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Re: How to define enough?

Posted: Sun Dec 01, 2019 12:26 pm
by CrazyCatLady
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.
This. For me, enough is being able to make expenditures and not worry about it. November saw a bunch of unbugeted expenses - new hot water heater, car repairs, an emergency vet visit and some black Friday shopping, and I still am able to sleep at night. I couldn't always say that.

Re: How to define enough?

Posted: Sun Dec 01, 2019 12:32 pm
by mrspock
SandysDad wrote:
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.
While this might feel right, it’s not actually true per the data. The day firecalc says you have 100% success, you are statistically very very likely going to die with a good pile of money — regardless of what the market does. Having 2x this does nothing but make you die with squander years of healthy retirement toiling away earning money you don’t actually need.

Re: How to define enough?

Posted: Sun Dec 01, 2019 12:39 pm
by bck63
Silk McCue wrote:
Fri Nov 29, 2019 9:50 pm
Enough is far less than what people have convinced themselves it is.

Cheers
Amen.

Re: How to define enough?

Posted: Sun Dec 01, 2019 1:21 pm
by SandysDad
How it "feels" is exactly why I added that the question "if markets decline 50%". There is an emotional side to "enough". One can't predict the future, but if one imagines how they will feel if stocks drop 50%, they then have a pretty good idea how they will emotionally handle a retirement w/ a subsequent sharp market decline.

FWIW, Just before my own early retirement I asked myself that question, and changed my AA as a result to something I am very comfortable (emotionally) with not working if the markets have a sharp decline.
mrspock wrote:
Sun Dec 01, 2019 12:32 pm
SandysDad wrote:
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.
While this might feel right, it’s not actually true per the data. The day firecalc says you have 100% success, you are statistically very very likely going to die with a good pile of money — regardless of what the market does. Having 2x this does nothing but make you die with squander years of healthy retirement toiling away earning money you don’t actually need.

Re: How to define enough?

Posted: Sun Dec 01, 2019 1:32 pm
by MathWizard
Enough has a minimum of being able to support yourself for the rest of your life.

For a reasonable maximum, after the minimum is met, then when the satisfaction of not working exceeds the satisfaction of working+getting money for working.

For some, working gives a sense of purpose, and social interaction. Except for some frustration with company direction, and lack of time for other pursuits, I would keep working as long as I could, just failing back when it would be better for someone else to take over. Farmers used to do this with their children. They got to eventually putter around, or not, and go in for coffee / cookies anytime they wanted.

Re: How to define enough?

Posted: Sun Dec 01, 2019 1:34 pm
by hoops777
One problem with enough is your spouse has to agree if married.I have laid it all out to reassure her but my wife still is very uneasy.

Re: How to define enough?

Posted: Sun Dec 01, 2019 2:05 pm
by willthrill81
hoops777 wrote:
Sun Dec 01, 2019 1:34 pm
One problem with enough is your spouse has to agree if married.I have laid it all out to reassure her but my wife still is very uneasy.
I'm of the opinion that that should be the case, but it is not with many couples. I've heard of many situations where one spouse independently decided to retire while the other decided to keep working. That doesn't make sense to me, but it doesn't seem very unusual.

Re: How to define enough?

Posted: Sun Dec 01, 2019 2:25 pm
by mrspock
SandysDad wrote:
Sun Dec 01, 2019 1:21 pm
How it "feels" is exactly why I added that the question "if markets decline 50%". There is an emotional side to "enough". One can't predict the future, but if one imagines how they will feel if stocks drop 50%, they then have a pretty good idea how they will emotionally handle a retirement w/ a subsequent sharp market decline.

