

Post by freddie » Fri Jun 27, 2014 2:20 pm

1) Taxes are lower than they were 15 years in general. Go back 20 years and it is even more obvious. The current laws are very favorable to retired middle class income people.
2) College costs were expected to double.
3) Nothing has changed.That uncertainty has been around since the 80s. The only thing that has changed is that we have spend 15 more years doing nothing
4) Now this is a goal post mover. You get an unexpected expense. Of course this one is to a large extent optional.

We didn't get those 10% returns everyone was counting on in the 90s. Instead you go like 6% and now have a lot less money than you expected. And of course everyones faith in the market has been shaken. Compare the optimists (there are some. See the 100% stock people) to the pessimists (there are a lot. Read how excited people are about to pay off 3.5% mortgages or wondering if a 2% SWR is too aggressive). I think it is that uncertainty that bothers most people.


RunningRad wrote:I respect what you're saying, but, one, wanted to encourage those newbies in their mid-20s, and two, wanted to raise the possibility that you're the one moving your own goalposts, whether because they were initially misplaced or because of subsequent events

Here are some ways that the goal posts have moved...

1) Tax rates have increased across the board--Federal, ACA-related surcharges, property tax (rate increase and increase in property value)
2) Expected cost for college tuition has more than doubled from $25-30k/year/child to up to $65k/year/child
3) Uncertainty of social security payments and/or greater means testing
4) Possible financial dependence of sister and in-laws

Next post, how the ball is deflating...

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Re: "Being Done" Saving: White Coat Investor blog post

Post by EddyB » Fri Jun 27, 2014 2:32 pm

RunningRad wrote:I respect what you're saying, but, one, wanted to encourage those newbies in their mid-20s, and two, wanted to raise the possibility that you're the one moving your own goalposts, whether because they were initially misplaced or because of subsequent events

Here are some ways that the goal posts have moved...

1) Tax rates have increased across the board--Federal, ACA-related surcharges, property tax (rate increase and increase in property value)
2) Expected cost for college tuition has more than doubled from $25-30k/year/child to up to $65k/year/child
3) Uncertainty of social security payments and/or greater means testing
4) Possible financial dependence of sister and in-laws

Next post, how the ball is deflating...
1) [OT comments removed by admin LadyGeek]
Of course, your property taxes may have gone up, I'm not saying they didn't, but more generally are you perhaps recasting what's really happened to make it more consistent with your pessimistic view?
2) Generally college costs have been increasing at the same alarming rates for decades, so I'm not sure what's moved. See, e.g., https://trends.collegeboard.org/college ... -over-time
3) I'm not "certain" of what I'll get from social security, but I don't know of solid reasons to be less certain now than 15 or 20 years ago.
4) While admirable and understandable, isn't this precisely an example of you moving your own goalposts? There's a difference between deciding, for yourself, that you should work longer to support someone else (increasing the scope of your personally-determined responsibilities) and, being hit with some unforeseeable cost.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by LadyGeek » Fri Jun 27, 2014 4:03 pm

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Re: "Being Done" Saving: White Coat Investor blog post

Post by EddyB » Fri Jun 27, 2014 5:04 pm

EddyB wrote:
RunningRad wrote:I respect what you're saying, but, one, wanted to encourage those newbies in their mid-20s, and two, wanted to raise the possibility that you're the one moving your own goalposts, whether because they were initially misplaced or because of subsequent events

Here are some ways that the goal posts have moved...

1) Tax rates have increased across the board--Federal, ACA-related surcharges, property tax (rate increase and increase in property value)
2) Expected cost for college tuition has more than doubled from $25-30k/year/child to up to $65k/year/child
3) Uncertainty of social security payments and/or greater means testing
4) Possible financial dependence of sister and in-laws

Next post, how the ball is deflating...
1) [OT comments removed by admin LadyGeek] [Edit by EddyB to replace my prior factual statements which were somehow taken as political with a more narrowly factual claim: No, Federal taxes haven't increased during the period described.]
Of course, your property taxes may have gone up, I'm not saying they didn't, but more generally are you perhaps recasting what's really happened to make it more consistent with your pessimistic view?
2) Generally college costs have been increasing at the same alarming rates for decades, so I'm not sure what's moved. See, e.g., https://trends.collegeboard.org/college ... -over-time
3) I'm not "certain" of what I'll get from social security, but I don't know of solid reasons to be less certain now than 15 or 20 years ago.
4) While admirable and understandable, isn't this precisely an example of you moving your own goalposts? There's a difference between deciding, for yourself, that you should work longer to support someone else (increasing the scope of your personally-determined responsibilities) and, being hit with some unforeseeable cost.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Blue » Fri Jun 27, 2014 6:12 pm

How does one individual contribute max to two separate 401k's in the same year?

