Ben Felix - How to Retire Early (The 4% Rule)

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hoops777
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by hoops777 » Thu May 14, 2020 11:49 am

willthrill81 wrote:
Thu May 14, 2020 11:39 am
hoops777 wrote:
Thu May 14, 2020 11:35 am
willthrill81 wrote:
Thu May 14, 2020 10:50 am
smitcat wrote:
Thu May 14, 2020 10:45 am
"But all of those people aren't employed. We have totally new jobs that simply didn't exist before. Heck, many of today's jobs didn't exist just 20 years ago."
I agree - the problem is that many people will not adapt to new jobs/skills/careers and that will leave them out of luck.
Not a day goes by that I do not see great resistance to new jobs/skills/careers that could pay more, yield higher satisfaction, and lend more future security right on this Bogle website.
Yes, workers must be willing to adapt. Like it or not, the job market is constantly shifting and has been for the last ~140 years. Those who do not adapt to it will be left behind. That's just the way it is.

The media doesn't help matters when they focus on industries that are failing and people losing those jobs when other industries are thriving and begging for people to work in them.
Sounds great....adapt or be left behind.
A lot of older blue collar workers, simply have no option to start a new career. Yea you can get a job at Walmart and try to survive on 1/4 of what you were earning.
I listened to a podcast on Joe Rogan about 6 months ago with Andrew Yang,who was pushing universal income because of the gradual elimination of jobs.
This is a real and very serious problem and no,there are not a ton of thriving industries looking to hire 50 year old truck drivers and the like with good paying jobs.
Your statement about working at Walmart for one-fourth of a blue collar worker's prior pay is obviously at least somewhat hyperbolic. Most blue collar workers aren't making $80k/annually.

Issues related to universal basic income are completely off topic, so I won't even touch that.
I did not say I was in support of universal income I was simply identifying the speaker.
The point is there are no decent jobs for those people that can adequately replace their old income. This is also off topic so I will end it there.
K.I.S.S........so easy to say so difficult to do.

ValuationsMatter
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Thu May 14, 2020 11:56 am

willthrill81 wrote:
Thu May 14, 2020 11:31 am

If you're elderly and not able-bodied, you have SS benefits (or a pension) to fall back on.

I've said for years that those who crave guarantees and security and are considering a starting withdrawal rate under 3% would probably be well served by using a portion of their portfolio to buy a single premium immediate annuity. A TIPS / I-bonds ladder could be another good choice.
It's an unwinnable discussion and a moot point, in my opinion. You'll stand on the ground that as long as one draws breath, they have something to fall back on, but that is far from the meaning of the context in which I used the phrase. Let's digress from the semantics and move forward with the assumption that one does not want to include anything but passive sources of income or that they have included those other 'fall back' passive sources and desire a lifestyle beyond them which only their portfolio can grant. In that case, and whatever other caveats must be made to account for the wrenches one chooses to throw in, incorporating portfolio growth in a long-term retirement plan provides the 'fall back' that would make me comfortable to leave my chosen career. Kinda hard to argue, since we're talking about human psychology, and not hard math.

Thanks for pointing out the TIPS/I-bonds. I'll look into them. Also, I would be interested in your thoughts on withdrawing a fixed percentage of 3% portfolio/yr in retirement, and allowing your portfolio to outpace inflation. I recognize that this would have to accept the near-certainty that annual expenses will be cut in half from one year to the next at some point in the future. Accepting that, would anything else be wrong with such at approach?
Last edited by ValuationsMatter on Thu May 14, 2020 12:06 pm, edited 2 times in total.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Thu May 14, 2020 12:04 pm

willthrill81 wrote:
Thu May 14, 2020 11:39 am
Yes, workers must be willing to adapt. Like it or not, the job market is constantly shifting and has been for the last ~140 years. Those who do not adapt to it will be left behind. That's just the way it is.
There will be no paid jobs to adapt to eventually. Academic thoughts aside, telling a trucker to learn to code is equally hyperbolic.

If thousands of factory workers are replaced by dozens of engineers/technicians who repair the automation equipment, where do they go? Implying that there are always other jobs is not a satisfactory explanation without some data showing how automation at the scale we see today still maintains a job market sizeable enough and a quality of life that's high enough to replace those factors lost from an older infrastructure.

I'm not saying your theory is wrong. I'm open minded to the data. I'm just skeptical that it's true. Further, I tend to believe that as AI comes to prominence, it cannot remain true in the long-run.

UBI, though not necessary for quite some time yet, will be a necessity for human quality of life if my beliefs about AI come to pass.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Thu May 14, 2020 12:05 pm

geerhardusvos wrote:
Thu May 14, 2020 11:04 am
smitcat wrote:
Thu May 14, 2020 10:40 am
geerhardusvos wrote:
Thu May 14, 2020 9:28 am
smitcat wrote:
Thu May 14, 2020 7:32 am
geerhardusvos wrote:
Wed May 13, 2020 9:51 pm


25X is in case we don’t get any of the “backups” as you say (SS isn’t a back up though, it’s a reality). We could probably retire with 22-24X and delay Social Security and be fine. Given the historical data and the information we have, I’m comfortable with 25X expenses for anyone to never work again, even an early retirement horizon... the math and historical probabilities are with us. We can’t afford not to retire early! Still bewildered why this is so controversial... Sure, we may start with a 3.5% wr but should be able to ramp that up in the good years to 4.5%. I think a variable withdraw strategy is the right approach when having a high equity portfolio
"Still bewildered why this is so controversial"
Simple - because other folks reading these posts might actually believe them. It is important that someone reading these that do not have a method to know about the 'backups' realizes that it could make for huge problems down the road. Your application sounds like it will work in your situation but it also relies on items not originally posted like these:
- "knowing that we will surely still make some income somehow (we will have a lot of life and skills left),"
- "and we will have inheritance"
- "and Social Security to some extent down the road."

In the original post to readers the backups were specifically all stripped out and made to seem like the 25X would be all that is needed for success.
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Please stop worrying about a 4% wr.

Someone retiring in their 50s, let’s say 55, has about a 30 year retirement. The 4% wr has a 99% success historically to hold up with a 75-25 portfolio over 30 years. So someone in their 50s who has 25X their expensive is by definition financially independent. Period. No “backups”. How much more safe from a planning perspective can you get? Any withdrawal rate lower than 4% for 30 year time horizon is just ridiculous, especially if the investor understands their investments. If the investor just gets $200 a month in Social Security starting at age 70, the 4% withdrawal rate would have 100% historical success. Please look at the data.

4% wr is a good guideline for bogleheads and helpful for people to have confidence in, especially for the 30 year time horizon. And it is very likely to last significantly longer especially with an investor who retires with a mid-high equity portfolio and avoids SORR. Variable withdrawal rate strategies are very helpful and logical for this reason.

Just look at the data again, seems you may have missed it:

65 million scenarios of all available US data
Image
You have moved the goalposts from your original post:
- 50's leaves 40 or 50 year retirement for many couples
- you said no other income
- at 50% equity portfolio
- not a variable rate strategy, needed all funds
On your chart that leaves us with 86% success rate for 40 yrs and a 74% success rate for 50 years.

So if you now want to say 30 year retirement, and 75% portfolio in equities, and you will be counting on some SS, and a variable rate strategy then you have a winner.
You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

"Stop worrying about 4% wr."
I am not worried about 4% - this was never about me as stated previously.

"whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw."
Neither have I commented about your situation/plan - this was never about you as stated previously.

"All has been consistent with the statements and data coming from my end."
This is what you posted...
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

"Most of us will have SS or other income in retirement so that’s not novel or backup"
In your post immediately above you said - even without SS considered they are very likely OK

"We plan to live until 92"
Sorry to hear that, many couples have plans to exceed that for at least one.

"25x-28x is comfortable for us for saying goodbye to the megacorp a"
Now you are at 25-28 times plus backups.

