In retirement, a $100 monthly expense needs $30,000 in your portfolio

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sean.mcgrath
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by sean.mcgrath »

EnjoyIt wrote: Tue Sep 10, 2019 12:20 pm That's the thing, once you are 25x, it does not take much more effort to increase potential spending in retirement. That is how you keep getting all those one more year folks. Honestly, if we hated our jobs we would have been long retired by cutting back on expenses and eliminated work completely.
Yep, I am quite confident I will fall into this trap. :happy

Given our wildly high savings rates, each extra year gives us 10% or so of extra spend. Fortunately, we have set ourselves an absolute deadline: when the last kid is out of the house, I retire no matter what. :beer
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by sean.mcgrath »

corn18 wrote: Tue Sep 10, 2019 2:11 pm
LiterallyIronic wrote: Tue Sep 10, 2019 12:45 pm
corn18 wrote: Tue Sep 10, 2019 10:33 am This chart can be made for any level of income. This one is for $600k income. And it isn't exact. Just a way to help convince my wife that if we can somehow manage to live on $100k / year, I could retire now. She likes $150k a lot better. And $200k even more. I might be dead by then.
How did you make the calculations? To determine how long I need to work to pay a one-time $1,000 item, for example, would vary. If I stopped my 401k contributions, it would take fewer days to have that $1,000 in my pocket than it would normally take. For the monthly increase, did you just multiple that by 12 to get the annual expense and then multiply by 25 to know how much more you would need to have 25x that in retirement and then divide that by your daily amount saved for retirement to determine how much longer you would need to work?
I don't remember how I did it.
I just take our monthly savings rate and divide by 3%. That's roughly the time for things "on top of plan."
Inframan4712
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Inframan4712 »

SantaClaraSurfer wrote: Mon Aug 03, 2020 10:27 am
Inframan4712 wrote: Mon Aug 03, 2020 6:32 am I would be very surprised if that pension fund is solvent or in existence in 2043.
Not sure why you would make that claim since I shared no details about the specific employer/pension fund.
Because there are precious few protections for pension holders in the U.S. And not likely for anymore to be enacted. And 2043 is 23 years from today.


https://www.reuters.com/article/column- ... SKBN1Z61IN

https://psc-cuny.org/clarion/march-2012 ... r-pensions
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willthrill81
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by willthrill81 »

Inframan4712 wrote: Mon Aug 03, 2020 10:53 am
SantaClaraSurfer wrote: Mon Aug 03, 2020 10:27 am
Inframan4712 wrote: Mon Aug 03, 2020 6:32 am I would be very surprised if that pension fund is solvent or in existence in 2043.
Not sure why you would make that claim since I shared no details about the specific employer/pension fund.
Because there are precious few protections for pension holders in the U.S. And not likely for anymore to be enacted. And 2043 is 23 years from today.


https://www.reuters.com/article/column- ... SKBN1Z61IN

https://psc-cuny.org/clarion/march-2012 ... r-pensions
Also, insolvency does not meet 'you get zero money'. It might just mean that you get less money than the plan originally said that you would. That's exactly the situation facing SS benefits in about 14 years, maybe sooner.
Last edited by willthrill81 on Mon Aug 03, 2020 11:02 am, edited 1 time in total.
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Inframan4712
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Inframan4712 »

willthrill81 wrote: Mon Aug 03, 2020 10:56 am
Inframan4712 wrote: Mon Aug 03, 2020 10:53 am
SantaClaraSurfer wrote: Mon Aug 03, 2020 10:27 am
Inframan4712 wrote: Mon Aug 03, 2020 6:32 am I would be very surprised if that pension fund is solvent or in existence in 2043.
Not sure why you would make that claim since I shared no details about the specific employer/pension fund.
Because there are precious few protections for pension holders in the U.S. And not likely for anymore to be enacted. And 2043 is 23 years from today.


https://www.reuters.com/article/column- ... SKBN1Z61IN

https://psc-cuny.org/clarion/march-2012 ... r-pensions
Also, solvency does not meet 'you get zero money'. It might just mean that you get less money than the plan originally said that you would. That's exactly the situation facing SS benefits in about 14 years, maybe sooner.
I agree. I just think it not Boglehead-ish for me to count on anything like a pension or SS so far into the future. If I get it, great. But a lot of us here budget for it not being there for us at retirement age.
SantaClaraSurfer
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by SantaClaraSurfer »

Inframan4712 wrote: Mon Aug 03, 2020 10:53 am Because there are precious few protections for pension holders in the U.S. And not likely for anymore to be enacted. And 2043 is 23 years from today.

https://www.reuters.com/article/column- ... SKBN1Z61IN

https://psc-cuny.org/clarion/march-2012 ... r-pensions
Thank you, however, those both read more like op/eds than financial advice to me. Feels like this is moving off topic, too. My initial comment was based on the premise that the pension benefit will be available, and then using the OPs calculations to weigh taking a lump sum versus waiting to take the benefit. It's obviously a different calculation if you start with the assumption that the pension fund will fail, and then the PBGC, as well.

