Was there a $$$ number after which things got easier?

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KlangFool
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Re: Was there a $$$ number after which things got easier?

Post by KlangFool » Mon May 15, 2017 6:38 pm

EnjoyIt wrote:
KlangFool wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
EnjoyIt,

SWR = 4% for retirement age. SWR = 3.33% or lower for early retirement. So, if the account growth exceeded 4%/3.33% or like 10% now, the investment is still not big enough for retirement.

KlangFool
Hold on, the people are saying that the growth exceeds their income. From that number you must deduct taxes including FICA as well as any contributions one makes to retirement accounts. That means that growth not only exceeds their income but also exceeds their expenses which must be much lower than income. If growth exceeds my income that means I have saved way way way too much money considering my taxes are 30% of my income and I spend about 25-30% of my income.
EnjoyIt,

Let's assume that your income is 150K and your annual expense is 50K.

In order to retire at retirement age, you need 1.25 million. In order to retire early, you need 1.5 million. Let's assume that you have 1 million now, it is entirely possible that you have 1 year with growth exceeding 15% > 150K. But, even with 1.15 million, you cannot retire yet.

KlangFool

wolf359
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Re: Was there a $$$ number after which things got easier?

Post by wolf359 » Mon May 15, 2017 6:43 pm

EnjoyIt wrote: Working does not mean you are contributing to society, it just means you are getting up doing someone else's bidding. Even the self employed are doing work for a payer's behalf. It also does depend what kind of work that you do. If you are a frivolous litigation lawyer are you really contributing to society? I know, a straw man response. I figure if you have enough money to stop working and really have nothing better to do then work, then by all means work. If you enjoy what you do, or get some significant satisfaction from what you do then again, work. But working just for the sake of working is a waste of your most precious resource which is time.
You tend to get paid when you produce something that is valued by somebody. Now, I agree that some of our society's values are a little whacked and some people get paid too much for things of dubious value to society, and others get paid too little for the value they produce for society.

But working when you don't have to work means that YOU can decide what you want to do, and if YOU feel that it contributes to society. When you don't have to work to put food on the table, you can do something that is meaningful to you, and your own definition of what will benefit the world.

EnjoyIt
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Re: Was there a $$$ number after which things got easier?

Post by EnjoyIt » Mon May 15, 2017 8:08 pm

KlangFool wrote:
EnjoyIt,

Let's assume that your income is 150K and your annual expense is 50K.

In order to retire at retirement age, you need 1.25 million. In order to retire early, you need 1.5 million. Let's assume that you have 1 million now, it is entirely possible that you have 1 year with growth exceeding 15% > 150K. But, even with 1.15 million, you cannot retire yet.

KlangFool
I see where you are going with this. I guess I just assumed growth to be multi year and not just a one time burst. I guess that was my mistake.
wolf359 wrote:
EnjoyIt wrote: Working does not mean you are contributing to society, it just means you are getting up doing someone else's bidding. Even the self employed are doing work for a payer's behalf. It also does depend what kind of work that you do. If you are a frivolous litigation lawyer are you really contributing to society? I know, a straw man response. I figure if you have enough money to stop working and really have nothing better to do then work, then by all means work. If you enjoy what you do, or get some significant satisfaction from what you do then again, work. But working just for the sake of working is a waste of your most precious resource which is time.
You tend to get paid when you produce something that is valued by somebody. Now, I agree that some of our society's values are a little whacked and some people get paid too much for things of dubious value to society, and others get paid too little for the value they produce for society.

But working when you don't have to work means that YOU can decide what you want to do, and if YOU feel that it contributes to society. When you don't have to work to put food on the table, you can do something that is meaningful to you, and your own definition of what will benefit the world.
I couldn't agree with you more. One of the great perks of financial independence. The freedom to choose what you do with your time.

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Hawaiishrimp
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Re: Was there a $$$ number after which things got easier?

Post by Hawaiishrimp » Mon May 15, 2017 8:50 pm

EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

EnjoyIt
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Re: Was there a $$$ number after which things got easier?

Post by EnjoyIt » Mon May 15, 2017 9:34 pm

Hawaiishrimp wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.

KlangFool
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Re: Was there a $$$ number after which things got easier?