You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Thu May 14, 2020 12:05 pm

ValuationsMatter wrote:
Thu May 14, 2020 11:56 am
willthrill81 wrote:
Thu May 14, 2020 11:31 am

If you're elderly and not able-bodied, you have SS benefits (or a pension) to fall back on.

I've said for years that those who crave guarantees and security and are considering a starting withdrawal rate under 3% would probably be well served by using a portion of their portfolio to buy a single premium immediate annuity. A TIPS / I-bonds ladder could be another good choice.
It's an unwinnable discussion and a moot point, in my opinion. You'll stand on the ground that as long as one draws breath, they have something to fall back on, but that is far from the meaning of the context in which I used the phrase. Let's digress from the semantics and move forward with the assumption that one does not want to include anything but passive sources of income or that they have included those passive sources and desire a lifestyle beyond them which only their portfolio can grant. In that case, and whatever other caveats must be made to account for the wrenches one chooses to throw in, planning in portfolio growth in long-term retirement provides the 'fall back' that would make me comfortable. Kinda hard to argue, since we're talking about human psychology, and not hard math.
I was merely pushing back on the idea that retirees, whether early or traditional, have nothing to fall back on. That's simply not true for nearly all of them. Granted, what they might be falling back on might not be adequate and/or they might be uncomfortable with it, but that doesn't mean that it doesn't exist.
ValuationsMatter wrote:
Thu May 14, 2020 11:56 am
Thanks for pointing out the TIPS/I-bonds. I'll look into them. Also, I would be interested in your thoughts on withdrawing a fixed percentage of 3% portfolio/yr in retirement, and allowing your portfolio to outpace inflation. I recognize that this would have to accept the near-certainty that annual expenses will be cut in half from one year to the next at some point in the future. Accepting that, would anything else be wrong with such at approach?
Fixed percentage withdrawal methods aren't bad, but they have what many consider to be definite drawbacks. For one, as you point out, they result in your withdrawals being as volatile as your portfolio. If your portfolio drops 30%, then so will your withdrawals. Another issue is that if your portfolio and withdrawals are growing over time, this assumes that you will have greater utility for the added spending as you get older. Actual spending data from retirees shows that the opposite is more likely to be true; retirees spending consistently drops 1-2% in inflation-adjusted dollars annually.

I think that if you're interested in mathematically guaranteeing that you'll never prematurely deplete your portfolio, you should look into the work that several of us have done with using the time value of money formula to determine annual withdrawals.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Thu May 14, 2020 12:08 pm

ValuationsMatter wrote:
Thu May 14, 2020 12:04 pm
willthrill81 wrote:
Thu May 14, 2020 11:39 am
Yes, workers must be willing to adapt. Like it or not, the job market is constantly shifting and has been for the last ~140 years. Those who do not adapt to it will be left behind. That's just the way it is.
There will be no paid jobs to adapt to eventually. Academic thoughts aside, telling a trucker to learn to code is equally hyperbolic.
I never said such a thing.
ValuationsMatter wrote:
Thu May 14, 2020 12:04 pm
I'm not saying your theory is wrong. I'm open minded to the data. I'm just skeptical that it's true. Further, I tend to believe that as AI comes to prominence, it cannot remain true in the long-run.
I'm skeptical because we've been hearing the argument that machines would render human workers obsolete for more than 100 years, yet it has not yet remotely come to fruition. If it ever does, it might actually be a boon for everyone. If machines can completely care for our needs, then we might be able to live as Gene Roddenberry thought that we eventually would in a sort of utopia.
“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

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Thu May 14, 2020 12:23 pm

willthrill81 wrote: Fixed percentage withdrawal methods aren't bad, but they have what many consider to be definite drawbacks. For one, as you point out, they result in your withdrawals being as volatile as your portfolio. If your portfolio drops 30%, then so will your withdrawals. Another issue is that if your portfolio and withdrawals are growing over time, this assumes that you will have greater utility for the added spending as you get older. Actual spending data from retirees shows that the opposite is more likely to be true; retirees spending consistently drops 1-2% in inflation-adjusted dollars annually.

I think that if you're interested in mathematically guaranteeing that you'll never prematurely deplete your portfolio, you should look into the work that several of us have done with using the time value of money formula to determine annual withdrawals.
Great feedback, and I bookmarked that link to read later, thanks! I have read that about retirement spending declining as one ages. Seems reasonable, that spending would decline with activity, which I would assume is necessarily the case as one's health declines. I'd still be curious to see if the analysis that led to the conclusion properly accounted for decreasing portfolios.
willthrill81 wrote:
Thu May 14, 2020 12:08 pm
I never said such a thing.
No, I was not accusing, just reflecting on a larger social dialogue we're having where that turn of phrase is symbolic of one side's general argument. I know you're a more nuanced thinker. Apologies for not being more clear.
I'm skeptical because we've been hearing the argument that machines would render human workers obsolete for more than 100 years, yet it has not yet remotely come to fruition. If it ever does, it might actually be a boon for everyone. If machines can completely care for our needs, then we might be able to live as Gene Roddenberry thought that we eventually would in a sort of utopia.
Fair counterpoints.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Thu May 14, 2020 12:56 pm

smitcat wrote:
Thu May 14, 2020 12:05 pm
You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Tyler9000 » Thu May 14, 2020 1:09 pm

Stef wrote:
Thu May 14, 2020 1:12 am
Tyler9000 wrote:
Wed May 13, 2020 11:22 am
For example, gold doesn't grow, pays no dividend, and has a long-term expected return of zero. According to standard thinking, one would expect a portfolio with a sizable allocation to a zero-yielding asset to have a lower safe withdrawal rate than one with only stocks. Luckily, we can test that assumption. Looking at every retirement year since 1970, a portfolio of 100% US stocks had a 30-year SWR of 4.3%. A portfolio of 60% stocks and 40% gold had a SWR of 5.0%. So much for weighting the expected returns of each asset!
Bad example as gold wasn't traded in 1970. You have to start at 1974-1976 to get the effective historical returns of gold.
For reference, cropping the available start dates at 1975 instead of 1970 leaves the 100% TSM SWR unchanged at 4.3% and raises the SWR of the 60/40 TSM/gold portfolio to 5.3%. But I understand that gold is controversial here, and my goal is not to argue about SWRs for specific portfolios. My basic point is simply that expected returns clearly do not fully describe portfolio performance in retirement.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by HomerJ » Thu May 14, 2020 1:14 pm

ValuationsMatter wrote:
Thu May 14, 2020 11:27 am
It is not meaningful to an approach that is focused on the level of security I would desire from a planning perspective if I want to retire without going back to work, implicit in the word 'retire' to me, if I don't have another passive source of income. If, passively, I am wholly dependent on my portfolio starting in my early 40's, then some portfolio growth would provide cushion to deal with the unexpected/circumstances necessarily absent from a simplified model. I wouldn't say I'm pessimistic, but I am conservative, and I believe in redundancy to the extent that I would not feel comfortable without it.
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
I also think your perspective only applies to able-bodied retirees who run out of money. In these sorts of plans, you're most likely to run out of money near the end of your life when you are least able-bodied.
Actually, retirement plans fail when there's a crash or poor returns EARLY in retirement.

When one is still young, and CAN go back to work.

You state you want a plan that guarantees you never work again. So you better save more.

But someone else might go with 4%, but make it part of the plan to go back to work (probably just part-time) if the portfolio takes a hit early on in retirement.

If one is 45, and has 25x expenses (and some SS coming in 20 years), one could retire then, but recognizing that they may have to go back to work in the next 10 years if things don't work out well.

Or, one could work full-time to 50-55 and get up to 33x-40x expenses, and then pretty much guarantee they can retire forever.

Second choice is guaranteeing you work an extra 5-10 years. The first choice means you MIGHT have to go back to work for 5-10 years.

Many people might go for the first choice.

Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by randomguy » Thu May 14, 2020 1:26 pm

smitcat wrote:
Thu May 14, 2020 12:05 pm
geerhardusvos wrote:
Thu May 14, 2020 11:04 am


You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Thu May 14, 2020 1:28 pm

HomerJ wrote:
Thu May 14, 2020 1:14 pm
ValuationsMatter wrote:
Thu May 14, 2020 11:27 am
It is not meaningful to an approach that is focused on the level of security I would desire from a planning perspective if I want to retire without going back to work, implicit in the word 'retire' to me, if I don't have another passive source of income. If, passively, I am wholly dependent on my portfolio starting in my early 40's, then some portfolio growth would provide cushion to deal with the unexpected/circumstances necessarily absent from a simplified model. I wouldn't say I'm pessimistic, but I am conservative, and I believe in redundancy to the extent that I would not feel comfortable without it.
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
I also think your perspective only applies to able-bodied retirees who run out of money. In these sorts of plans, you're most likely to run out of money near the end of your life when you are least able-bodied.
Actually, retirement plans fail when there's a crash or poor returns EARLY in retirement.

When one is still young, and CAN go back to work.

You state you want a plan that guarantees you never work again. So you better save more.

But someone else might go with 4%, but make it part of the plan to go back to work (probably just part-time) if the portfolio takes a hit early on in retirement.

If one is 45, and has 25x expenses (and some SS coming in 20 years), one could retire then, but recognizing that they may have to go back to work in the next 10 years if things don't work out well.

Or, one could work full-time to 50-55 and get up to 33x-40x expenses, and then pretty much guarantee they can retire forever.

Second choice is guaranteeing you work an extra 5-10 years. The first choice means you MIGHT have to go back to work for 5-10 years.

Many people might go for the first choice.

Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
Really good points here. Would only squabble slightly by saying that a 3% wr is the lowest historically needed for essentially a guaranteed perpetual (60+ years) draw down for 50%+ equity portfolios. 2.5% wr is unnecessarily low. Great points you made nonetheless.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Thu May 14, 2020 2:05 pm

randomguy wrote:
Thu May 14, 2020 1:26 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
geerhardusvos wrote:
Thu May 14, 2020 11:04 am


You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.
I don't know which data set you're basing your numbers on, but it definitely isn't the SS Administration's data. Theirs indicates that an opposite-sex couple age 50 only has a 38% chance of either spouse surviving to age 90. It indicates only a 4% chance of both surviving to that age. Granted, this doesn't take wealth, health status, etc. into account, but there's a big discrepancy between 90% and 38%.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by randomguy » Thu May 14, 2020 2:20 pm

willthrill81 wrote:
Thu May 14, 2020 2:05 pm
randomguy wrote:
Thu May 14, 2020 1:26 pm


Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.
I don't know which data set you're basing your numbers on, but it definitely isn't the SS Administration's data. Theirs indicates that an opposite-sex couple age 50 only has a 38% chance of either spouse surviving to age 90. It indicates only a 4% chance of both surviving to that age. Granted, this doesn't take wealth, health status, etc. into account, but there's a big discrepancy between 90% and 38%.

Of course not. No sane person would use the SS data set to calculate their life expectancy. Why should I care how long smokers, obese people, ones with diabetes and so on live when I am planning my retirement? It has no relevance to how long I will live. Go to any of the insurance companies (or universities if you are worried about bias. The numbers always come back with in a year or two) calculators and get a number that uses a data set that applies to you. There is a huge gap in life expectancy between groups so using an average of them makes no sense when planning out your person situation.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Thu May 14, 2020 3:24 pm

HomerJ wrote:
Thu May 14, 2020 1:14 pm
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
To be fair, I've bounced around quite a bit as I've considered various options. Some of the comments have been hypothetical in consideration of what would be required if I don't have a pension and/or in the portion of my budget that my pension would not cover. Sometimes, I like setting up a thought experiment to examine and question my beliefs. So, let's get away from the theoretical and get to the personal & practical. In reality, let me lay out my situation and outlook. I don't know if fully intend to stop working altogether, but I do intend/hope to be Financially Independent by 44 when I retire from the military so that doing so would be possible.

- I'm hoping/expecting a retirement from the military that would currently pay ~$50k post-taxes (tied annually to CPI)
- Financial Independence (comfy modest lifestyle) = ~$75k/yr.
- So, I need to make up $25k/yr (post tax) from my portfolio. 15% LTCG (unsafe future assumption, I acknowledge) yields $29.4k/yr pre-tax.
- Assume 3% (fixed %) of portfolio withdrawal is indefinitely safe. Yields Portfolio requirement of $980k.
- Current invested assets ~$800k. Currently investing at a rate of $42.5k/yr (likely to increase marginally until retirement).
- 6 years to military retirement yields ~$1.05M portfolio (assumes 0% real ROI as current valuations are concerning & time period is short)
- Inflation impact: (2% for 6 years requires 12.6% more/yr). Salary & Retirement are tied to CPI. Acknowledge risk in pre-retirement portfolio growth failing to match inflation.

If I retire after military retirement & my portfolio drops 50% in a given year, it really only hits the difference from my pension to my desired budget. So, I'd be on a $62.5k budget. That leaves me flexible enough to absorb large market swings. The 'fall back' discussion was really a tangent for me, as if things go my way, I will have one.

Anything wrong with the above general plan? Accepting no plan is perfect, it seems pretty solid to me. Any holes in my thinking?
Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
I don't know the me who doesn't have hoops to jump through. I don't know what kind of guy I will be. I might sit at home, drink beer, get fat, and play video games. I might find a passion for work that I never found to this point. I might just go live in a different geographic locale every year. I see it as a choose your own adventure book. I most likely will retire from the military as soon as I am allowed to. I may/may not continue to do data science/operations research. I am conservative, though. I am not comfortable with the leap into the unknown without feeling that I have solid financial independence, first.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 7:42 am

geerhardusvos wrote:
Thu May 14, 2020 12:56 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 7:45 am

HomerJ wrote:
Thu May 14, 2020 1:14 pm
ValuationsMatter wrote:
Thu May 14, 2020 11:27 am
It is not meaningful to an approach that is focused on the level of security I would desire from a planning perspective if I want to retire without going back to work, implicit in the word 'retire' to me, if I don't have another passive source of income. If, passively, I am wholly dependent on my portfolio starting in my early 40's, then some portfolio growth would provide cushion to deal with the unexpected/circumstances necessarily absent from a simplified model. I wouldn't say I'm pessimistic, but I am conservative, and I believe in redundancy to the extent that I would not feel comfortable without it.
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
I also think your perspective only applies to able-bodied retirees who run out of money. In these sorts of plans, you're most likely to run out of money near the end of your life when you are least able-bodied.
Actually, retirement plans fail when there's a crash or poor returns EARLY in retirement.

When one is still young, and CAN go back to work.

You state you want a plan that guarantees you never work again. So you better save more.

But someone else might go with 4%, but make it part of the plan to go back to work (probably just part-time) if the portfolio takes a hit early on in retirement.

If one is 45, and has 25x expenses (and some SS coming in 20 years), one could retire then, but recognizing that they may have to go back to work in the next 10 years if things don't work out well.

Or, one could work full-time to 50-55 and get up to 33x-40x expenses, and then pretty much guarantee they can retire forever.

Second choice is guaranteeing you work an extra 5-10 years. The first choice means you MIGHT have to go back to work for 5-10 years.

Many people might go for the first choice.

Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
"If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%."
I agree - I think one of the largest potential problems with a 40's plan is reasonably figuring a satisfactory expenses budget, especially if you have a family and not just a single planner.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 7:49 am

randomguy wrote:
Thu May 14, 2020 1:26 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
geerhardusvos wrote:
Thu May 14, 2020 11:04 am


You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.
Yes I agreed - and the younger you are now the more likely you can make that curve swing upwards for many reasons such as nutrition, non-smoker, medical updates , etc. A reasonably educated and active 'younger' person will stretch all of these average ages in the coming years.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Wanderingwheelz » Fri May 15, 2020 8:03 am

As long as you have a home that’s paid for- a well-built/well-located home you’re happy to live your remaining years in, and you have 25x expenses saved up in addition to the house, you can retire at any age in my opinion.