FWIW, Just before my own early retirement I asked myself that question, and changed my AA as a result to something I am very comfortable (emotionally) with not working if the markets have a sharp decline.
mrspock wrote:
Sun Dec 01, 2019 12:32 pm
SandysDad wrote:
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.
While this might feel right, it’s not actually true per the data. The day firecalc says you have 100% success, you are statistically very very likely going to die with a good pile of money — regardless of what the market does. Having 2x this does nothing but make you die with squander years of healthy retirement toiling away earning money you don’t actually need.
Thanks for the clarification, I see where you are coming from now! Makes sense.

Re: How to define enough?

Posted: Sun Dec 01, 2019 2:51 pm
by Dandy
I guess for some who have a decent asset level a 95% success or a 1 in 20 chance of failure more acceptable than having a 100% success but dying with a substantial amount of money. That is pretty much a personal choice depending on, for example, is your current lifestyle acceptable with a lower withdrawal rate?, do you have heirs?, do you have longevity in your family?, etc.

I have a nice life style and have gradually increased it in retirement. I don't want to take the 5% risk of running out (or very low) on assets at an advanced age. I also don't want to depend on heirs for financial help and, in fact, want to leave them assets if at all possible. As we progress in retirement and assets having been doing well we are gifting "early inheritance" to our children rather than have them wait for our demise. But, we always make sure our best guess at retirement funding needed is very secure.

So our choice is to pass on an allocation or approach that is back tested to be 95% successful and opt for leaving $$$ on the table for heirs or (prolonged life span/illness,other major unknowable expenses).

Re: How to define enough?

Posted: Sun Dec 01, 2019 4:09 pm
by willthrill81
Dandy wrote:
Sun Dec 01, 2019 2:51 pm
I guess for some who have a decent asset level a 95% success or a 1 in 20 chance of failure more acceptable than having a 100% success but dying with a substantial amount of money. That is pretty much a personal choice depending on, for example, is your current lifestyle acceptable with a lower withdrawal rate?, do you have heirs?, do you have longevity in your family?, etc.

I have a nice life style and have gradually increased it in retirement. I don't want to take the 5% risk of running out (or very low) on assets at an advanced age. I also don't want to depend on heirs for financial help and, in fact, want to leave them assets if at all possible. As we progress in retirement and assets having been doing well we are gifting "early inheritance" to our children rather than have them wait for our demise. But, we always make sure our best guess at retirement funding needed is very secure.

So our choice is to pass on an allocation or approach that is back tested to be 95% successful and opt for leaving $$$ on the table for heirs or (prolonged life span/illness,other major unknowable expenses).
In the real world, most BHs' risk of actually running out of money is probably both lower and higher than 5%, regardless of their investment and withdrawal strategy (though most retirees even here do not seem to have a withdrawal policy statement). I'll explain.

The risk of portfolio depletion (i.e. you truly go broke) due to withdrawals being too high is very small, far smaller than 5%, simply because a sane person will not blindly spend their portfolio down to zero like a computer simulation says that they would. In the real world, we all make adjustments of some kind as we go along, especially when our portfolio suffers. This doesn't mean that there isn't a risk that what we withdraw will not be adequate for us to maintain our desired lifestyle, but that's a far cry from the proverbial 'eating cat food while living in a cardboard box' hyperbole we occasionally hear.

However, the risk of major societal upheavals significantly disrupting our retirement income strategy in all its facets is probably well above 5%. Examples could include things like hyperinflation, major reductions or complete removal of SS benefits, nationalization of the stock market, war(s), etc. Consequently, Bernstein believes that the optimistic success rate of any investment/withdrawal strategy can be no higher than 80%. I don't necessarily agree with the methods he used to arrive at that number, but the concept is very sound and strongly rooted in history.

Circling back to the beginning, I would say that the likelihood of someone with $1 million in their portfolio plus SS benefits completely their portfolio or nearly so due to a poor investment/withdrawal strategy is smaller than 5%, but the likelihood of such an event occurring due to macro-environmental changes wholly out of their control is well above 5%.

Re: How to define enough?

