How to define enough?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
ihatework
Posts: 1
Joined: Fri Nov 29, 2019 8:46 pm

How to define enough?

Post by ihatework » Fri Nov 29, 2019 8:59 pm

Greetings...

I am looking for the best color of white. That's a joke, for those of you who have done any home improvements you know there are 1000 shades and ways to describe white.

I had to start with that since the definition of 'enough' is going to have as many answers as shades of white has.

I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.

User avatar
David Jay
Posts: 7311
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: How to define enough?

Post by David Jay » Fri Nov 29, 2019 9:48 pm

[edit] First time around I missed that this is your first post - Welcome to the forum!

1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
Last edited by David Jay on Sat Nov 30, 2019 8:41 am, edited 2 times in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Silk McCue
Posts: 3480
Joined: Thu Feb 25, 2016 7:11 pm

Re: How to define enough?

Post by Silk McCue » Fri Nov 29, 2019 9:50 pm

Enough is far less than what people have convinced themselves it is.

Cheers

GrowthSeeker
Posts: 717
Joined: Tue May 15, 2018 10:14 pm

Re: How to define enough?

Post by GrowthSeeker » Fri Nov 29, 2019 10:18 pm

For me, psychologically speaking, it is the portfolio size that remains constant or grows slightly throughout retirement when I’m living somewhat frugally, and there haven’t been big expenses or a big market correction recently. e.g. a withdrawal rate of 2.5%, or 50x
Then if I get a big surprise expense, or the market crashes: who cares?
(like Silk McCue says)
Last edited by GrowthSeeker on Fri Nov 29, 2019 10:20 pm, edited 2 times in total.
Just because you're paranoid doesn't mean they're NOT out to get you.

User avatar
tooluser
Posts: 470
Joined: Sat Oct 01, 2011 7:04 pm

Re: How to define enough?

Post by tooluser » Fri Nov 29, 2019 10:19 pm

I use three definitions:

1) Top down - Current salary minus expenses I definitely won't have in retirement. (Assumes one's life is close to what they want.)
2) Bottom up - Detailed budget for living the way I want to in retirement. (Reasonably speaking.)
3) Minimum I could live on for a simple and locally-based life. (Survive bad downturns in the market.)

Many people are happy with #3. I like #1 and #2 to match. #2 can account for things like moving after retirement, different tax rates, different medical expenses. #2 is the most important and the most difficult to calculate.

4) After Enough, there is then the question of how much pad you want on top of that for unknowns.

I've calculated all four ways, but it will still be quite the leap when I retire.

Scooter57
Posts: 1077
Joined: Thu Jan 24, 2013 9:20 am

Re: How to define enough?

Post by Scooter57 » Fri Nov 29, 2019 10:34 pm

For me enough is an amount that keeps me from staying up late at night worrying about how I'm going to fix the car, replace the roof, or pay for an unexpected medical bill. I have enough money to fix the things money can fix. After I had that much, getting a lot more made no difference in how I felt about my money or how I live.

I don't get a thrill from buying stuff. I love my old car, my old home, and my 50+ year old guitar, so though I can afford to replace all of them with fancier ones, I haven't. Most of my money goes to my hardworking, very deserving kids who have never asked me for anything. But I am the same very happy, creative person I was 25 years ago when they were little and we lived on very little money, in a beautiful rural area with good schools and a lot of creative, not very well off friends.

H-Town
Posts: 2122
Joined: Sun Feb 26, 2017 2:08 pm

Re: How to define enough?

Post by H-Town » Fri Nov 29, 2019 10:37 pm

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
Greetings...

I am looking for the best color of white. That's a joke, for those of you who have done any home improvements you know there are 1000 shades and ways to describe white.

I had to start with that since the definition of 'enough' is going to have as many answers as shades of white has.

I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
I run a lot of projections with many sets of assumption. But all of the work just give me an overall idea. I think when I know it’s enough, it’s enough. I won’t know until it’s time.

MathIsMyWayr
Posts: 1121
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: How to define enough?

Post by MathIsMyWayr » Fri Nov 29, 2019 10:45 pm

I have gone through a number of the criteria of being enough. For the ultimate test, I use Fidelity Retirement Analysis tool with the market condition significantly below average, for objectivity and ease of estimation. I plan to give a ultimate passing grade if
  • we can meet the retirement expenses (need and want) with the tax-deferred accounts after SS and pensions.
  • the remaining balance at the of the retirement period close to or to exceed the starting value in real dollars.
The 2nd condition needs keep the withdrawal rate under 3%.
This is my ultimate, but not necessary condition for being enough.

bhough
Posts: 79
Joined: Wed Feb 15, 2017 6:53 pm

Re: How to define enough?

Post by bhough » Fri Nov 29, 2019 10:57 pm

I add up how much it costs for my family to live quietly and safely with fresh food made at home. I add one fun trip per year and then 10%. The total is very low. I suspect you are already there.