Post by KlangFool » Tue May 16, 2017 8:56 am

EnjoyIt wrote:
Hawaiishrimp wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.
EnjoyIt,

Unless you have a windfall of some sort, your portfolio will have to grow for many years until it is big enough for this to happen. And, when your portfolio growth exceed more that your wages every now and then, you are very close to 25X and 33X. And, when you reach 25X and/or 33X, you may choose to retire at that moment as opposed to working longer. Due to all those reasons, people do not reach 50X.

I am facing this question now. I am approximately 20X now. If the market growth stays at the current pace, it might be the first year where it exceeds my wages. At my case, it probably will never reach 50X unless I have a windfall. I would retire before then. Life is too short!!

KlangFool

EnjoyIt
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Re: Was there a $$$ number after which things got easier?

Post by EnjoyIt » Tue May 16, 2017 9:53 am

KlangFool wrote:
EnjoyIt wrote:
Hawaiishrimp wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.
EnjoyIt,

Unless you have a windfall of some sort, your portfolio will have to grow for many years until it is big enough for this to happen. And, when your portfolio growth exceed more that your wages every now and then, you are very close to 25X and 33X. And, when you reach 25X and/or 33X, you may choose to retire at that moment as opposed to working longer. Due to all those reasons, people do not reach 50X.

I am facing this question now. I am approximately 20X now. If the market growth stays at the current pace, it might be the first year where it exceeds my wages. At my case, it probably will never reach 50X unless I have a windfall. I would retire before then. Life is too short!!

KlangFool
KlangFool,
I fully agree with everything you said. I guess I was just picking on the several members who are actually planning on a 2% withdrawal rate which for me is completely rediculous. Even 3% is a little extreme unless the 3% is right at the edge of bare necessity of living.

Admiral
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Re: Was there a $$$ number after which things got easier?

Post by Admiral » Tue May 16, 2017 9:54 am

KlangFool wrote:
EnjoyIt wrote:
Hawaiishrimp wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.
EnjoyIt,

Unless you have a windfall of some sort, your portfolio will have to grow for many years until it is big enough for this to happen. And, when your portfolio growth exceed more that your wages every now and then, you are very close to 25X and 33X. And, when you reach 25X and/or 33X, you may choose to retire at that moment as opposed to working longer. Due to all those reasons, people do not reach 50X.

I am facing this question now. I am approximately 20X now. If the market growth stays at the current pace, it might be the first year where it exceeds my wages. At my case, it probably will never reach 50X unless I have a windfall. I would retire before then. Life is too short!!

KlangFool
KF--

I'm not clear on how (or perhaps why) you are assigning this somewhat arbitrary multiple of wages and claiming that this means one "has enough." Let me explain.

Our gross wages are $240k. However, our spending is much, much less than that, even accounting for taxes. In our case, after retirement and taxable savings, our expenses are approx $84k. That, however, includes the costs associated with a mortgage, and with two children: food, clothing, two extra airline seats, activities, and so on.

In retirement, our (projected) expenses will not include a) kids living at home (one hopes) b) a mortgage c) retirement and non-retirement savings and so on.

So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages). But most people are not going to have the same level of expenses (much less the same savings rate or tax rate) when they stop working.

All that one needs when one is considering "their number" is a portfolio that supports a SWR (whatever one thinks that should be) that supports their lifestyle AT THAT TIME. Not whatever their wages are at present.

Do you disagree?

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Youngblood
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Re: Was there a $$$ number after which things got easier?

Post by Youngblood » Tue May 16, 2017 10:08 am

For me it was when I made more money investing than I did teaching school.

YB
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The Wizard
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Re: Was there a $$$ number after which things got easier?

Post by The Wizard » Tue May 16, 2017 10:13 am

Admiral wrote:... But most people are not going to have the same level of expenses (much less the same savings rate or tax rate) when they stop working...
Depends on what you mean by expenses.
I spend considerably more on travel related expenses in retirement now that I have unlimited time. Give me another $50,000/year after tax and I can incorporate that into my enhanced lifestyle smoothly.
I'm good like that...
Attempted new signature...

KlangFool
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Re: Was there a $$$ number after which things got easier?

Post by KlangFool » Tue May 16, 2017 10:17 am

Admiral wrote:
KlangFool wrote:
EnjoyIt wrote:
Hawaiishrimp wrote:
EnjoyIt wrote:For all you people that said "growth in the accounts exceeded wages from work"
Why are you still working?
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.
EnjoyIt,

Unless you have a windfall of some sort, your portfolio will have to grow for many years until it is big enough for this to happen. And, when your portfolio growth exceed more that your wages every now and then, you are very close to 25X and 33X. And, when you reach 25X and/or 33X, you may choose to retire at that moment as opposed to working longer. Due to all those reasons, people do not reach 50X.