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Re: "Being Done" Saving: White Coat Investor blog post

Post by HurdyGurdy » Fri Jun 27, 2014 6:13 pm

2. There are only two ways to 'save less.' One is to spend more and that means you need more later in life if you don't expect to downgrade your lifestyle. The second is to earn less. That's appealing but if you are the primary provider for your family you may also be the primary provider of benefits and that tends to substantially reduce your flexibility to work half-time, etc. (ACA may change that going forward but right now, without subsidies, the private marketplace is expensive).
A third way could be to give to charity.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by placeholder » Fri Jun 27, 2014 7:08 pm

Blue wrote:How does one individual contribute max to two separate 401k's in the same year?
For an i401k contribute as employer only.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by afan » Fri Jun 27, 2014 9:56 pm

I can see retiring at 70 because you conclude that you have a sufficient excess over plausible need that you can hold a very conservative portfolio with no realistic risk of running out of money. But getting to that point at 50, based on aggressive projections of investment returns over decades seems irresponsible. Keep working.

I suppose one could have $50 million at age 50, and reasonably conclude that a -1% real return for the next 50 years and you would still be fine. But "done" would require a huge excess of projected assets over projected needs. It is easy to say you could never spend hundreds of thousands of dollars a year. But try both spouses in nursing homes. See what it costs. Try large amounts of medical expenses not covered by insurance. Try a major economic downturn and your portfolio has seriously negative returns that stay down for years.

By the sorts of projections White Coat Investor uses in his post, I could retire. But I have no intention of doing so. I'll quit when I cannot find work, or I am physically or intellectually unable to keep at it.

The most reliable way to be "done" is to die at your desk. With no debt. And life insurance for your heirs.
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Re: "Being Done" Saving: White Coat Investor blog post

Post by Atilla » Fri Jun 27, 2014 11:11 pm

Being done is a whole lot easier if you live in a cheap house in the hood. That's our tactic.
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desiderium
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Re: "Being Done" Saving: White Coat Investor blog post

Post by desiderium » Sat Jun 28, 2014 8:17 am

afan wrote:I can see retiring at 70 because you conclude that you have a sufficient excess over plausible need that you can hold a very conservative portfolio with no realistic risk of running out of money. But getting to that point at 50, based on aggressive projections of investment returns over decades seems irresponsible. Keep working.

I suppose one could have $50 million at age 50, and reasonably conclude that a -1% real return for the next 50 years and you would still be fine. But "done" would require a huge excess of projected assets over projected needs. It is easy to say you could never spend hundreds of thousands of dollars a year. But try both spouses in nursing homes. See what it costs. Try large amounts of medical expenses not covered by insurance. Try a major economic downturn and your portfolio has seriously negative returns that stay down for years.

By the sorts of projections White Coat Investor uses in his post, I could retire. But I have no intention of doing so. I'll quit when I cannot find work, or I am physically or intellectually unable to keep at it.

The most reliable way to be "done" is to die at your desk. With no debt. And life insurance for your heirs.
I think the wisdom here is that early retirement necessitates projections over an long unknowable period, with a high likelihood of "black swans" both in markets and personal affairs. For most people who can retire early, the most valuable asset they have is personal capital. Giving that away at its peak is risky without a huge nest egg.

One way to hedge this asset is to find a way to stay in the earning game, working part time, consulting, doing locum tenens, etc. By replacing even part of one's income, the portfolio projections become way more robust, and one can vary the income according to choice and need.

Ldevelopment
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Re: "Being Done" Saving: White Coat Investor blog post

Post by Ldevelopment » Sat Jun 28, 2014 8:48 am

afan wrote:I can see retiring at 70 because you conclude that you have a sufficient excess over plausible need that you can hold a very conservative portfolio with no realistic risk of running out of money. But getting to that point at 50, based on aggressive projections of investment returns over decades seems irresponsible. Keep working.

I suppose one could have $50 million at age 50, and reasonably conclude that a -1% real return for the next 50 years and you would still be fine. But "done" would require a huge excess of projected assets over projected needs. It is easy to say you could never spend hundreds of thousands of dollars a year. But try both spouses in nursing homes. See what it costs. Try large amounts of medical expenses not covered by insurance. Try a major economic downturn and your portfolio has seriously negative returns that stay down for years.