Now the harder question: what do you do when you have enough? I honestly feel people spend money to excess to avoid answering this question, it is that uncomfortable.

User avatar
HomerJ
Posts: 13405
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to define enough?

Post by HomerJ » Fri Nov 29, 2019 11:18 pm

David Jay wrote:
Fri Nov 29, 2019 9:48 pm
1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
This.

If you're young, it's hard to know what your expenses will be in retirement.. You'll have to guess (But you can still base it somewhat on your current expenses).

If you're older, closer to retirement, it's a lot easier to get a good idea of what you'll need, based on your current expenses, which should be close to what you'll spend in retirement.

Now, if you're just talking about what makes you happy, that's different for everyone...

I suggest slow increments to lifestyle creep.. Don't buy a bigger house or a nicer car as soon as you can afford it... Wait a few years, see if it's really important to you, and save the extra for a bit.

Keep in mind the fact of diminishing returns. Spending more and more gets you less and less extra benefit.

Upgrading from a $3000 beater car that breaks down every few months to a solid new $23,000 Honda Civic (for example) is a huge jump. Going from a $23,000 Honda Civic to a $46,000 Lexus sedan is a smaller jump (but may still be worth it to many people). Going from a $46,000 Lexus sedan to $69,000 BMW sedan is a even smaller jump (But still worth it to many people).

Each bump up does get you more, but less and less each time.

A $40 steak at a nice steakhouse may indeed be 3x better than a $12 steak at Applebees... But a $120 steak at a different restaurant isn't going to be 3x better than the $40 steak... It may indeed be a better steak, but you're getting less and less for your money. A $500 steak is just silly. It's no longer about the steak at all anymore at that point. You're paying for something else.

And the other intangibles may be worth it. But you have to decide for yourself if it is.

It's a great gift when you can discover the level of spending that makes you happy enough. It's a state of mind. At that point, you stop major upgrades to your lifestyle, and really start saving. The lower your spending level, the easier and faster it will be to reach financial independence.

You're going to have to find your own level of "enough" someday.

You can't keep increasing your lifestyle forever, unless you plan to work as long as you live (and that's not 100% up to you).
Last edited by HomerJ on Sat Nov 30, 2019 12:30 am, edited 2 times in total.
The J stands for Jay

Scooter57
Posts: 1077
Joined: Thu Jan 24, 2013 9:20 am

Re: How to define enough?

Post by Scooter57 » Fri Nov 29, 2019 11:36 pm

Homer J,

That Beemer would have to make it possible for me to drive at 150 mph on the highway in a special lane that never has any traffic for me to believe it is worth more than the Civic.

SandysDad
Posts: 81
Joined: Wed Dec 06, 2017 7:27 am

Re: How to define enough?

Post by SandysDad » Sat Nov 30, 2019 5:19 am

David Jay wrote:
Fri Nov 29, 2019 9:48 pm
1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
Above is excellent but add one question for yourself and then you know you have enough. First set or consider your asset allocation, then ask yourself “if the stock market declined by 50% would i still retire?”

When you can answer Yes, you have enough.

User avatar
Sandtrap
Posts: 8494
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: How to define enough?

Post by Sandtrap » Sat Nov 30, 2019 7:54 am

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
Greetings...

I am looking for the best color of white. That's a joke, for those of you who have done any home improvements you know there are 1000 shades and ways to describe white.

I had to start with that since the definition of 'enough' is going to have as many answers as shades of white has.

I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
Enough to retire and to fullfil basic income needs.
Enough in retirement to fullfill most all unexpected financial needs.
Enough in retirement and enough to provide for some emergency needs of one's heirs.
Enough to leave a legacy to one's heirs and hares of hares.
Enough to fullfill all of the above, including a prolonged recession, with confidence.

OP:
In the above list, Where do you fit in at the present time?

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

Dandy
Posts: 6001
Joined: Sun Apr 25, 2010 7:42 pm

Re: How to define enough?

Post by Dandy » Sat Nov 30, 2019 8:27 am

Enough would be at age 60 to be able to cover your "normal" retirement expenses with a withdrawal rate of 3% or less with an overall equity allocation between 40 and 60%.

For me I didn't feel I had enough until pension and SS income was close to my normal expenses even though I had objectively enough assets that that shouldn't have mattered. That occurred at age 70. I felt facing 30 or more years of retirement with no earning power to be daunting since that was almost as long as my working career. For me, and I think many, the transition from saving and adding to your nest egg to withdrawing from your nest egg to be a source of worry. Less logic more emotion.

Before having income almost equal expenses I found following Dr. Wm Bernstein's idea of having 20 years worth of drawdown dollars in "safe" fixed income to be a source of comfort. It made me realize that the goal had shifted from growth to asset preservation. There is a certain realization that the retirement asset pot is all you've got and there are no do overs. Some can say 4% withdrawal is "safe" and not worry -- but if it isn't ...?

MikeG62
Posts: 2247
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: How to define enough?