For anyone interested, this Investopedia article is an informative read on this topic.
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HomerJ
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by HomerJ »

SQRT wrote: Mon Aug 03, 2020 9:42 amAs an aside. I think “lifestyle creep” is a pretty negative term around here and often refers to unnecessary or frivolous spending. Of course, that isn’t always the case. When I think back to my lifestyle just out of school and compare it to my lifestyle now (just turned 70, fully retired 14 years) there has been a lot of “creep”. Actually more like a quantum leap. I don’t view this as a negative at all.
You made a huge ton of money in a fairly short time period. Stock options or sold your business, right? It's different for you.

Lifestyle creep is a real danger for most people. Because it's hard to go backwards.

And when you spend more, it's a double-whammy... Because you are saving less than you could have AND you now need more to retire to maintain that new level of spending.

Here's what I suggest for most people. Save at least half your raises.

Let's say you are making $60,000 a year, and saving 15% ($9000 a year). You get a promotion or move to another company and jump to $70,000.

Save at least $5000 more a year, and spend at most $5000 more a year. You still get to increase your lifestyle a bit, but your savings jumps to $16,000 a year. That's a huge jump from $9000 a year... Now you're saving 22% a year.

Over 5,10,20 years of that, you save a ton of money.

Too many people get a raise from $60,000 to $70,000 and immediately increase their spending by $9,000-$10,000. It's understandable. That's your money... You worked hard, it's starting to pay off, so you want a nicer car or a bigger house... But that's dangerous lifestyle creep. You need to increase your savings too.
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HomerJ
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by HomerJ »

SantaClaraSurfer wrote: Mon Aug 03, 2020 10:27 am
Inframan4712 wrote: Mon Aug 03, 2020 6:32 am I would be very surprised if that pension fund is solvent or in existence in 2043.
Not sure why you would make that claim since I shared no details about the specific employer/pension fund.

But I'm happy to read any link you have about why someone in our situation should not count on employer-based pensions in general. Please share.

For me, the lump sum is an interesting question to face. We get periodic offers to take a lump sum that "sweeten" the deal for a specific window of time. It doesn't pencil out even then, as far as I can see.
Do you calculate how much that lump sum could grow between now and 2043? 23 years could be three doublings, or 8x.
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.”
EnjoyIt
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by EnjoyIt »

sean.mcgrath wrote: Mon Aug 03, 2020 10:49 am
EnjoyIt wrote: Tue Sep 10, 2019 12:20 pm That's the thing, once you are 25x, it does not take much more effort to increase potential spending in retirement. That is how you keep getting all those one more year folks. Honestly, if we hated our jobs we would have been long retired by cutting back on expenses and eliminated work completely.
Yep, I am quite confident I will fall into this trap. :happy

Given our wildly high savings rates, each extra year gives us 10% or so of extra spend. Fortunately, we have set ourselves an absolute deadline: when the last kid is out of the house, I retire no matter what. :beer
Once you hit 25x, your investments should be giving you about 1 years worth of return and usually more. Add in your general contribution and its easy to see how huge a few extra years of work can become.
I like to show some math:
Bogleheads recommend saving 15%-20% of gross every year. If that same Bogleheads is paying 30% in state and federal taxes and saving 20%, that means they are spending 50% of gross and that means they are saving 2/5 or 0.4 of a year's expenses. Add in the growth from investments of 4% and that means
1 extra year of work will take them to 26.4x.
2 extra years will be 27.86x
3 extra years will be 29.37x
4 extra years will be 30.95x
5 extra years will be 32.58x
That is a 30% boost in spending. Or, it will take a portfolio from 4% withdrawals to almost 3% withdrawals.

If the returns are closer to historical average of 5.7% real those 5 extra years will provide a 71% boost in spending or will take a portfolio from 4% withdrawals down to 2.86%.

Some may find the extra few years worth it while other will not.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
EnjoyIt
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by EnjoyIt »

HomerJ wrote: Mon Aug 03, 2020 12:00 pm
SQRT wrote: Mon Aug 03, 2020 9:42 amAs an aside. I think “lifestyle creep” is a pretty negative term around here and often refers to unnecessary or frivolous spending. Of course, that isn’t always the case. When I think back to my lifestyle just out of school and compare it to my lifestyle now (just turned 70, fully retired 14 years) there has been a lot of “creep”. Actually more like a quantum leap. I don’t view this as a negative at all.
You made a huge ton of money in a fairly short time period. Stock options or sold your business, right? It's different for you.