By the sorts of projections White Coat Investor uses in his post, I could retire. But I have no intention of doing so. I'll quit when I cannot find work, or I am physically or intellectually unable to keep at it.

The most reliable way to be "done" is to die at your desk. With no debt. And life insurance for your heirs.
Just reading this is a bit depressing. I don't want to work till 70 and I will not have millions and millions to draw from either. So I guess I'm screwed.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by polkadot » Sat Jun 28, 2014 9:18 am

placeholder wrote:
Blue wrote:How does one individual contribute max to two separate 401k's in the same year?
For an i401k contribute as employer only.

I thought there is a hard limit of 52K on contributions(both employee and employer) across all 401k accounts for 2014. I wonder how the White Coat Investor is able to get almost 92K into two 401K accounts. Can someone please point out what I am missing?

Thanks,
Frank

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Re: "Being Done" Saving: White Coat Investor blog post

Post by travellight » Sat Jun 28, 2014 9:29 am

I am also entering the being done savings part. I think I spent 8000 more last year than the year before.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Ungoliant » Sat Jun 28, 2014 10:11 am

afan wrote:I can see retiring at 70 because you conclude that you have a sufficient excess over plausible need that you can hold a very conservative portfolio with no realistic risk of running out of money. But getting to that point at 50, based on aggressive projections of investment returns over decades seems irresponsible. Keep working.

I suppose one could have $50 million at age 50, and reasonably conclude that a -1% real return for the next 50 years and you would still be fine. But "done" would require a huge excess of projected assets over projected needs. It is easy to say you could never spend hundreds of thousands of dollars a year. But try both spouses in nursing homes. See what it costs. Try large amounts of medical expenses not covered by insurance. Try a major economic downturn and your portfolio has seriously negative returns that stay down for years.

By the sorts of projections White Coat Investor uses in his post, I could retire. But I have no intention of doing so. I'll quit when I cannot find work, or I am physically or intellectually unable to keep at it.

The most reliable way to be "done" is to die at your desk. With no debt. And life insurance for your heirs.
That's wonderful for you if you enjoy your work or if your primary goal in life is to leave behind as much as possible for your loved ones, but many people, myself included, don't share that view and it has nothing whatsoever to do with making unrealistic or irresponsible projections. I'm planning for any early retirement because I have many other things I want to do in life besides the 9-to-5. I only get one life to live and the idea of sitting at my desk working until I'm dead or incapacitated, having never achieved the freedom to fully pursue my other interests, is just about the most depressing thing I can imagine. Of course I'm also looking at this from the perspective of someone who is single with no children, so I have little interest in leaving anything behind, fewer uncertainties to account for, and a higher personal risk tolerance than someone who has others counting on them for their livelihoods.

With that said, I feel I'm actually quite conservative in my projected growth estimates and certainly would never bet my future on anything like a steady 5% real in perpetuity. I also don't agree at all with the idea of ever being "done" saving before the day you're also done working. Maybe this again comes from the high value I place on my free time and relatively little desire to spend frivolously, but if I have excess money, I'm "spending" it on an earlier and/or less risky retirement, not on a higher standard of living for a few years that will only have to be dialed back again later.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Longtimelurker » Sat Jun 28, 2014 10:13 am

@ 35 I am done with the fanatical savings phase. Problem is, i make a lot more money then I can spend while increasing my happiness... So, i keep saving. Ohh well.
Stay the course. If you can't resist greed, and fear is proven to be 2x as strong, you are doomed as an investor.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by placeholder » Sat Jun 28, 2014 10:17 am

polkadot wrote:I thought there is a hard limit of 52K on contributions(both employee and employer) across all 401k accounts for 2014. I wonder how the White Coat Investor is able to get almost 92K into two 401K accounts. Can someone please point out what I am missing?
What you are missing is that the limit across all plans is the 17.5k deferral/Roth while the 415c limit of 52k is per "business entity" or something along those lines so you can have a job and a side business which will each have their own 52k limit.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by polkadot » Sat Jun 28, 2014 5:39 pm

placeholder wrote:
polkadot wrote:I thought there is a hard limit of 52K on contributions(both employee and employer) across all 401k accounts for 2014. I wonder how the White Coat Investor is able to get almost 92K into two 401K accounts. Can someone please point out what I am missing?
What you are missing is that the limit across all plans is the 17.5k deferral/Roth while the 415c limit of 52k is per "business entity" or something along those lines so you can have a job and a side business which will each have their own 52k limit.
Thanks for clarifying this. Something to think about when I open my second side business!