Post by MikeG62 » Sat Nov 30, 2019 9:43 am

For us it was being able to live the life we want to live in retirement (which includes substantial travel and entertainment (sleeping away from our home 45-60 nights per year) and other discretionary spending, as well as living in the home where we raised our kids) while pulling only around 3.25% from our portfolio (and assuming we never collect a dime of SS). The reason for that assumption on SS is not because I think we won't or that the trust fund will go broke (because I don't), but simply to add further conservatism to our planning. To me this is enough. Others might consider this more than enough. YMMV.
Real Knowledge Comes Only From Experience

User avatar
LarryG
Posts: 313
Joined: Sun Mar 11, 2007 11:10 am

Re: How to define enough?

Post by LarryG » Sat Nov 30, 2019 10:25 am

“How Much Is Enough?

Bernstein recommends a rule of thumb, based on annuity payouts and spending patterns late in life, that you should have 20-25 times your residual living expenses (after pensions/Social Security) invested solely in safe assets. No stocks at all. This should be in TIPS, SPIAs, and short-term bonds. If you have more than that, that’s your “risk portfolio,” which he describes this way:

Anything above that, you can invest in risky assets. That’s your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn’t do well, at least you’re not pushing a shopping cart under an overpass.”

This is a quote from an interview with Bill Bernstein in The White Coat Investor.

I personally have decided that “I have won the game” and at age 89 am using my estimated future RMDs until age 94 as the amount to be invested in ”safe” funds. The remainder will be in equities.

LarryG

User avatar
Raybo
Posts: 1854
Joined: Tue Feb 20, 2007 11:02 am
Location: San Francisco
Contact:

Re: How to define enough?

Post by Raybo » Sat Nov 30, 2019 10:33 am

There is the definition of "enough" money, which is well covered above.

There is also the definition of "enough" to do. Unless you have hobbies, interests, or a passion for something, retirement can be a lot of time to fill. Without the need to trade your days for money, each day offers 18 hours to fill doing something. If you don't have something you want to do with all your time, think twice before rushing to retire.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

User avatar
Abe
Posts: 2009
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

Re: How to define enough?

Post by Abe » Sat Nov 30, 2019 10:58 am

LarryG wrote:
Sat Nov 30, 2019 10:25 am
“How Much Is Enough?

Bernstein recommends a rule of thumb, based on annuity payouts and spending patterns late in life, that you should have 20-25 times your residual living expenses (after pensions/Social Security) invested solely in safe assets. No stocks at all. This should be in TIPS, SPIAs, and short-term bonds. If you have more than that, that’s your “risk portfolio,” which he describes this way:

Anything above that, you can invest in risky assets. That’s your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn’t do well, at least you’re not pushing a shopping cart under an overpass.”
This what I do. I like the idea of having 20-25 times of my residual living expenses invested in safe assets. This may be a more conservative approach, but it makes me feel better.
Slow and steady wins the race.

User avatar
Watty
Posts: 17644
Joined: Wed Oct 10, 2007 3:55 pm

Re: How to define enough?

Post by Watty » Sat Nov 30, 2019 11:42 am

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
I have not travelled nearly as much as some people here but I have gotten out of the US enough times and gotten away from the tourist areas enough times to see how people live in some parts of the world and often it is an eyeopener.

Having a household net worth of $93K is enough to put you into the top 10% of the world. $831K will get you into the top 1% of the world.

https://www.cnbc.com/2018/11/07/how-muc ... dwide.html
To be among the global top 10 percent, you may not need as much money as you think. According to the 2018 Global Wealth Report from Credit Suisse Research Institute, you don’t even need six figures.

A net worth of $93,170 U.S. is enough to make you richer than 90 percent of people around the world, Credit Suisse reports. The institute defines net worth, or “wealth,” as “the value of financial assets plus real assets (principally housing) owned by households, minus their debts.”

More than 102 million people in America are in the 10 percent worldwide, Credit Suisse reports, far more than from any other country.

You need significantly less to be among the global 50 percent: If you have just $4,210 to your name, you’re still richer than half of the world’s residents. And it takes a net worth of $871,320 to join the global 1 percent.

For most Americans "enough" is a pretty low bar.

During the 2008 financial crisis I was in my 50's. Things were looking bad and it was not clear that it would not get a lot worse and get as bad as the great depression. I did a mental "fire drill" to come up with a fallback plan in case things got even worse.

It would have been frugal but at that point I realized that I had enough to move to very low cost of living area and buy a modest house and retire with little worry that I would not have a place to live or food on the table even I never worked again. That is not how I would have wanted to live but it would have been "enough" and knowing that was more reassuring than I would have expected.

I and as guilty as most people in wanting to have more than enough, but especially on Thanksgiving weekend it is good to thankful for what we have.

User avatar
praxis
Posts: 514
Joined: Sun Sep 06, 2009 1:51 pm

Re: How to define enough?