I am facing this question now. I am approximately 20X now. If the market growth stays at the current pace, it might be the first year where it exceeds my wages. At my case, it probably will never reach 50X unless I have a windfall. I would retire before then. Life is too short!!

KlangFool
KF--

I'm not clear on how (or perhaps why) you are assigning this somewhat arbitrary multiple of wages and claiming that this means one "has enough." Let me explain.

Our gross wages are $240k. However, our spending is much, much less than that, even accounting for taxes. In our case, after retirement and taxable savings, our expenses are approx $84k. That, however, includes the costs associated with a mortgage, and with two children: food, clothing, two extra airline seats, activities, and so on.

In retirement, our (projected) expenses will not include a) kids living at home (one hopes) b) a mortgage c) retirement and non-retirement savings and so on.

So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages). But most people are not going to have the same level of expenses (much less the same savings rate or tax rate) when they stop working.

All that one needs when one is considering "their number" is a portfolio that supports a SWR (whatever one thinks that should be) that supports their lifestyle AT THAT TIME. Not whatever their wages are at present.

Do you disagree?
Admiral,

<< All that one needs when one is considering "their number" is a portfolio that supports a SWR (whatever one thinks that should be) that supports their lifestyle AT THAT TIME. Not whatever their wages are at present.>>

My time is NOW. Aka, present. I am aiming for Financial Independence (FI) ASAP. You assume that you could and would work until a future retirement age. Aka, future.

<< In retirement, our (projected) expenses will not include a) kids living at home (one hopes) b) a mortgage c) retirement and non-retirement savings and so on.>>

Good for you if you can safely assume that. In my case, I have no job security. I probably will be permanently unemployed and under-employed after I lose my current job. Many of my peers in the 40s and 50s are permanently unemployed and under-employed.

<< So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages).>>

In my post, the 25X refer to 25X annual expense. In your case, it will be 25 X 86K = 2.15 million. As per my understanding, all SWR formula is based on annual expense. It is not based on wages.

KlangFool

Admiral
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Re: Was there a $$$ number after which things got easier?

Post by Admiral » Tue May 16, 2017 10:50 am

KlangFool wrote:
Admiral wrote:
KlangFool wrote:
EnjoyIt wrote:
Hawaiishrimp wrote:
Uh... because stocks may go down tomorrow..
uh... won't they come back up? shouldn't you have some fixed income sources to ride out a storm? I know, I know some bogleheads are very conservative and are looking to retire with 2% withdrawals. Personally I think its a little nuts, but whatever makes you happy is probably what is important. If I had 50x I would probably double my spending and then cut back if times become rough. Maybe not fly first class on my next trip to the Galapagos Islands.

If your portfolio is growing every year more than your wages, not only have you won the game, you demolished it.
EnjoyIt,

Unless you have a windfall of some sort, your portfolio will have to grow for many years until it is big enough for this to happen. And, when your portfolio growth exceed more that your wages every now and then, you are very close to 25X and 33X. And, when you reach 25X and/or 33X, you may choose to retire at that moment as opposed to working longer. Due to all those reasons, people do not reach 50X.

I am facing this question now. I am approximately 20X now. If the market growth stays at the current pace, it might be the first year where it exceeds my wages. At my case, it probably will never reach 50X unless I have a windfall. I would retire before then. Life is too short!!

KlangFool
KF--

I'm not clear on how (or perhaps why) you are assigning this somewhat arbitrary multiple of wages and claiming that this means one "has enough." Let me explain.

Our gross wages are $240k. However, our spending is much, much less than that, even accounting for taxes. In our case, after retirement and taxable savings, our expenses are approx $84k. That, however, includes the costs associated with a mortgage, and with two children: food, clothing, two extra airline seats, activities, and so on.

In retirement, our (projected) expenses will not include a) kids living at home (one hopes) b) a mortgage c) retirement and non-retirement savings and so on.

So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages). But most people are not going to have the same level of expenses (much less the same savings rate or tax rate) when they stop working.