You just have to remain flexible in your spending, which isn’t going to be hard to do since there will be no housing expense besides taxes and upkeep, which are manageable. Travel and leisure is something we are all finding is something we can live w/o, if need be.

I’m 48 with more than 25x, but not a lot more, and I’d be fine retiring for good tomorrow, knowing my wife and I could cut back spending by a good bit if circumstances dictated we do.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 8:30 am

ValuationsMatter wrote:
Thu May 14, 2020 3:24 pm
HomerJ wrote:
Thu May 14, 2020 1:14 pm
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
To be fair, I've bounced around quite a bit as I've considered various options. Some of the comments have been hypothetical in consideration of what would be required if I don't have a pension and/or in the portion of my budget that my pension would not cover. Sometimes, I like setting up a thought experiment to examine and question my beliefs. So, let's get away from the theoretical and get to the personal & practical. In reality, let me lay out my situation and outlook. I don't know if fully intend to stop working altogether, but I do intend/hope to be Financially Independent by 44 when I retire from the military so that doing so would be possible.

- I'm hoping/expecting a retirement from the military that would currently pay ~$50k post-taxes (tied annually to CPI)
- Financial Independence (comfy modest lifestyle) = ~$75k/yr.
- So, I need to make up $25k/yr (post tax) from my portfolio. 15% LTCG (unsafe future assumption, I acknowledge) yields $29.4k/yr pre-tax.
- Assume 3% (fixed %) of portfolio withdrawal is indefinitely safe. Yields Portfolio requirement of $980k.
- Current invested assets ~$800k. Currently investing at a rate of $42.5k/yr (likely to increase marginally until retirement).
- 6 years to military retirement yields ~$1.05M portfolio (assumes 0% real ROI as current valuations are concerning & time period is short)
- Inflation impact: (2% for 6 years requires 12.6% more/yr). Salary & Retirement are tied to CPI. Acknowledge risk in pre-retirement portfolio growth failing to match inflation.

If I retire after military retirement & my portfolio drops 50% in a given year, it really only hits the difference from my pension to my desired budget. So, I'd be on a $62.5k budget. That leaves me flexible enough to absorb large market swings. The 'fall back' discussion was really a tangent for me, as if things go my way, I will have one.

Anything wrong with the above general plan? Accepting no plan is perfect, it seems pretty solid to me. Any holes in my thinking?
Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
I don't know the me who doesn't have hoops to jump through. I don't know what kind of guy I will be. I might sit at home, drink beer, get fat, and play video games. I might find a passion for work that I never found to this point. I might just go live in a different geographic locale every year. I see it as a choose your own adventure book. I most likely will retire from the military as soon as I am allowed to. I may/may not continue to do data science/operations research. I am conservative, though. I am not comfortable with the leap into the unknown without feeling that I have solid financial independence, first.
The way I read your post your future plans/rick/challenges have very little to do with math and back testing and very much to do with your future personal choices.
"I might sit at home, drink beer, get fat, and play video games."
This will likely lead to much less spending and a shorter life - no need for extra funds

"I might find a passion for work that I never found to this point."
This will lead to a larger income and larger savings which will yield many extra funds for you when you call on them.

"I might just go live in a different geographic locale every year. I see it as a choose your own adventure book."
This will likely lead to a much greater spending level and maybe a longer life as well - you will need additional funds.

Future family, charities, callings in life, activities, etc ???? ( the younger you are the more time for future surprises/changes)

The good news is any and all of this is very possible from where you are now. The bad news is that you are completely in control of which plan(s) you have for the future. Much luck ...

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by WS1 » Fri May 15, 2020 8:45 am

randomguy wrote:
Thu May 14, 2020 1:26 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
geerhardusvos wrote:
Thu May 14, 2020 11:04 am


You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.
Thank you for posting this. I took a one semester long demographics class and am a veteran of the paleo diet wars of the early aughts. I have a deep hatred of “Average Life Expectancy”

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by vitaflo » Fri May 15, 2020 9:15 am

willthrill81 wrote:
Tue May 12, 2020 10:36 am
vipertom1970 wrote:
Tue May 12, 2020 10:30 am
Will, if a person needs a 1.5% withdraw rate then there is nothing to worry about at a portfolio of 95/5 cash correct ?
The worry in that situation wouldn't be running out of money. The potential concern would be the regret in having kept working at a job you didn't love in order to accumulate at least twice as large of a portfolio as you needed to. A 1.5% withdrawal rate requires double the portfolio size of a 3% withdrawal rate. Someone who could have implemented a 3% withdrawal rate in the year 2000, had a 20% saving rate, and had a 60/40 AA would not have been able to implement a 1.5% withdrawal rate until September of 2017. That's a really big opportunity cost for most people.
For me this is the bigger risk. Being required to work for an extra 17 years during the prime of my life is absolutely unacceptable. I would much rather run out of money when I'm 80. In the end we're all just trading time. Time now for time later. It's a balancing act but many people take it way too far.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 9:18 am

smitcat wrote:
Fri May 15, 2020 7:42 am
geerhardusvos wrote:
Thu May 14, 2020 12:56 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 9:48 am

Wanderingwheelz wrote:
Fri May 15, 2020 8:03 am
As long as you have a home that’s paid for- a well-built/well-located home you’re happy to live your remaining years in, and you have 25x expenses saved up in addition to the house, you can retire at any age in my opinion.

You just have to remain flexible in your spending, which isn’t going to be hard to do since there will be no housing expense besides taxes and upkeep, which are manageable. Travel and leisure is something we are all finding is something we can live w/o, if need be.

I’m 48 with more than 25x, but not a lot more, and I’d be fine retiring for good tomorrow, knowing my wife and I could cut back spending by a good bit if circumstances dictated we do.
That’s fantastic, congratulations :sharebeer
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 9:52 am

smitcat wrote:
Fri May 15, 2020 7:45 am
HomerJ wrote:
Thu May 14, 2020 1:14 pm
ValuationsMatter wrote:
Thu May 14, 2020 11:27 am
It is not meaningful to an approach that is focused on the level of security I would desire from a planning perspective if I want to retire without going back to work, implicit in the word 'retire' to me, if I don't have another passive source of income. If, passively, I am wholly dependent on my portfolio starting in my early 40's, then some portfolio growth would provide cushion to deal with the unexpected/circumstances necessarily absent from a simplified model. I wouldn't say I'm pessimistic, but I am conservative, and I believe in redundancy to the extent that I would not feel comfortable without it.
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
I also think your perspective only applies to able-bodied retirees who run out of money. In these sorts of plans, you're most likely to run out of money near the end of your life when you are least able-bodied.
Actually, retirement plans fail when there's a crash or poor returns EARLY in retirement.

When one is still young, and CAN go back to work.

You state you want a plan that guarantees you never work again. So you better save more.

But someone else might go with 4%, but make it part of the plan to go back to work (probably just part-time) if the portfolio takes a hit early on in retirement.

If one is 45, and has 25x expenses (and some SS coming in 20 years), one could retire then, but recognizing that they may have to go back to work in the next 10 years if things don't work out well.

Or, one could work full-time to 50-55 and get up to 33x-40x expenses, and then pretty much guarantee they can retire forever.

Second choice is guaranteeing you work an extra 5-10 years. The first choice means you MIGHT have to go back to work for 5-10 years.

Many people might go for the first choice.

Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
"If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%."
I agree - I think one of the largest potential problems with a 40's plan is reasonably figuring a satisfactory expenses budget, especially if you have a family and not just a single planner.
How is it that hard to predict expenses? Our expenses over the last 15 years have been on average 65K per year including home remodels and unforeseen medical expenses. I take that as my baseline and I will just adjust for inflation every year. Some months we only spent 4000, others we spend 8000. But that’s expected and expenses are pretty easy to control and predict.
Last edited by geerhardusvos on Fri May 15, 2020 10:39 am, edited 1 time in total.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Fri May 15, 2020 10:03 am

smitcat wrote:
Fri May 15, 2020 8:30 am
Future family, charities, callings in life, activities, etc ???? ( the younger you are the more time for future surprises/changes)
True. So, the question is turned back to me as to whether the $75k/yr will support my lifestyle, and I think that's a fairly easy target to stay within. After taxes, I currently live very comfortably on $60k/yr. Tricare Prime for retirees is seemingly excellent medical coverage.