Post by praxis » Sat Nov 30, 2019 12:04 pm

Here's how we did it to have "enough" to avoid outliving our savings:

We started with our current pre-retirement annual expenses budget.
We regularly track our annual expenses, so we knew what we usually spend each year. We only do this exercise looking backward. We use mostly credit cards, auto draft payments and the occasional paper check, so we begin by picking 3 months of statements (usually Apr, Sep & Dec) and create a detailed average monthly budget list including everything that costs in our lives. We even include average monthly car depreciation, average monthly taxes, insurance, medicine co-pays, utilities, food, travel, clothes, haircuts, gifts, eating out, entertainment, repairs, gas. It takes a while to capture everything we spend, but we try.

We estimate what expenses might appear during retirement that we haven't had before, like long term care, assisted living, major medical, extended longevity, inflation, and special family members' needs. We thought some of the impact of these unforeseen expenses will be offset by what we expect will be reductions in other expenses as we age, such as less travel late in life, or selling our house and downsizing. This part of the exercise will probably be especially personal and unique to your case. We used 50% of our annual pre-retirement expenses as a liberal add-on for this.

We then totaled our post-retirement income of SS & pension and subtract that from our annual expenses. We estimate our life expectancies using the SS actuarial charts and add in a liberal number. Instead of 87, for instance, we used 95 for the last of us to die. That gives us another buffer.

To secure our savings, we set our asset allocation at 40% stocks/ 60% bonds. To minimize taxes, we withdraw our RMDs from the bonds in our IRAs and any additional cash we need from the stocks in our taxable accounts.

We only get one shot at this, so we were pretty conservative in setting a retirement date, and liberal in estimating expenses. And we know that we can significantly downsize our lifestyle if we need to. Good luck.
Last edited by praxis on Sat Nov 30, 2019 12:23 pm, edited 3 times in total.

NearlyRetired
Posts: 69
Joined: Fri Aug 09, 2019 12:56 pm
Location: United Kingdom

Re: How to define enough?

Post by NearlyRetired » Sat Nov 30, 2019 12:19 pm

I did something similar to tooluser.

I started bottom up, looking in detail at our current expenditure for rates, food, utilities etc.(essential living)
To that I added discretionary spend for holidays, weekends away etc. (comfortable living)

I then looked at our current savings & investments to see how long they would likely support us living comfortably, taking into account SS payments and compared that to expected life terms using a number of different Monté Carlo simulations.

If the investments looked like they would last to around our expected life span, then that was enough.

I did not though worry too much about the 4% rule as I am not fussed about running the investments down to zero, and if they did then SS and rental income would still keep us at essential.
To err is to be human, to really mess up, use a computer

metalworking
Posts: 183
Joined: Sun Jan 03, 2016 9:20 pm

Re: How to define enough?

Post by metalworking » Sat Nov 30, 2019 12:45 pm

Enough is when you are no longer effective (and no longer care to be effective) in your job and your attitude is affecting yourself and other people. You may not have enough money to completely retire at that time but it is time for you to say "enough".

framus
Posts: 9
Joined: Sun Mar 24, 2019 1:57 pm

Re: How to define enough?

Post by framus » Sat Nov 30, 2019 1:37 pm

For me having enough means I can abandon thinking that it is "All About the Benjamins". 8-)

User avatar
Phineas J. Whoopee
Posts: 8824
Joined: Sun Dec 18, 2011 6:18 pm

Re: How to define enough?

Post by Phineas J. Whoopee » Sat Nov 30, 2019 2:09 pm

My investing mission statement, which took ever so long to formulate, and still longer to express compactly, is:

To meet my future financial needs, and within reason wants, without taking undue risk.

I may or may not have helped answer OP's question about how to define enough.

PJW

User avatar
HomerJ
Posts: 13405
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to define enough?

Post by HomerJ » Sat Nov 30, 2019 2:36 pm

metalworking wrote:
Sat Nov 30, 2019 12:45 pm
Enough is when you are no longer effective (and no longer care to be effective) in your job and your attitude is affecting yourself and other people. You may not have enough money to completely retire at that time but it is time for you to say "enough".
I'm not sure what this means. Are you saying even if you don't have enough money to retire, you should just stop working?

I agree it's not good to have a bad attitude and to be ineffective at your job, but I don't think the solution is to stop working, and potentially run out of money at 75...

I think the solution would be to reset your attitude and work effectively again until you do have enough money to retire (switching jobs may help).
The J stands for Jay

User avatar
HomerJ
Posts: 13405
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to define enough?

Post by HomerJ » Sat Nov 30, 2019 2:38 pm

I'm not sure what the OP is asking.

Is he asking about "enough" as a state of mind?

I had a bologna and cheese sandwich today for lunch and was perfectly happy. I have "enough".

Or is he asking about "enough" as a multiple of expenses?

I have "enough" money to supply me with bologna and cheese for the rest of my life. Even pickles too!
The J stands for Jay

User avatar
White Coat Investor
Posts: 14269
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How to define enough?