All that one needs when one is considering "their number" is a portfolio that supports a SWR (whatever one thinks that should be) that supports their lifestyle AT THAT TIME. Not whatever their wages are at present.

Do you disagree?
Admiral,

<< All that one needs when one is considering "their number" is a portfolio that supports a SWR (whatever one thinks that should be) that supports their lifestyle AT THAT TIME. Not whatever their wages are at present.>>

My time is NOW. Aka, present. I am aiming for Financial Independence (FI) ASAP. You assume that you could and would work until a future retirement age. Aka, future.

<< In retirement, our (projected) expenses will not include a) kids living at home (one hopes) b) a mortgage c) retirement and non-retirement savings and so on.>>

Good for you if you can safely assume that. In my case, I have no job security. I probably will be permanently unemployed and under-employed after I lose my current job. Many of my peers in the 40s and 50s are permanently unemployed and under-employed.

<< So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages).>>

In my post, the 25X refer to 25X annual expense. In your case, it will be 25 X 86K = 2.15 million. As per my understanding, all SWR formula is based on annual expense. It is not based on wages.

KlangFool
Fair enough. And does your calculation include future social security benefits? In my case, those (expected) benefits plus a pension will cover (projected) annual expenses from FRA of spouse onward. If not, then the withdrawal rate need be less than 2%.

$2m is, in fact, my number, but with the above factored in that is probably needlessly high.

KlangFool
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Re: Was there a $$$ number after which things got easier?

Post by KlangFool » Tue May 16, 2017 10:54 am

Admiral wrote:
Fair enough. And does your calculation include future social security benefits? In my case, those (expected) benefits plus a pension will cover (projected) annual expenses from FRA of spouse onward. If not, then the withdrawal rate need be less than 2%.

$2m is, in fact, my number, but with the above factored in that is probably needlessly high.
Admiral,

<<And does your calculation include future social security benefits? >>

No. I need to survive until at least 62 years old. If I factored in the amount that I need until 62 years old, the number comes up to be approximately the same as 25 X current annual expense.

<< In my case, those (expected) benefits plus a pension will cover (projected) annual expenses from FRA of spouse onward.>>

Is your pension vested? Would you be fully employed until 62/67 years old?

In my opinion, do not count your chicken until the egg hatches.

KlangFool

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HomerJ
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Re: Was there a $$$ number after which things got easier?

Post by HomerJ » Tue May 16, 2017 10:56 am

The day we paid off the house, everything got easier.

But we also were halfway to our "number" as well at that point. Just a paid-off house with zero money in the bank would not have been enough.

But that's about the time we realized we were well on track, and could loosen up the spending a little.

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TheTimeLord
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Re: Was there a $$$ number after which things got easier?

Post by TheTimeLord » Tue May 16, 2017 11:06 am

countofmc wrote: So for our BH members, was there a number you hit after which it really felt like amassing more and more $ was getting easier and compounding was really noticeable?
Only during Bull markets
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TheTimeLord
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Re: Was there a $$$ number after which things got easier?

Post by TheTimeLord » Tue May 16, 2017 11:09 am

HomerJ wrote:The day we paid off the house, everything got easier.

But we also were halfway to our "number" as well at that point. Just a paid-off house with zero money in the bank would not have been enough.

But that's about the time we realized we were well on track, and could loosen up the spending a little.
I agree once we were debt free things got a lot easier because our paychecks then far exceeded our monthly expenses.
Run, You Clever Boy!

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HomerJ
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Re: Was there a $$$ number after which things got easier?

Post by HomerJ » Tue May 16, 2017 12:59 pm

bigred77 wrote:I look forward to 3 events:

1- Knowing even if all income ceased, I'd be able to support a family indefinitely, even if at a lower standard of living than currently. Everyone will be sheltered, educated, and fed.

2- Knowing even if all income ceased, I'd be able to support a family indefinitely at our current lifestyle. Everyone will be sheltered well, educated well, and fed well.

3- Knowing that we can support our desired lifestyle indefinitely without any additional income. That means living pretty high on the hog.


For me, getting to number 1 would mean a networth of about $1M. Number 2 means about $2.5M. Number 3 probably around $5M.

I think I can get to #1 in 4-5 more years. Hope to hit #2 maybe 10 years later. Maybe we can hit #3 in 10 years after that. At some point along the journey I may just decide I have enough and call it quits.
Good milestones. I hit #1 a few years back, and that's when all the stress from money disappeared. Yes, I want #2 (I doubt I'll continue to work for #3), but having #1 locked in makes me very happy.