3% of portfolio/yr + 3% average inflation would suggest that nominal long-term returns of 6% should keep real income constant over the course of retirement. Anything over and above a 6% return, would be real portfolio growth. It would theoretically allow me to take a pretty conservative AA and still achieve the goal of a comfy, conservative retirement. According to a couple quick google searches, a 60/40 has yielded somewhere between 4-7% REAL returns historically. That's a nice cushion to deal with prevailing theories about how America will not continue to grow as it has in the past.

Once the portfolio is sufficient to achieve long term goals at an extremely conservative allocation, wouldn't it make sense to invest any excess much more aggressively? i.e. set aside the portion of the portfolio that meets retirement goals/plans. Any portion in excess of that portfolio could then be used aggressively since its loss no longer represents a threat to long-term stability. It would be ok to be greedy with that money, take shots, perhaps seek riskier business opportunities, etc...
The good news is any and all of this is very possible from where you are now. The bad news is that you are completely in control of which plan(s) you have for the future. Much luck ...
Why is complete control bad news?

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by HomerJ » Fri May 15, 2020 10:13 am

geerhardusvos wrote:
Fri May 15, 2020 9:52 am
How is it hard that to predict expenses? Our expenses over the last 15 years have been on average 65K per year including home remodels and unforeseen medical expenses. I take that as my baseline and I will just adjust for inflation every year. Some months we only spent 4000, others we spend 8000. But that’s expected and expenses are pretty easy to control and predict.
The younger you are, the harder it is. Things change, with jobs, location, kids, etc.

We are in our 50s, and we've had a fairy steady lifestyle for the past 5-10 years, and know where we are going to live in retirement (so we know how much we'll be paying in property taxes), so we have a pretty good handle on our expenses.

We do still have one last kid at home, so when he's gone, that will change things a bit (food budget should go down!), but not a huge change.

When I was 35, it would have been really hard to guess what my expenses in retirement would be.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 10:17 am

HomerJ wrote:
Fri May 15, 2020 10:13 am
geerhardusvos wrote:
Fri May 15, 2020 9:52 am
How is it hard that to predict expenses? Our expenses over the last 15 years have been on average 65K per year including home remodels and unforeseen medical expenses. I take that as my baseline and I will just adjust for inflation every year. Some months we only spent 4000, others we spend 8000. But that’s expected and expenses are pretty easy to control and predict.
The younger you are, the harder it is. Things change, with jobs, location, kids, etc.

We are in our 50s, and we've had a fairy steady lifestyle for the past 5-10 years, and know where we are going to live in retirement (so we know how much we'll be paying in property taxes), so we have a pretty good handle on our expenses.

We do still have one last kid at home, so when he's gone, that will change things a bit (food budget should go down!), but not a huge change.

When I was 35, it would have been really hard to guess what my expenses in retirement would be.
We’ve been able to keep things pretty constant, and I can understand why some people would have an issue predicting expenses. We live in an HCOL area, and we plan to move to a lower cost of living area in the next 10 years, but we are budgeting for our current budget. Should even out OK. Not paying for my kids college and have budgeted for sports and activities.

Another thing to think about is we are forcing ourselves to live within a budget once we retire. We are smart and financially savvy, so whether we budget 50 K or 100 K we should be able to figure it out. Since medical expenses and other costs might rise differently than expected, budgeting for 100% of our current budget in an HCOL seems very safe. But whatever budget we have we can figure it out! The more we have, the more we can travel and do things that we love, but we won’t ever go without the essentials. Sometimes making less allows for spending less because of subsidies and tax breaks
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 11:58 am

geerhardusvos wrote:
Fri May 15, 2020 9:18 am
smitcat wrote:
Fri May 15, 2020 7:42 am
geerhardusvos wrote:
Thu May 14, 2020 12:56 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 12:01 pm

geerhardusvos wrote:
Fri May 15, 2020 9:52 am
smitcat wrote:
Fri May 15, 2020 7:45 am
HomerJ wrote:
Thu May 14, 2020 1:14 pm
ValuationsMatter wrote:
Thu May 14, 2020 11:27 am
It is not meaningful to an approach that is focused on the level of security I would desire from a planning perspective if I want to retire without going back to work, implicit in the word 'retire' to me, if I don't have another passive source of income. If, passively, I am wholly dependent on my portfolio starting in my early 40's, then some portfolio growth would provide cushion to deal with the unexpected/circumstances necessarily absent from a simplified model. I wouldn't say I'm pessimistic, but I am conservative, and I believe in redundancy to the extent that I would not feel comfortable without it.
If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%.

If you can save 33x-40x expenses by your 40s, good for you. You deserve all the leisure years.
I also think your perspective only applies to able-bodied retirees who run out of money. In these sorts of plans, you're most likely to run out of money near the end of your life when you are least able-bodied.
Actually, retirement plans fail when there's a crash or poor returns EARLY in retirement.

When one is still young, and CAN go back to work.

You state you want a plan that guarantees you never work again. So you better save more.

But someone else might go with 4%, but make it part of the plan to go back to work (probably just part-time) if the portfolio takes a hit early on in retirement.

If one is 45, and has 25x expenses (and some SS coming in 20 years), one could retire then, but recognizing that they may have to go back to work in the next 10 years if things don't work out well.

Or, one could work full-time to 50-55 and get up to 33x-40x expenses, and then pretty much guarantee they can retire forever.

Second choice is guaranteeing you work an extra 5-10 years. The first choice means you MIGHT have to go back to work for 5-10 years.

Many people might go for the first choice.

Me, I don't think working an extra 5 years in your 40s is a huge sacrifice, and would want the extra certainty. Now, working an extra 5 years in your late 50s or early 60s is a much bigger sacrifice (and you have less retirement years to fund), so I will be fine with 4% in those situations.
"If you want to retire in your 40s, and guarantee you never have to work again, you better save a crap-ton of money, yes that's true. Pulling 4% might not work. You better save 50%-75% more and pull 2.5%-3%."
I agree - I think one of the largest potential problems with a 40's plan is reasonably figuring a satisfactory expenses budget, especially if you have a family and not just a single planner.
How is it that hard to predict expenses? Our expenses over the last 15 years have been on average 65K per year including home remodels and unforeseen medical expenses. I take that as my baseline and I will just adjust for inflation every year. Some months we only spent 4000, others we spend 8000. But that’s expected and expenses are pretty easy to control and predict.
If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 12:06 pm

ValuationsMatter wrote:
Fri May 15, 2020 10:03 am
smitcat wrote:
Fri May 15, 2020 8:30 am
Future family, charities, callings in life, activities, etc ???? ( the younger you are the more time for future surprises/changes)
True. So, the question is turned back to me as to whether the $75k/yr will support my lifestyle, and I think that's a fairly easy target to stay within. After taxes, I currently live very comfortably on $60k/yr. Tricare Prime for retirees is seemingly excellent medical coverage.

3% of portfolio/yr + 3% average inflation would suggest that nominal long-term returns of 6% should keep real income constant over the course of retirement. Anything over and above a 6% return, would be real portfolio growth. It would theoretically allow me to take a pretty conservative AA and still achieve the goal of a comfy, conservative retirement. According to a couple quick google searches, a 60/40 has yielded somewhere between 4-7% REAL returns historically. That's a nice cushion to deal with prevailing theories about how America will not continue to grow as it has in the past.