Lifestyle creep is a real danger for most people. Because it's hard to go backwards.

And when you spend more, it's a double-whammy... Because you are saving less than you could have AND you now need more to retire to maintain that new level of spending.

Here's what I suggest for most people. Save at least half your raises.

Let's say you are making $60,000 a year, and saving 15% ($9000 a year). You get a promotion or move to another company and jump to $70,000.

Save at least $5000 more a year, and spend at most $5000 more a year. You still get to increase your lifestyle a bit, but your savings jumps to $16,000 a year. That's a huge jump from $9000 a year... Now you're saving 22% a year.

Over 5,10,20 years of that, you save a ton of money.

Too many people get a raise from $60,000 to $70,000 and immediately increase their spending by $9,000-$10,000. It's understandable. That's your money... You worked hard, it's starting to pay off, so you want a nicer car or a bigger house... But that's dangerous lifestyle creep. You need to increase your savings too.
I think lifestyle creep is normal and happens to most people. The key as you said is to increase it slowly and not allow it to outpace or keep up with your income. Also, if lifestyle creep happens too fast, one's income will not be able to support further creep and may make the family feel stagnant which can lead to lifestyle creep they can't afford. I see this happen all the time in my profession. Doctors get out of residency and have a massive boost in income. That same year they buy the fancy car and huge house that uses up the entire raise. From that point on any lifestyle creep must be fead through more work since there is no more room.

On the contrary if most doctors held onto their residency car for a few more years and rented for a few years, it would provide the opportunity to build wealth and pay down debt. Then, consider buying a slightly nicer car. Don't jump straight into an $80k+ car. Maybe consider a $35k-$45k car. Don't jump straight to first class international. Consider doing extended legroom instead. Don't buy a 3x of income house but consider a 2x of income house (not in California or NY.) Maybe consider buying a home that you can upgrade in the future. Let the lifestyle creep actually creep in as opposed to one huge jump. It is these small incremental life improvements that will provide far more happiness than jumping in full swing.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
rgs92
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by rgs92 »

Well, $100,000 will buy a fixed annuity for mid-life people that generates about $500 a month for life (at least that was the case for many years up until recently). So that's a linear 200-to-1. That's the rule of thumb I always keep in my head.
So a for $100 a month you need a lump sum of $20,000. All fixed here, of course.

It's not exact by any means, but it's a handy tool good for mental-estimation whenever a quick net present value for a lifetime payment is needed.
Last edited by rgs92 on Mon Aug 03, 2020 12:52 pm, edited 1 time in total.
smitcat
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by smitcat »

SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
This is by far the best approach.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by ColoRetiredGirl »

Inframan4712 wrote: Mon Aug 03, 2020 6:32 am
SantaClaraSurfer wrote: Sun Aug 02, 2020 3:53 pm Side note that is directly to the point of this thread:

My wife had a small vested pension from her 20's that had been closed down by her employer.

When we started down our pre-Boglehead, Dave Ramsey path of snowballing our way out of debt we were VERY tempted to cash out and take the lump sum offer on that pension.

We are VERY glad we did not.

Her "small pension" will pay $1500+ a month starting in 2043.

Let's just say the lump sum offer was nowhere near the amount required for us to hit an equivalent 300x number in 2043. Not even remotely close.
I would be very surprised if that pension fund is solvent or in existence in 2043.
I had a pension with a company which was bought out and the pension was closed. Fast forward 29.2 years later to 2020, I received my pension. It can happen but I do agree I would not necessarily count my chickens before they hatched.
SantaClaraSurfer
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by SantaClaraSurfer »

HomerJ wrote: Mon Aug 03, 2020 12:02 pm Do you calculate how much that lump sum could grow between now and 2043? 23 years could be three doublings, or 8x.
$50,000 put 100% into SWPPX (low cost S&P 500 Mutual fund) in 1998 = $254,000 today. So, that would yield 5x to use your frame. And to use the OP formula, $50,000 in 1998 dollars could yield $846 monthly to a retiree today.

To get that kind of result with your lump sum today going forward:

-You would have to stay 100% invested in SWPPX up till retirement
-The S&P 500 would need to match or exceed the returns of 1998-2020
-You would need to purchase an annuity in 2043 that would give you the $846 monthly in 2043 dollars, or, if you prefer, find a suitable investment for income in your retirement years and manage it.

Conversely, the $1,500 monthly income in 2043 promised by the pension = roughly $850 in today's dollars for life (no COLA). To get that a retiree would only need to do nothing today. The pension simply needs to deliver on its promise.