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HomerJ
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Re: Was there a $$$ number after which things got easier?

Post by HomerJ » Tue May 16, 2017 1:46 pm

Admiral wrote:So, point being that yes, if I wanted to stop working tomorrow I might need $6m (25x wages).
It's not 25x wages. It's 25x expenses. Your expenses are $84k, so you only need $2 million or so, not $6 million.

I think you understand this, since you go on to talk about replacing lower expenses, not wages, in retirement... Just want to make sure.

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HomerJ
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Re: Was there a $$$ number after which things got easier?

Post by HomerJ » Tue May 16, 2017 2:01 pm

htdrag11 wrote:For me, it's whatever doubling of my current budget.

For example, my current budget is $50k/annual. If taking out 3%/year of my portfolio yields $100k, then I'm home free, practically.

At this juncture, I'm doing fine with taking only 2% and had not taken out our SS money yet.

YMMV :beer
You are home free completely, not practically. In fact, depending on your age, you were probably home-free, completely, years ago.

Edit: Unless, I guess, you hate your current lifestyle?

That's an interesting metric, that you need to be able to double your current lifestyle at 3% before you consider yourself in good shape.

CurlyDave
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Re: Was there a $$$ number after which things got easier?

Post by CurlyDave » Tue May 16, 2017 2:34 pm

For me, reaching the early stages of financial independence was the important milestone. We had 401(k)s, taxable accounts, future pensions, future SS, and rental properties. When we hit the point where I could project that we could both become unemployed, sell our residence, move into the lowest of the rentals and still survive indefinitely without ever having another dollar of salary that was the first stage of FI. Of course it would have meant negative lifestyle changes, but it was possible.

I didn't need to work, and I could tell the company to bug off any time I wanted. Of course this meant that my stress was greatly reduced and I started actually liking my job. And, incidentally becoming more valuable at it, so salary and savings rate both increased. And with the portfolio doing more in the way of returns, compounding really set in.

I am both new to the BH board, and reached a secure retirement by a different route than most. Since I still manage rentals some would say I am not really retired. Well, they are entitled to that opinion, but I am FI, which is the big stress reliever. And I like the life I have, which is the most important part of all.

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Re: Was there a $$$ number after which things got easier?

Post by Admiral » Wed May 17, 2017 6:32 am

KlangFool wrote:
Admiral wrote:
Fair enough. And does your calculation include future social security benefits? In my case, those (expected) benefits plus a pension will cover (projected) annual expenses from FRA of spouse onward. If not, then the withdrawal rate need be less than 2%.

$2m is, in fact, my number, but with the above factored in that is probably needlessly high.
Admiral,

<<And does your calculation include future social security benefits? >>

No. I need to survive until at least 62 years old. If I factored in the amount that I need until 62 years old, the number comes up to be approximately the same as 25 X current annual expense.

<< In my case, those (expected) benefits plus a pension will cover (projected) annual expenses from FRA of spouse onward.>>

Is your pension vested? Would you be fully employed until 62/67 years old?

In my opinion, do not count your chicken until the egg hatches.

KlangFool
Yes, the pension (which is my wife's) is fully vested and begins at age 60, or when I reach 58. However she has no plan to stop working at that age, while I intend to stop at 58. However we will be able to live on her salary alone quite easily once kids are grown. Everyone is different in terms of their expectations for the future and job security in their industry. We are well educated, skilled professionals with experience that is highly valued, and I see no reason to see the glass as half empty. I believe we will be employed until we choose not to be employed.

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Re: Was there a $$$ number after which things got easier?

Post by czeckers » Wed May 17, 2017 6:49 am

With respect to looking for the accelerated portfolio growth, the first 10 years are just brute force savings -- very little contribution from portfolio growth. Years 10-15 growth starts to match your contribution. Years 15-20, growth outpaces your contributions.
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Re: Was there a $$$ number after which things got easier?

Post by investingdad » Wed May 17, 2017 8:53 am

I'm one of the posters that said things got easier when portfolio increases were greater than our income in a given year.

So why are we working?

Because there's no guarantee the market will perform well next year. In which case our income may be needed just to stay level on the year.

So easier for sure, but not independent yet.

I'd like to have 32x expenses myself.

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