Post by White Coat Investor » Sat Nov 30, 2019 2:43 pm

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
Greetings...

I am looking for the best color of white. That's a joke, for those of you who have done any home improvements you know there are 1000 shades and ways to describe white.

I had to start with that since the definition of 'enough' is going to have as many answers as shades of white has.

I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
When someone giving you a $10M check causes absolutely no change in how you live or think.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Schlabba
Posts: 179
Joined: Sat May 11, 2019 9:14 am

Re: How to define enough?

Post by Schlabba » Sat Nov 30, 2019 2:48 pm

Enough depends on your goals. I very recently spoke to a friend who also invests in index funds just like I do, but he wants an indoor swimming pool and a huge house.

I want to be able to retire and have money left to spend at the end of every month. I might also start a new business when I don’t rely on a salary to build wealth anymore. I could even open a pub. I probably also want to be able to give that freedom to my children when I die.

One of my fears in life is being old so that finding a new job is difficult, and then having to put up with a horrible boss. I feel like a glorified slave as long as I don’t have enough income from investments.
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

hoops777
Posts: 2717
Joined: Sun Apr 10, 2011 12:23 pm

Re: How to define enough?

Post by hoops777 » Sat Nov 30, 2019 2:51 pm

My definition of enough is being able to have enough interest payments in safe investments like Cds,IBonds,etc. to more than cover our desired expenses and travel.Our SS will cover our basic living expenses.
Another thing I really like is the Stanford Longevity Plan.Being able to do what you want using SS and your RMD’s is simple and fantastic.Our last line of defense is a paid off home in the Bay Area.
I have combined Bernstein with the Stanford.
K.I.S.S........so easy to say so difficult to do.

Invest2027
Posts: 13
Joined: Thu May 17, 2018 8:23 pm

Re: How to define enough?

Post by Invest2027 » Sat Nov 30, 2019 2:53 pm

David Jay wrote:
Fri Nov 29, 2019 9:48 pm
[edit] First time around I missed that this is your first post - Welcome to the forum!

1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
+
4. Add 45% buffer to account for market downturn/sequence of return risk in early retirement (100% equities for life and beyond :D )

enough said
Last edited by Invest2027 on Sat Nov 30, 2019 3:04 pm, edited 1 time in total.
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort. | Herm Albright 1876-1944

rbslos36
Posts: 29
Joined: Sat Jan 05, 2013 10:56 pm

Re: How to define enough?

Post by rbslos36 » Sat Nov 30, 2019 2:59 pm

Dandy wrote:
Sat Nov 30, 2019 8:27 am
Enough would be at age 60 to be able to cover your "normal" retirement expenses with a withdrawal rate of 3% or less with an overall equity allocation between 40 and 60%.

For me I didn't feel I had enough until pension and SS income was close to my normal expenses even though I had objectively enough assets that that shouldn't have mattered. That occurred at age 70. I felt facing 30 or more years of retirement with no earning power to be daunting since that was almost as long as my working career. For me, and I think many, the transition from saving and adding to your nest egg to withdrawing from your nest egg to be a source of worry. Less logic more emotion.

Before having income almost equal expenses I found following Dr. Wm Bernstein's idea of having 20 years worth of drawdown dollars in "safe" fixed income to be a source of comfort. It made me realize that the goal had shifted from growth to asset preservation. There is a certain realization that the retirement asset pot is all you've got and there are no do overs. Some can say 4% withdrawal is "safe" and not worry -- but if it isn't ...?
I share the same philosophy. What was your allocation 5 years before retirement? I currently am at 50/50 at age 65 and wondering if my portfolio should be more conservative.
RB

metalworking
Posts: 183
Joined: Sun Jan 03, 2016 9:20 pm

Re: How to define enough?

Post by metalworking » Sat Nov 30, 2019 3:07 pm

HomerJ wrote:
Sat Nov 30, 2019 2:36 pm
metalworking wrote:
Sat Nov 30, 2019 12:45 pm
Enough is when you are no longer effective (and no longer care to be effective) in your job and your attitude is affecting yourself and other people. You may not have enough money to completely retire at that time but it is time for you to say "enough".
I'm not sure what this means. Are you saying even if you don't have enough money to retire, you should just stop working?

I agree it's not good to have a bad attitude and to be ineffective at your job, but I don't think the solution is to stop working, and potentially run out of money at 75...

I think the solution would be to reset your attitude and work effectively again until you do have enough money to retire (switching jobs may help).
When I said "may not have enough to completely retire" I should have said find a new job. When I see someones signature, "Ihatework" I figure there is a possibility that this person may be bringing themselves and everyone down at work. If that is the case I do think a person in that state of mind should move on and save themselves (and everyone else) from misery. Just my opinion.

HermanTheGerman
Posts: 1
Joined: Sat Nov 30, 2019 8:46 pm

Re: How to define enough?