Once the portfolio is sufficient to achieve long term goals at an extremely conservative allocation, wouldn't it make sense to invest any excess much more aggressively? i.e. set aside the portion of the portfolio that meets retirement goals/plans. Any portion in excess of that portfolio could then be used aggressively since its loss no longer represents a threat to long-term stability. It would be ok to be greedy with that money, take shots, perhaps seek riskier business opportunities, etc...
The good news is any and all of this is very possible from where you are now. The bad news is that you are completely in control of which plan(s) you have for the future. Much luck ...
Why is complete control bad news?
"Why is complete control bad news?"
Probably a poor phrase - its up to you so you cannot rely on math or some calculator. This is a very subjective issue which no-one else will likely be able to help with in the least.
"So, the question is turned back to me as to whether the $75k/yr will support my lifestyle, and I think that's a fairly easy target to stay within."
Sounds good - only you can solve for this parameter.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 12:37 pm

smitcat wrote:
Fri May 15, 2020 11:58 am
geerhardusvos wrote:
Fri May 15, 2020 9:18 am
smitcat wrote:
Fri May 15, 2020 7:42 am
geerhardusvos wrote:
Thu May 14, 2020 12:56 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
You are fine with your plan great. It has backups and that is also great. Your also are concerned that I am worried about 4% too much -could not be further from the truth. The post where this was concerning was about other folks reading this quote and thinking it might be something to rely on:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."
Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by randomguy » Fri May 15, 2020 1:00 pm

smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Fri May 15, 2020 1:19 pm

randomguy wrote:
Fri May 15, 2020 1:00 pm
smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.
I agree. We're planning on retirement income of about $80k annually, which isn't far off what we're spending now while raising a child. If we need to make do with $60k, for instance, we'll make do quite happily.

The 'lean FIRE' crowd could get into trouble with budgeting though. If your annual budget is only $20k, you don't have much room to cut back.
“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

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 2:33 pm

geerhardusvos wrote:
Fri May 15, 2020 12:37 pm
smitcat wrote:
Fri May 15, 2020 11:58 am
geerhardusvos wrote:
Fri May 15, 2020 9:18 am
smitcat wrote:
Fri May 15, 2020 7:42 am
geerhardusvos wrote:
Thu May 14, 2020 12:56 pm


Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
"That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio"
Again that is just fine if you have a plan to work again, have SS in addition, are planning on an inheritance or your budget allows for variable spending. Together I typically label these as backups and you are comfortable because you have them.

I believe a 15% failure rate is not acceptable for those that do not have backups.
And then it could easily be a longer retirement than 40 yrs - lets hope so.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 2:38 pm

randomguy wrote:
Fri May 15, 2020 1:00 pm
smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.
"I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources."
But those expenses do not typically remain the same at 20,30,40,50 etc.

"Most people live on a pretty steady income if they were working. I think they can do the same in retirement."
The comment was couched for someone in their 30's that are projecting their expenses to remain flat and consistent throughout their remaining lifetimes.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by H-Town » Fri May 15, 2020 2:50 pm

willthrill81 wrote:
Fri May 15, 2020 1:19 pm
randomguy wrote:
Fri May 15, 2020 1:00 pm
smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.
I agree. We're planning on retirement income of about $80k annually, which isn't far off what we're spending now while raising a child. If we need to make do with $60k, for instance, we'll make do quite happily.

The 'lean FIRE' crowd could get into trouble with budgeting though. If your annual budget is only $20k, you don't have much room to cut back.
It's all relative though. 20k could be more than enough in some places. 80k could be very tight in certain places.

I just didn't think this discussion would continue to draw interests from many folks here.

If FI is the goal and we don't want to risk running out of money, why don't we plan to provide a lot of cushion? Instead of planning to save 25x annual expense, one can plan to double that, i.e. 50x annual expense. Instead of focusing on outside factors that we cannot control, focus on your saving and spending. If one cannot achieve 50x, he or she can plan to work with what they have. Human race has done that since the beginning.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 2:53 pm

smitcat wrote:
Fri May 15, 2020 2:33 pm
geerhardusvos wrote:
Fri May 15, 2020 12:37 pm
smitcat wrote:
Fri May 15, 2020 11:58 am
geerhardusvos wrote:
Fri May 15, 2020 9:18 am
smitcat wrote:
Fri May 15, 2020 7:42 am


"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
"That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio"
Again that is just fine if you have a plan to work again, have SS in addition, are planning on an inheritance or your budget allows for variable spending. Together I typically label these as backups and you are comfortable because you have them.

I believe a 15% failure rate is not acceptable for those that do not have backups.
And then it could easily be a longer retirement than 40 yrs - lets hope so.
We are all still waiting for you to tell us who will not have Social Security.

85% is solid. By withdrawing 3.8% for even a couple years would make this well above 90% success... SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked. Please show us some data that tells us otherwise, or stop the nitpicking
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Fri May 15, 2020 3:04 pm

H-Town wrote:
Fri May 15, 2020 2:50 pm
willthrill81 wrote:
Fri May 15, 2020 1:19 pm
randomguy wrote:
Fri May 15, 2020 1:00 pm
smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.
I agree. We're planning on retirement income of about $80k annually, which isn't far off what we're spending now while raising a child. If we need to make do with $60k, for instance, we'll make do quite happily.

The 'lean FIRE' crowd could get into trouble with budgeting though. If your annual budget is only $20k, you don't have much room to cut back.
It's all relative though. 20k could be more than enough in some places. 80k could be very tight in certain places.

I just didn't think this discussion would continue to draw interests from many folks here.

If FI is the goal and we don't want to risk running out of money, why don't we plan to provide a lot of cushion? Instead of planning to save 25x annual expense, one can plan to double that, i.e. 50x annual expense. Instead of focusing on outside factors that we cannot control, focus on your saving and spending. If one cannot achieve 50x, he or she can plan to work with what they have. Human race has done that since the beginning.
Why stop at 50X? Why not go for 75X? You can keep playing limbo with your withdrawal rate/expense multiple until the day you die.

Many believe that 25x already provides plenty of cushion for a 30 year retirement. For longer retirements, 33x would have survived for 50 years in nearly all circumstances. 50x is for either extremely nervous nellies, who would probably be well served with a TIPS/I-bond ladder and/or a SPIA, or bragging rights unless you're just accumulating for someone else, such as your heirs, or something similar.
“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

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Fri May 15, 2020 3:12 pm

geerhardusvos wrote:
Fri May 15, 2020 2:53 pm
smitcat wrote:
Fri May 15, 2020 2:33 pm
geerhardusvos wrote:
Fri May 15, 2020 12:37 pm
smitcat wrote:
Fri May 15, 2020 11:58 am
geerhardusvos wrote:
Fri May 15, 2020 9:18 am


Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
"That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio"
Again that is just fine if you have a plan to work again, have SS in addition, are planning on an inheritance or your budget allows for variable spending. Together I typically label these as backups and you are comfortable because you have them.

I believe a 15% failure rate is not acceptable for those that do not have backups.
And then it could easily be a longer retirement than 40 yrs - lets hope so.
We are all still waiting for you to tell us who will not have Social Security.

85% is solid. By withdrawing 3.8% for even a couple years would make this well above 90% success... SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked. Please show us some data that tells us otherwise, or stop the nitpicking
"We are all still waiting for you to tell us who will not have Social Security."

The statement I said would not work explicitly said that SS was not required, here is its again:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

But if they did have SS it would depend on how much they required to pull from the portfolio as well as how much the SS benefits would be. That might make the equation work and it might not.

"85% is solid."
For you the answer is absolutely yes - because you have multiple fallback positions.

"By withdrawing 3.8% for even a couple years would make this well above 90% success."
That would not be 'bare bones' as in your statement - so with that backup it would likely help greatly.

"SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked."
As I said above SS added to your statement may or may not make the 25X work (depends on SS amount and required draw).