Posted: Sun Dec 01, 2019 5:13 pm
by Dandy
In the real world, most BHs' risk of actually running out of money is probably both lower and higher than 5%, regardless of their investment and withdrawal strategy (though most retirees even here do not seem to have a withdrawal policy statement). I'll explain. ....
I get the points you are making. But if the 95% success and 100% success were truly valid projections I still feel the majority of people would react the same way e.g. many would decide that 95% success rate is fine and take the chance of failure (which isn't necessarily eating dog food under a bridge -it may be not affording your rent, healthcare, or "senior care" if you live to 100.) I agree that most people adjust their spending in the face of a bad times

Others would feel fine with leaving money on the table as long as they were "guaranteed" not to face significant money issues even with a longer life expectancy. They too would likely curb spending in the face of bad times.

Agreed that there are many factors out of our control that would likely ruin the best of plans. But you have to make the decision with how you are going to fund your retirement and how you will withdraw from it. Go for 4 or 5% withdrawal and assume back tested studies are the best you can rely on or withdraw less if you are able and improve the odds a bit more.

Re: How to define enough?

Posted: Sun Dec 01, 2019 5:20 pm
by Bobby206
Silk McCue wrote:
Fri Nov 29, 2019 9:50 pm
Enough is far less than what people have convinced themselves it is.

Cheers
Says you. Another person can't say what my "needs" are or how much is needed for me to feel "safe." You can only speak for yourself I should think.

Re: How to define enough?

Posted: Sun Dec 01, 2019 5:58 pm
by 1210sda
SandysDad wrote:
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.
I agree with you Dad.

I put some numbers to it. Enough for me would be 143% of my initial goal.

If I had an initial goal of $1,000,000 allocated 60% to stocks and 40% to Fixed Income, enough for me would be
$1,430,000. With this amount, if the stocks fell by 50% and my Fixed Income stayed flat, I could still afford to retire.

At $1,430,000 my stocks would be $858,000 (60%)and my Fixed would be $572,000 (40%). After the 50% drop, my stocks would be $429,000 and my Fixed Inc would remain at $572,000 for a total portfolio of $1,001,000, my initial goal.

I know it's never this simple, but this would give me a strong degree of comfort in my retirement.

I suppose I would rebalance back to 60/40. Maybe.

1210

Re: How to define enough?

Posted: Sun Dec 01, 2019 6:40 pm
by Silk McCue
Bobby206 wrote:
Sun Dec 01, 2019 5:20 pm
Silk McCue wrote:
Fri Nov 29, 2019 9:50 pm
Enough is far less than what people have convinced themselves it is.

Cheers
Says you. Another person can't say what my "needs" are or how much is needed for me to feel "safe." You can only speak for yourself I should think.
Says you??? You seem to have taken this personally. There was no need for that.

Wishing you enough.

Cheers

Re: How to define enough?

Posted: Sun Dec 01, 2019 6:50 pm
by hoops777
Silk McCue wrote:
Sun Dec 01, 2019 6:40 pm
Bobby206 wrote:
Sun Dec 01, 2019 5:20 pm
Silk McCue wrote:
Fri Nov 29, 2019 9:50 pm
Enough is far less than what people have convinced themselves it is.

Cheers
Says you. Another person can't say what my "needs" are or how much is needed for me to feel "safe." You can only speak for yourself I should think.
Says you??? You seem to have taken this personally. There was no need for that.

Wishing you enough.

Cheers
I can see how your remark could be taken in a negative way.You are pretty much implying that people do not understand their financial situation and needs and that they get them confused with things they do not really need.That is a very complex and personal decision.

Re: How to define enough?

Posted: Sun Dec 01, 2019 8:45 pm
by Random Musings
Enough is when you take your final breath.

RM

Re: How to define enough?