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Re: "Being Done" Saving: White Coat Investor blog post

Post by TheTimeLord » Sat Jun 28, 2014 6:24 pm

placeholder wrote:
polkadot wrote:I thought there is a hard limit of 52K on contributions(both employee and employer) across all 401k accounts for 2014. I wonder how the White Coat Investor is able to get almost 92K into two 401K accounts. Can someone please point out what I am missing?
What you are missing is that the limit across all plans is the 17.5k deferral/Roth while the 415c limit of 52k is per "business entity" or something along those lines so you can have a job and a side business which will each have their own 52k limit.
Of course you need a second business that actually generates income.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: "Being Done" Saving: White Coat Investor blog post

Post by afan » Sat Jun 28, 2014 8:22 pm

Ldevelopment wrote:Just reading this is a bit depressing. I don't want to work till 70 and I will not have millions and millions to draw from either. So I guess I'm screwed.
I don't look at is as depressing.

Just the human condition.

The vast majority of the humans who ever lived had to work from the point they were old enough to do something productive until their health failed them. For most people the health failure happened not very long before they died. For most of them it would not had made any sense to ask whether they wanted to work. What choice did they have?

I don't want to work, I work because I need the money. I could take a chance and throw away some future earnings because I don't want to work, but, again, the word "irresponsible" leaps to mind.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: "Being Done" Saving: White Coat Investor blog post

Post by afan » Sat Jun 28, 2014 8:36 pm

Ungoliant,

You are right that I don't have a lot of other things I intend to do for the rest of my life. Maybe read more classical Greek literature, maybe learn classical Greek, I would like to learn music theory, and there is always always more math.

But all of those can be pursued nights and weekends. I would not quit work to learn them. And if I don't ever get around to it, well, many people have lived full and happy lives without knowing anymore about those topics than I do now. So I will not feel sorry for myself if I never get any further with those goals.

On the other hand, in addition to the sufferings of poverty, I would feel like a fool if I brought it on myself by concluding I probably had enough money, and was wrong.

So I expect the accumulation phase of my life to last all my life. Even if I retired now, reasonable projections would have me a net saver through retirement. But I don't want to rely on "reasonable projections" if I don't have to.

To stay on BH-type topics, the single best thing one can do to protect the financial future is to generate income. If you can do it, you should do it.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: "Being Done" Saving: White Coat Investor blog post

Post by natureexplorer » Sat Jun 28, 2014 9:28 pm

One issue with declaring yourself “done” saving for retirement and now spending more money is that you and your family will get used to a more extravagant lifestyle, which to maintain, means you’ll need to save more money. $2 Million might be plenty of money given your current lifestyle, but if you then start spending $300K a year, you’re going to have a tough time transitioning to the $80K a year, plus Social Security, that you’ll get in retirement from a $2 Million portfolio.
And that is a big issue in my opinion and a flaw in the plan.

Sure, we might all spend a little more in our last few years before retirement, when we consider ourselves already ready to retire and we are just building a little financial cushion. Maybe you will go on that once-off first class trip to far places.

But spending 100% of your income while planning to spend 25% of that amount in retirement is a very risky plan and probably not very feasible. I would expect that person to push her retirement age further out as she was doesn't all of a sudden want to adjust to a much simpler lifestyle in retirement.

After spending $100k/year for a decade, do you think you would still be happy retiring for decades for $25k/year?

I know we tend to underestimate our ability to adjust and to cope/accept new circumstances that we are handed, but why plan that way? I think a better plan would be simply retiring earlier and/or increasing the spending for all years before and after retirement.

I actually went to school with several people from Latin American countries that had received high-paying job offers in the US. At the time - before having started the new jobs, they said they would only work for 5 years before retirement or semi-retirement in their home country. Needless to say, they adjusted well to Western lifestyles and they are somehow no longer content with the simpler lifestyles back home.