"Please show us some data that tells us otherwise, or stop the nitpicking"
The data is exactly what you have presented - your initial statement does not work unless you modify it in one or more ways as you are currently doing with each of these follow up posts.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Fri May 15, 2020 3:28 pm

smitcat wrote:
Fri May 15, 2020 3:12 pm
geerhardusvos wrote:
Fri May 15, 2020 2:53 pm
smitcat wrote:
Fri May 15, 2020 2:33 pm
geerhardusvos wrote:
Fri May 15, 2020 12:37 pm
smitcat wrote:
Fri May 15, 2020 11:58 am


Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
"That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio"
Again that is just fine if you have a plan to work again, have SS in addition, are planning on an inheritance or your budget allows for variable spending. Together I typically label these as backups and you are comfortable because you have them.

I believe a 15% failure rate is not acceptable for those that do not have backups.
And then it could easily be a longer retirement than 40 yrs - lets hope so.
We are all still waiting for you to tell us who will not have Social Security.

85% is solid. By withdrawing 3.8% for even a couple years would make this well above 90% success... SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked. Please show us some data that tells us otherwise, or stop the nitpicking
"We are all still waiting for you to tell us who will not have Social Security."

The statement I said would not work explicitly said that SS was not required, here is its again:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

But if they did have SS it would depend on how much they required to pull from the portfolio as well as how much the SS benefits would be. That might make the equation work and it might not.

"85% is solid."
For you the answer is absolutely yes - because you have multiple fallback positions.

"By withdrawing 3.8% for even a couple years would make this well above 90% success."
That would not be 'bare bones' as in your statement - so with that backup it would likely help greatly.

"SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked."
As I said above SS added to your statement may or may not make the 25X work (depends on SS amount and required draw).

"Please show us some data that tells us otherwise, or stop the nitpicking"
The data is exactly what you have presented - your initial statement does not work unless you modify it in one or more ways as you are currently doing with each of these follow up posts.
You’re not answering the questions. Social Security is a government guaranteed benefit. Anything can happen but almost everything points to the fact that we will all get some Social Security benefit, and for those who have worked for 20+ years, it’s pretty close to guaranteed. By definition SS is not a back up.

https://www.fool.com/retirement/2017/02 ... etire.aspx

In addition to 25X alone working for someone with a 30 to 40 year retirement with no other sources of income, almost everyone will have SS. Almost everyone in the middle class gets some sort of inheritance. Almost everyone’s spending goes down when they are elderly. Almost everyone who is able to manage their money well can figure out how to make their money last based on market returns. 25X alone has worked very well historically for someone retiring in their 50s. Goodbye sir!
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HomerJ
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by HomerJ » Fri May 15, 2020 3:35 pm

H-Town wrote:
Fri May 15, 2020 2:50 pm
If FI is the goal and we don't want to risk running out of money, why don't we plan to provide a lot of cushion? Instead of planning to save 25x annual expense, one can plan to double that, i.e. 50x annual expense. Instead of focusing on outside factors that we cannot control, focus on your saving and spending. If one cannot achieve 50x, he or she can plan to work with what they have. Human race has done that since the beginning.
Because you have to balance the risk of running out of money with running out of time.

Sure, if you get to 25x at 40, nothing wrong with working another 10 years and getting to 50x.

But if you get to 25x at 55 or 60, working an extra 10 years is more of a sacrifice.

Many of the people on this forum who have no problem with 2% or 3% SWRs (50x, 33x expenses) are high-income people with low spending (good Bogleheads).

They are hitting 25x in their 40s, and then they post "Well, I'm going for 3% SWR", because they are still going to retire at 52.

There's no big sacrifice there.

But that's not the reality for most people.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

pop77
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by pop77 » Fri May 15, 2020 3:58 pm

The problem is not mathematical but rather psychological. Some will keep working till they are kicked out as they can always find reasons NOT to retire. As there is no guarantee, you can come up with a scenario where even 50 X expenses will not work. What if you had a medical emergency not covered by insurance? What if US goes to war with China? what if there is a dirty bomb? What if there a pandemic every year? How about climate change? AI ? Singularity?

25 X your expenses + SS+ paid off home has a very high probability to cover any length of retirement with 70% + equities. It does not cover a doomsday scenario.

You got to believe in human spirit and resilience just by looking at history. Also, if there are down years, they will be followed by up years if this is true. If the human race just gives up then even 100 X expenses will not help.

Note that for longer retirement, the range of outcomes just expands, there is a probability you will end up with lots and lots of money but no time to enjoy it.

IF you value money more than time and/or find working enjoyable, work on!

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by H-Town » Fri May 15, 2020 4:59 pm

HomerJ wrote:
Fri May 15, 2020 3:35 pm
H-Town wrote:
Fri May 15, 2020 2:50 pm
If FI is the goal and we don't want to risk running out of money, why don't we plan to provide a lot of cushion? Instead of planning to save 25x annual expense, one can plan to double that, i.e. 50x annual expense. Instead of focusing on outside factors that we cannot control, focus on your saving and spending. If one cannot achieve 50x, he or she can plan to work with what they have. Human race has done that since the beginning.
Because you have to balance the risk of running out of money with running out of time.

Sure, if you get to 25x at 40, nothing wrong with working another 10 years and getting to 50x.

But if you get to 25x at 55 or 60, working an extra 10 years is more of a sacrifice.

Many of the people on this forum who have no problem with 2% or 3% SWRs (50x, 33x expenses) are high-income people with low spending (good Bogleheads).

They are hitting 25x in their 40s, and then they post "Well, I'm going for 3% SWR", because they are still going to retire at 52.

There's no big sacrifice there.

But that's not the reality for most people.
Good point. There should be moderation for everything. And every financial situation is different.

I also agree to the point the the above poster made: at a certain point, it's more psychological than mathematical issue.

I'm just thanking to live through another day. A new day is a new adventure.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by NoRegret » Sat May 16, 2020 1:39 am

geerhardusvos wrote:
Fri May 15, 2020 12:37 pm
smitcat wrote:
Fri May 15, 2020 11:58 am
geerhardusvos wrote:
Fri May 15, 2020 9:18 am
smitcat wrote:
Fri May 15, 2020 7:42 am
geerhardusvos wrote:
Thu May 14, 2020 12:56 pm


Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr. Please let that sink in. What are you concerned about with my above statement? Do you have other data to show us as a basis for your concern?
"Yes, a 50 year retirement is supported almost 90% of the time with a 75-25 portfolio using a 4% wr."
But not any equity portfolio greater than 50%.
50 years at 75% equities = 88% success
50 years at 50% equities = 74% success
Not having the ability to flex spending or have backups = possible disaster.
Those are great success numbers. Can you tell me who in the United States won’t have Social Security? Especially those who have worked 20 years or more? I fail to see how SS is “backup” — I’m sorry that you don’t like the data and reality
Your statement said they did not need SS, here it is again....
"Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

If SS is now allowed it would depend on the amount of SS and the amount they are expecting to receive from the portfolio
"Those are great success numbers."
That is fine then your definition of "very likely OK" = 74% success or better.
Not sure how many folks share that definition but I am not one of them.
The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
Let me start by saying that I'm targeting a 3-3.3% WR in my own retirement planning: 40+ year starting at age 56, some years from now. That said I see multiple problems with Backtest driven SWR research.

1. A minor quibble and only tangentially relevant: stock market index returns were not accessible to individual investors for the majority of the backtest period. At best, they were probably getting index - 1.5% per year. (The relevance is that since investors are getting more of the market return, future market returns may be lower.)

2. Another counter factual is that nobody was financing their retirement out of stock market wealth. Pensions were mostly in bonds back then or flush with contributions. DC plans are a modern development and it remains to be seen what happens when the majority of retirees rely on the stock market to fund their living expenses.

3. Lastly there aren't that many INDEPENDENT, NON-OVERLAPPING 30 year periods of good historical data, much less 40-60 years. If you have N observations of a random variable, the chance of the next observation falling out of the existing range is on the order of 1/N. It's a big problem if N is small.

While targeting 3-3.3% WR myself, by no means do I think it's iron-clad -- that's why it's only a first order target and I'll have multiple fall backs.