Posted: Sun Dec 01, 2019 9:00 pm
by RadAudit
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.
What I did was fairly simple, and looking back, scary as heck. :oops: I knew what my salary was. I multiplied that number by 25. When the portfolio equaled that number, I figured I would retire thinking I could withdraw enough at ~4% / yr and make it for the next 30 years. Getting about 1/2 way there only took 39 years.

[Now, you can get fancier if you want. Calculate income streams (SS, pensions, etc.) net out expenses (health care, mortgage expenses, other budgeted expenses, etc.) and multiple the gap by 25, etc., if you want to get closer. Which is actually closer to what I did because I like to push numbers around the page.]

Then, one day, I woke up. Mom died the year before. The estate was settled. I had a (very) small inheritance coming in. The kids were out of school. I really didn't like my job any more. So, I handed in my retirement papers and decided to go with what I had. Fortunately, the timing was pretty good because we were just coming out of the last recession.

Re: How to define enough?

Posted: Sun Dec 01, 2019 11:30 pm
by james22
Plus 10%

Re: How to define enough?

Posted: Mon Dec 02, 2019 8:47 am
by Shallowpockets
I guess enough is when you stop working for whatever reason and have whatever assets you have. That’s it. Will it be enough at that point? Doesn’t matter, it is what it is.
Otherwise you can worry about it and find all kinds of problems with your definition of enough. You can factor inflation, LTC, liquidity of money, percentages, your longevity probability.
You can worry about a lot of things. You can worry right up until your last breath. Or you can run the usual numbers of 4% withdrawal rates, or 20x expenses. Then you can say, I have enough.
Take your expenses from last year. Do you have those? If not that is a red flag. Times them by 20. That is your goal. At least.
So save, invest until you hit those numbers and get on with your life.
That was my way of being and I did hit those numbers.

If you are asking this question you are already on track for the above. You just are unable to make a decision, or accept, what amount is sufficient for you.

Re: How to define enough?

Posted: Mon Dec 02, 2019 4:08 pm
by Bobby206
Silk McCue wrote:
Sun Dec 01, 2019 6:40 pm
Bobby206 wrote:
Sun Dec 01, 2019 5:20 pm
Silk McCue wrote:
Fri Nov 29, 2019 9:50 pm
Enough is far less than what people have convinced themselves it is.

Cheers
Says you. Another person can't say what my "needs" are or how much is needed for me to feel "safe." You can only speak for yourself I should think.
Says you??? You seem to have taken this personally. There was no need for that.

Wishing you enough.

Cheers
Sorry. I didn't intend to make it sound personal. My point is that each person has a different view. Your theory works for you but not for me. Put another way I am not saying your theory is wrong but that doesn't mean it's right for everybody. Peace.

Re: How to define enough?

Posted: Mon Dec 02, 2019 5:38 pm
by pdavi21
Enough is when you give up and retire.
Until then, you obviously wanted more.

"Enough is enough"

Re: How to define enough?

Posted: Mon Dec 02, 2019 5:46 pm
by Trader Joe
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 definition of enough is the maximum amount that I can accumulate and pass down to my heirs.

Re: How to define enough?

Posted: Mon Dec 02, 2019 7:51 pm
by remomnyc
Enough financially was when I had accumulated 25x expenses, excluding SS. Enough emotionally was when I had no desire to continue to work for money. The only thing left that I really wanted to buy was my time.

Re: How to define enough?

Posted: Tue Dec 03, 2019 3:33 am
by Portfolio7
Enough
- is when a trust for my oldest is fully funded and he has a support network established that doesn't rely on us
- is when my youngest has completed college
- is when our assets have doubled one more time (though it may be ok if they don't).
- is reaching retirement age, since I'm worn out and subject to annual layoffs. Subject to the need to fund college, and continued employment.

I'm about $800K from retirement. That can come in the form of salary, or returns, or growth in our business. This will replace my decimated pension, and I'm trying to cover for the 30% of SS that the CBO says the gov't can't afford to pay out at my FRA (though I'm more likely to wait until 70),