Post by HermanTheGerman » Sun Dec 01, 2019 12:26 am

metalworking wrote:
Sat Nov 30, 2019 12:45 pm
Enough is when you are no longer effective (and no longer care to be effective) in your job and your attitude is affecting yourself and other people. You may not have enough money to completely retire at that time but it is time for you to say "enough".
Very true. Often, when you feel you are approaching 'enough' and you don't enjoy your work, it is noticeable in your motivation, enthusiasm, and as you said ' effectiveness' / performance in your job. So - if you are generally realistic and proficient in retirement planning and know directionally where you stand - and the thought of giving-up working creeps into your head more often / somewhat consistently, it may very well mean you reached 'enough'.

But do your diligence analytically, and don't hang it up too soon - again, the most important thing in the next recession is to hold on to your job!

ThankuVanguard
Posts: 2
Joined: Sun Dec 01, 2019 7:27 am

Re: How to define enough?

Post by ThankuVanguard » Sun Dec 01, 2019 8:12 am

You ask a great question and one that I have pondered for many years. While others can give you a more mathematical answer based on your estimated expenses, life expectancy etc, let me approach it from a different perspective. I set up the following goals for myself to know when is enough. Please note that these are my opinions and may not be shared by many who frequent this forum:

1. Build a diversified portfolio large enough to generate enough dividends and interest income to replace my gross salary without having to sell a share.
2. Insure that any future long term care costs are self insured and that that potential cost is covered by life insurance to replace any principle sold.
3. Be debt-free well before my anticipated retirement.
4. Create wealth for the generations ahead.
5. Instill financial literacy in the next generation so that they can be good stewards of the wealth they receive.
6. Be self reliant as I do not anticipate receiving one penny from any government program.

It has taken me decades to get to the point where I see the light at the end of the tunnel on my plan. I had the help of two generations that proceeded me. They provided me with a strong work ethic, a college education, and an understanding to the power of compounding. I've lived through crashes, recessions, booms, busts and everything in between. My strategy has been unwavering. I invest in a combination of Vanguard index funds and low cost Vanguard managed funds every week. Modest amounts over the past 40 years. I have compounded the dividends and interest income and yes, paid the taxes. There is no free lunch. This strategy has gotten me to where I hope that I and my family are well positioned for not just my lifetime, but the generations ahead.

I often joke when people would ask me the age old question of how much is enough, my quipy answer was always "just a little bit more." In reality the idea of "enough" has far more to do with what is important to you. I could retire now and never ever run out of money in my lifetime. However, I would not be able to complete goal number 4 above. So I continue my decades old plan for the rest of my working life. One technical note, some will wonder how do I account for inflation in my plan above? You will note I will be replacing my gross salary not my net salary. The money that is currently being deducted to fund my 401K retirement account will be invested back into the portfolio to deal with inflation as will any social security I receive.

So I suppose under my plan, you never stop investing so perhaps how much is enough has more to do with when you reach the inflection point of when your investment income meets or exceeds your current working compensation. It is at this point you work because you want to and not because you have to.

Good luck with you search and I hope you will always have enough.

flaccidsteele
Posts: 39
Joined: Sun Jul 28, 2019 9:42 pm

Re: How to define enough?

Post by flaccidsteele » Sun Dec 01, 2019 8:32 am

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
When passive income > earned income > expenses, I have enough and earned income becomes optional

mmmodem
Posts: 1812
Joined: Thu May 20, 2010 1:22 pm

Re: How to define enough?

Post by mmmodem » Sun Dec 01, 2019 9:02 am

When I was young. TV told me "enough" is a family with 2.5 children and a dog and a cat. We would live in a single family home with a white picket fence. I would work 40 years and retire. I didn't question this definition until 2000.

Then home prices exploded in the Bay Area and it appeared a single earner income can no longer afford a home. I would have to revaluate "enough." We would need to be DINKs For a few years, and haver children much later than TV described.

Then the Great Recession happened and suddenly as DINKs we could afford a single family home. We could even afford it on a single income.

I asked my two older siblings what they thought. They're HHI was easily 2- 10x mine. They said despite their extraordinary income, they were barely getting by. This boggled my mind. Then people here on Boglehead confirmed it. How can 6 figure income not be enough in the Bay Area? At that point, I've never made more than 6 figures and I was living a middle class lifestyle with a mortgage. I didn't need government assistance but I couldn't afford a BMW and international vacations every year either.

I vacationed in Vietnam once and talked to the locals there about their lives. This was summer and no one was working and we were all drinking and partying. They told me manufacturing factory work was only available 3/4 of the year. So there's nothing to do in summer. They all had cell phones and a moped for transportation. They all wished they lived in America but I see them laughing and cheering themselves as they took shot after shot of alcohol. I'm pretty sure we do the same thing here in the states. Exactly the same thing. Except, I don't get the summer off.