Cheers,
NR
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Sat May 16, 2020 6:46 am

geerhardusvos wrote:
Fri May 15, 2020 3:28 pm
smitcat wrote:
Fri May 15, 2020 3:12 pm
geerhardusvos wrote:
Fri May 15, 2020 2:53 pm
smitcat wrote:
Fri May 15, 2020 2:33 pm
geerhardusvos wrote:
Fri May 15, 2020 12:37 pm


The scenario was someone retiring in their 50s. That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio, and >90% for 70-30 portfolio. Most people should be very comfortable with 25x expenses as a planning guideline. 23x is likely golden too with SS and a 30 year retirement. Please look at the data...

4% wr has >85% historical success for 60 year retirements with a 75-25 portfolio!!!!!!
"That’s about a 40 year retirement max. So a 4% wr has >85% success for a 50-50 portfolio"
Again that is just fine if you have a plan to work again, have SS in addition, are planning on an inheritance or your budget allows for variable spending. Together I typically label these as backups and you are comfortable because you have them.

I believe a 15% failure rate is not acceptable for those that do not have backups.
And then it could easily be a longer retirement than 40 yrs - lets hope so.
We are all still waiting for you to tell us who will not have Social Security.

85% is solid. By withdrawing 3.8% for even a couple years would make this well above 90% success... SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked. Please show us some data that tells us otherwise, or stop the nitpicking
"We are all still waiting for you to tell us who will not have Social Security."

The statement I said would not work explicitly said that SS was not required, here is its again:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

But if they did have SS it would depend on how much they required to pull from the portfolio as well as how much the SS benefits would be. That might make the equation work and it might not.

"85% is solid."
For you the answer is absolutely yes - because you have multiple fallback positions.

"By withdrawing 3.8% for even a couple years would make this well above 90% success."
That would not be 'bare bones' as in your statement - so with that backup it would likely help greatly.

"SS should last for a significant chunk of retirement, meaning retiring with 25x in your 50s is solid, no questions asked."
As I said above SS added to your statement may or may not make the 25X work (depends on SS amount and required draw).

"Please show us some data that tells us otherwise, or stop the nitpicking"
The data is exactly what you have presented - your initial statement does not work unless you modify it in one or more ways as you are currently doing with each of these follow up posts.
You’re not answering the questions. Social Security is a government guaranteed benefit. Anything can happen but almost everything points to the fact that we will all get some Social Security benefit, and for those who have worked for 20+ years, it’s pretty close to guaranteed. By definition SS is not a back up.

https://www.fool.com/retirement/2017/02 ... etire.aspx

In addition to 25X alone working for someone with a 30 to 40 year retirement with no other sources of income, almost everyone will have SS. Almost everyone in the middle class gets some sort of inheritance. Almost everyone’s spending goes down when they are elderly. Almost everyone who is able to manage their money well can figure out how to make their money last based on market returns. 25X alone has worked very well historically for someone retiring in their 50s. Goodbye sir!

"You’re not answering the questions. Social Security is a government guaranteed benefit."

The statement you posted that I know will not work explicitly said that SS was not required, here is its again:
"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%."

"Anything can happen but almost everything points to the fact that we will all get some Social Security benefit"
Social security typically is not received by 3-4% of folks in the US, additionally there are many folks who get the minimum SS benefits starting at $40.80.

There are numerous ways to modify your statement so that it will likely work out, all of which you have mentioned along the way:
- work after 'retiring'
- get or add SS
- do not live as long
- get an inheritance
- change the portfolio AA
- increase multiple above 25X
- be able to tolerate variable draws
- OK with risk of failure
So many ways you have posted to adjust the original thought so that it works with some amount of confidence ...but in it's original formulae it does not work.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Wanderingwheelz » Sat May 16, 2020 7:15 am

willthrill81 wrote:
Fri May 15, 2020 1:19 pm
randomguy wrote:
Fri May 15, 2020 1:00 pm
smitcat wrote:
Fri May 15, 2020 12:01 pm

If your expenses , goals and aspirations are the same now as 20 years ago and will be the same again 20 years from now then that is great.
I doubt too many folks, couples, families have that same experience.
I expect pretty much everyone goes through life matching their expenses, goals, and aspirations to their resources. I expect to do the same in retirement. If I hit 60 and decide I want to a trip to the ISS, my budget might be in trouble. I think that is an acceptable risk and I realize that some aspirations have to be left unsatisfied. Obviously there is always the chance of some low probability event (i.e. I need full time nursing care) that will really spike expenses but few people are hit by them. Most people live on a pretty steady income if they were working. I think they can do the same in retirement.
I agree. We're planning on retirement income of about $80k annually, which isn't far off what we're spending now while raising a child. If we need to make do with $60k, for instance, we'll make do quite happily.

The 'lean FIRE' crowd could get into trouble with budgeting though. If your annual budget is only $20k, you don't have much room to cut back.
This is the point I tried to make in my earlier post. If you have no debt at all, including on the home you live in, and you use a withdrawal method that has a high probability of getting the job done over a very long period of time (in my view that’s until at least one half of a couple is 90) then things should work out fine.

My wife and I could easily live off of $80,000/yr in retirement since we’re living off less than that now, and that’s with a college age kid that’s not independent yet. Cutting back 10-20% isn’t hard to do if you have no debt and you’re mindful of discretionary spending.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by calvin+hobbes » Sat May 16, 2020 7:25 am

randomguy wrote:
Thu May 14, 2020 1:26 pm
smitcat wrote:
Thu May 14, 2020 12:05 pm
geerhardusvos wrote:
Thu May 14, 2020 11:04 am


You’re saying many couples live to be in their 90s and 100s? Who’s the one moving the goalposts and not understanding the data? Avg age of death in the US is 78. https://www.macrotrends.net/countries/U ... expectancy

When will the nitpicking stop? All has been consistent with the statements and data coming from my end. Stop worrying about 4% wr. Most of us will have SS or other income in retirement so that’s not novel or backup, it’s a reality for many investors, and therefore makes 25x annual expenses is a great planning guideline to start with.

We plan to live until 92 (although I have health issues so that is improbable and only God knows, but my wife could live longer so it evens out), and that makes my retirement at age 40 a ~50 year retirement to support. 25x-28x is comfortable for us for saying goodbye to the megacorp and living as financially independent starting on my 40th bday (happens to be after bonus season), whatever we choose to do from there is up to us and we‘ll be fine since we have a strategy to avoid SORR and ability to variably withdraw. If I don’t travel and go out to eat for a couple years when I initially retire, it literally adds 2+ years to my retirement income...
Retire in your 50's - could easily be 52 + 40 = 92
40 year retirement

Life expectancy isn't the right number. Childhood deaths and people who die in their 20s don't really chance how long a 50 year old will live. And nobody is average (i.e 20% smoker, 1/3rd diabetic, 60% obese) so using that is rarely useful either. If I was 50 I would have a life expectancy of 93 with a 75% chance to make to 85 and a 25% chance of making it to 100. As a couple the odds of one of us making to 90 are up around 90%.
Please point me to this life expectancy data. Thank you.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ScubaHogg » Sat May 16, 2020 8:39 am

willthrill81 wrote:
Fri May 15, 2020 1:19 pm
The 'lean FIRE' crowd could get into trouble with budgeting though. If your annual budget is only $20k, you don't have much room to cut back.
Conversely, in America it is pretty simple generally to get a job that pays $10-20K a year. A lean FIRE person (of which I’m not one) could easily earn upwards of 100% of their budget at almost anytime (short of being infirm). For some reason that fact never gets mentioned when they are being criticized for their WD projections.
“There is no problem so bad you can’t make it worse.” - Chris Hatfield, Astronaut mantra

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by randomguy » Sat May 16, 2020 9:09 am

calvin+hobbes wrote:
Sat May 16, 2020 7:25 am


Please point me to this life expectancy data. Thank you.
pick your favorite. My experience is all are within a year or two for my situation. Most of them have links that point out how they do their math.

https://www.newretirement.com/retiremen ... lculators/

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