Those who follow this plan will find themselves not being able to retire after all. Exceptions proof the rule, but what they consider luxuries now will be needs then. I know people who consider flying business class a chore and prefer first class - and this is not long after them being excited about flying business class for the first time.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by stonerolled » Sat Jun 28, 2014 10:12 pm

Sometimes I think that the best part about saving isnt about the money saved but the living within and below your means.
Whether the money grows to 10 million or ends up being just enough, there was some cushion built in.
Its like having insurance or an emergency fund on a lifelong scale. This benefit is in greater jeopardy if too much projection of unknowns are thrown in early and savings ended with the attendant increase in expenses.
Personally, I am sick of saving but will continue to make hay while the sun is shining, being golden handcuffed for the next four years with a state pension that is too good to walk away from. At that time, will evaluate whether the savings are 10 million or just enough and adjust my expenses accordingly in retirement.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Trelin946 » Sat Jun 28, 2014 10:51 pm

You can never be too rich or too thin.
Wallis Simpson

Save as much as you can without depriving yourself. Its fun to sit back and watch the numbers grow and make a difference in people's lives. Someone, somewhere, somehow the fruits of your labor will be put to good use ie. grandchildren schooling, gifting a substantial and generous amounts to kids weddings, charities, etc etc. What a good position to be in!! :moneybag

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Hub » Sat Jun 28, 2014 10:51 pm

"Being done" saving for me is a similar future moment as is Financial Independence in my mind. When that day comes I will choose to either retire, start spending like my peers do, or change careers to phase II. My goal is age 40-45 and I intend to go with option 3: quit the day job, start my own thing and make work a bit more optional. I am open, however, to enjoying my current day job once I reach the spot to be done saving and just back off the "fanatical savings" as a previous poster called it. That would be an interesting change.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by kaudrey » Mon Jun 30, 2014 2:20 pm

We are definitely not done saving, but I understand what is meant. About 4 years ago, I realized that the fanatical saving we were doing, if kept up and under reasonable (conservative) projections, would lead us to overshooting our target by a lot. I consider my retirement age static because I am a fed and don't want to give up my health benefits, so I can't retire before a certain age.

Given that, we loosened up the purse strings a bit and bought a cabin in the mountains that we use on weekends. We love it, and have not once regretted that decision.

As far as the concern of lifestyle creep, a cabin the mountains doesn't lead to higher costs in retirement, at least for us. At retirement, we will sell the cabin, sell our primary residence, and move to a lower cost area someplace where we won't feel the need for a getaway (meaning, one house, no mortgage in retirement).

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Re: "Being Done" Saving: White Coat Investor blog post

Post by letsgobobby » Mon Jun 30, 2014 3:06 pm

I have considered the cabin in the woods too. How far away is yours and how often have you used it?

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Re: "Being Done" Saving: White Coat Investor blog post

Post by bhsince87 » Mon Jun 30, 2014 8:25 pm

Huh. We actually live in a cabin in the woods.

It's about 4,000 square feet on 12 acres on the Eastern side of the Blue Ridge. Been here about 15 years.

Our desire to "get away" on the weekends is minimal. I highly recommend the approach!
BH87

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Re: "Being Done" Saving: White Coat Investor blog post

Post by letsgobobby » Mon Jun 30, 2014 11:41 pm

Nice but cabins in woods near us do not have decent school districts. They do have lots of methheads though.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by oragne lovre » Tue Jul 01, 2014 1:33 am

placeholder wrote:
polkadot wrote:I thought there is a hard limit of 52K on contributions(both employee and employer) across all 401k accounts for 2014. I wonder how the White Coat Investor is able to get almost 92K into two 401K accounts. Can someone please point out what I am missing?
What you are missing is that the limit across all plans is the 17.5k deferral/Roth while the 415c limit of 52k is per "business entity" or something along those lines so you can have a job and a side business which will each have their own 52k limit.
Excellent point!
The finest, albeit the most difficult, of all human achievements is being reasonable.

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Re: "Being Done" Saving: White Coat Investor blog post

Post by Terraplane » Tue Jul 01, 2014 10:56 am

My version of "being done" meant that I quit a job that had me living in motels 3-8 months a year as a catastrophe insurance adjuster. Pay was nice but I missed a lot of family events and holiday's. Nine or ten years ago I realized that I could stay home, take most any job and be ok. 08/09 whacked that pretty hard but outlook is good now. I've been a para at a high school working with intellectually disabled students and job satisfaction for the last 9 years is off the charts. I get summers off to hike and bike. Wife and I fund our Roths and a few $ more in savings, she will retire next year and me in 5 yrs or so when I'm 62/63. I feel I work mostly for health insurance but haven't checked on ACA rates. Living in a LCOL area is nice, too.

Terraplane

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