Black Friday is my favorite holiday. I love deals. I don't know what "enough" is but I'm taking advantage of government retirement deals. That is, I max out tax advantaged accounts. Some say that is not enough. Some say that is too much. I just crested 6 figures last year. We're adding the international vacation to our lifestyle creep. Just one for now. Because our HSA, Roth IRA, and 401k are maxed, there are no more deals to be had. I have "enough" for now.

zengolf2011
Posts: 137
Joined: Tue Jul 21, 2015 1:27 pm

Re: How to define enough?

Post by zengolf2011 » Sun Dec 01, 2019 9:24 am

I'm surprised that here on the Bogleheads forum, no one has mentioned John Bogle's excellent book, Enough. It does not provide a magic formula. It does provide a frame of reference, a philosophy of life and values, which is the essential first step. I loved it, and loved Mr. Bogle more for writing it. Highly recommended!

Shallowpockets
Posts: 1425
Joined: Fri Nov 20, 2015 10:26 am

Re: How to define enoug

Post by Shallowpockets » Sun Dec 01, 2019 9:27 am

It is not enough to define enough. It is realization about what is enough for you. So the question should be reframed, how to define enough for you?
One criteria of enough is when you start looking for deals based on hotel points, credit card deals, and working the bonuses associated with accounts. Because you have nothing else to do otherwise in your money life.
When you start volunteering, because this is WORK, unpaid.
When you start posting fine line answers to BH questions and parse the difference between .02 and .03 percentage points.
There are many other things that you may start to adopt. These behaviors are feedback to your self that you have enough.
There are many people who have enough but do not know they have enough. Nothing like a little anxiety after you have enough. So try and recognize your own self and your needs and wants.

dbr
Posts: 30812
Joined: Sun Mar 04, 2007 9:50 am

Re: How to define enough?

Post by dbr » Sun Dec 01, 2019 9:29 am

David Jay wrote:
Fri Nov 29, 2019 9:48 pm
[edit] First time around I missed that this is your first post - Welcome to the forum!

1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
That really is it.

MnD
Posts: 4353
Joined: Mon Jan 14, 2008 12:41 pm

Re: How to define enough?

Post by MnD » Sun Dec 01, 2019 9:36 am

We retired in late 2018 (me)/ early 2019 (her) when our income from pension and portfolio was equal to our pre-retirement income after adjusting for taxes and cessation of retirement savings. Basically our overall financial standard of living was unchanged going from both of us working full time at peak earnings to both of us 100% retired. It's not rocket science.
70/30 AA, Global market cap equities, TSP G and DODLX FI. Rebalance to AA if FI <25% or >35%. Weighted ER<= 0.10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

tibbitts
Posts: 9375
Joined: Tue Feb 27, 2007 6:50 pm

Re: How to define enough?

Post by tibbitts » Sun Dec 01, 2019 9:39 am

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
Greetings...

I am looking for the best color of white. That's a joke, for those of you who have done any home improvements you know there are 1000 shades and ways to describe white.

I had to start with that since the definition of 'enough' is going to have as many answers as shades of white has.

I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
My thought process has been that I gradually realized I will never be confident in having "enough" - so the definition of "enough" is always somewhat more than you have.

HoosierJim
Posts: 700
Joined: Wed Mar 24, 2010 7:11 pm

Re: How to define enough?

Post by HoosierJim » Sun Dec 01, 2019 9:43 am

MnD wrote:
Sun Dec 01, 2019 9:36 am
... our income from pension and portfolio was equal to our pre-retirement income after adjusting for taxes and cessation of retirement savings.

It's a little more complicated for those that don't have pensions. Some people on this board advocate for a 2% withdrawal rate - Dave Ramsey says 8% - big,big difference between those numbers. Add social security claiming and health care costs, it's a bit more complicated.

MnD
Posts: 4353
Joined: Mon Jan 14, 2008 12:41 pm

Re: How to define enough?

Post by MnD » Sun Dec 01, 2019 9:53 am

HoosierJim wrote:
Sun Dec 01, 2019 9:43 am
MnD wrote:
Sun Dec 01, 2019 9:36 am
... our income from pension and portfolio was equal to our pre-retirement income after adjusting for taxes and cessation of retirement savings.

It's a little more complicated for those that don't have pensions. Some people on this board advocate for a 2% withdrawal rate - Dave Ramsey says 8% - big,big difference between those numbers. Add social security claiming and health care costs, it's a bit more complicated.
Our pension was 35% of one of two incomes, not inflation adjusted for several years. I'm glad to have it but it's not a magic bullet. We have addressed portfolio SWR issues, social security claiming, taxes, poor sequence of returns, health care costs and other variables in our retirement plan. You mentioned 2% SWR and above someone mentioned "3% SWR plus a 45% "buffer". I see those as failed retirement plans before one even retires - ideas that which might add decades of additional work and vastly increasing the risk of having zero retirement years or at least zero years of healthy active retirement. I'd say the "enough" question is not the strong suite of this board - dominated by overly conservative bad advice.
70/30 AA, Global market cap equities, TSP G and DODLX FI. Rebalance to AA if FI <25% or >35%. Weighted ER<= 0.10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

flyingaway
Posts: 2539
Joined: Fri Jan 17, 2014 10:19 am

Re: How to define enough?

Post by flyingaway » Sun Dec 01, 2019 10:52 am

Yesterday I thought I had enough. Today I know I need more money as I found new ways to entertain myself.

You can always find ways to spend more money and make yourself happier. Those who claim not to be able to spend more money to make themselves happier are just fooling themselves.

So enough is that you are tired of making more money for upgrading your life. You say: Enough is enough.

flyingaway
Posts: 2539
Joined: Fri Jan 17, 2014 10:19 am

Re: How to define enoug

Post by flyingaway » Sun Dec 01, 2019 10:58 am

Shallowpockets wrote:
Sun Dec 01, 2019 9:27 am
One criteria of enough is when you start looking for deals based on hotel points, credit card deals, and working the bonuses associated with accounts. Because you have nothing else to do otherwise in your money life.
If you REAALY have enough, why bother to look for hotel points, credit card deals, etc.?

User avatar
willthrill81
Posts: 13993
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: How to define enough?

Post by willthrill81 » Sun Dec 01, 2019 11:10 am

David Jay wrote:
Fri Nov 29, 2019 9:48 pm
1. It starts with expenses in retirement. Until you know what you need to spend, you can’t really know if you have enough.
2. Once you have forecast your expenses, subtract out all revenue streams (SS, pensions) to identify how much you need the portfolio to supply.
3. Select a sustainable withdrawal rate from your portfolio. Depending on how early you choose to retire, perhaps 3% - 4%.

That is enough.
:bingo

I would add that there is a strong, natural tendency for people to view greater income, whether while working or in retirement, as leading to greater happiness, which is very much akin to the proverbial carrot dangled in front of the horse (i.e. when you get more, you still want more).
Invest2027 wrote:
Sat Nov 30, 2019 2:53 pm
4. Add 45% buffer to account for market downturn/sequence of return risk in early retirement (100% equities for life and beyond :D )

enough said
If you're only withdrawing 3% to 4% of your portfolio, such a buffer has been unnecessary.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

ohai
Posts: 1163
Joined: Wed Dec 27, 2017 2:10 pm

Re: How to define enough?

Post by ohai » Sun Dec 01, 2019 11:20 am

Hi, op and guys. It seems to me that “enough” is a function of your life state more than your actual financial wealth. 30 year olds who earn $20 million are more likely to work than 60 year olds. The younger people will try to earn more because they have a long life ahead and there’s not much else to do; the level of finances probably doesn’t even matter.

cashboy
Posts: 153
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: How to define enough?

Post by cashboy » Sun Dec 01, 2019 11:51 am

ihatework wrote:
Fri Nov 29, 2019 8:59 pm
I am not really interested in what the definition of enough is but rather the thought process that different people go through to determine what enough is for them. If you could please share some realistic processes that you have gone through that lead you to economic freedom please share.
my process is considering all of the the facts objectively, not emotionally.

i have 'enough' of 'something' (whatever that something might be; not only money)

when i am not concerned about 'how much' of that 'something' i have.

on the other hand, if i AM concerned about 'how much' of that 'something' i have then i do not have 'enough' (and take action to fill the gap).
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CD - CASH - Canned Beans - Rice - Bottled Water)

Shallowpockets
Posts: 1425
Joined: Fri Nov 20, 2015 10:26 am

Re: How to define enoug

Post by Shallowpockets » Sun Dec 01, 2019 12:16 pm

flyingaway wrote:
Sun Dec 01, 2019 10:58 am
Shallowpockets wrote:
Sun Dec 01, 2019 9:27 am
One criteria of enough is when you start looking for deals based on hotel points, credit card deals, and working the bonuses associated with accounts. Because you have nothing else to do otherwise in your money life.
If you REAALY have enough, why bother to look for hotel points, credit card deals, etc.?

I think they see it as a game. Nothing else to do. Everyone likes free stuff.

dbr
Posts: 30812
Joined: Sun Mar 04, 2007 9:50 am

Re: How to define enoug

Post by dbr » Sun Dec 01, 2019 12:21 pm

Shallowpockets wrote:
Sun Dec 01, 2019 12:16 pm
flyingaway wrote:
Sun Dec 01, 2019 10:58 am
Shallowpockets wrote:
Sun Dec 01, 2019 9:27 am
One criteria of enough is when you start looking for deals based on hotel points, credit card deals, and working the bonuses associated with accounts. Because you have nothing else to do otherwise in your money life.
If you REAALY have enough, why bother to look for hotel points, credit card deals, etc.?

I think they see it as a game. Nothing else to do. Everyone likes free stuff.
Frequent flyer miles are definitely a hobby for a lot of people.

Post Reply