Now, $50,000 in 1998 dollars would be $80,793 today. So the lump sum today would have to be $80,793 today to begin to match the above conditions. We have never received a lump sum offer of $80,793, even in a "special window." And I doubt we will. The pension accountants are very smart. But I think I've spelled out the rough calculation so people can see it unpacked, especially the impact of inflation. I am very open to the idea that taking a lump sum could be the right choice for an investor who has looked at all sides of the question.

Now, if we're just going for multiples:

$50,000 put 100% into AAPL in 1998 = $52,375,000 today. So, our farsighted investor secured 1,047x riding AAPL to retirement. That equals $175,833 in monthly income today.

$50,000 put 100% into Jack "Manager of the Century" Welch's GE in 1998 = $23,868 in 2020. That's $79.56 per month. It's also .47x.

I don't think a Boglehead would make either investment as a replacement for their primary pension retirement income, but I do think that many average investors might consider something like it for their lump sum. (Or hire an expensive investment advisor with high fees.)

My take would be simple and along the lines of the OP, very little is as valuable as securing your basic income level in retirement. Personally, I am glad we stuck with the pension and did not use the lump sum to pay off debt. Social Security + Pension + Treasury Direct Savings Bonds + Boring Boglehead 401(k) investments are a cornerstone for our retirement peace of mind. They create a floor; and the more guaranteed income in that floor, the better.

I agree that some investments made today may someday have 8x returns, or, who knows, even better, but I would not lump sum our (admittedly small) pension in order to try to achieve that.
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HomerJ
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by HomerJ »

SantaClaraSurfer wrote: Mon Aug 03, 2020 1:33 pm
HomerJ wrote: Mon Aug 03, 2020 12:02 pm Do you calculate how much that lump sum could grow between now and 2043? 23 years could be three doublings, or 8x.
$50,000 put 100% into SWPPX (low cost S&P 500 Mutual fund) in 1998 = $254,000 today. So, that would yield 5x to use your frame. And to use the OP formula, $50,000 in 1998 dollars could yield $846 monthly to a retiree today.

To get that kind of result with your lump sum today going forward:

-You would have to stay 100% invested in SWPPX up till retirement
-The S&P 500 would need to match or exceed the returns of 1998-2020
-You would need to purchase an annuity in 2043 that would give you the $846 monthly in 2043 dollars, or, if you prefer, find a suitable investment for income in your retirement years and manage it.

Conversely, the $1,500 monthly income in 2043 promised by the pension = roughly $850 in today's dollars for life (no COLA). To get that a retiree would only need to do nothing today. The pension simply needs to deliver on its promise.

Now, $50,000 in 1998 dollars would be $80,793 today. So the lump sum today would have to be $80,793 today to begin to match the above conditions. We have never received a lump sum offer of $80,793, even in a "special window." And I doubt we will. The pension accountants are very smart. But I think I've spelled out the rough calculation so people can see it unpacked, especially the impact of inflation. I am very open to the idea that taking a lump sum could be the right choice for an investor who has looked at all sides of the question.

Now, if we're just going for multiples:

$50,000 put 100% into AAPL in 1998 = $52,375,000 today. So, our farsighted investor secured 1,047x riding AAPL to retirement. That equals $175,833 in monthly income today.

$50,000 put 100% into Jack "Manager of the Century" Welch's GE in 1998 = $23,868 in 2020. That's $79.56 per month. It's also .47x.

I don't think a Boglehead would make either investment as a replacement for their primary pension retirement income, but I do think that many average investors might consider something like it for their lump sum. (Or hire an expensive investment advisor with high fees.)

My take would be simple and along the lines of the OP, very little is as valuable as securing your basic income level in retirement. Personally, I am glad we stuck with the pension and did not use the lump sum to pay off debt. Social Security + Pension + Treasury Direct Savings Bonds + Boring Boglehead 401(k) investments are a cornerstone for our retirement peace of mind. They create a floor; and the more guaranteed income in that floor, the better.

I agree that some investments made today may someday have 8x returns, or, who knows, even better, but I would not lump sum our (admittedly small) pension in order to try to achieve that.
Heh, you have indeed done the math... Well done.. :)
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SQRT
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by SQRT »

HomerJ wrote: Mon Aug 03, 2020 12:00 pm
SQRT wrote: Mon Aug 03, 2020 9:42 amAs an aside. I think “lifestyle creep” is a pretty negative term around here and often refers to unnecessary or frivolous spending. Of course, that isn’t always the case. When I think back to my lifestyle just out of school and compare it to my lifestyle now (just turned 70, fully retired 14 years) there has been a lot of “creep”. Actually more like a quantum leap. I don’t view this as a negative at all.
You made a huge ton of money in a fairly short time period. Stock options or sold your business, right? It's different for you.

Lifestyle creep is a real danger for most people. Because it's hard to go backwards.

And when you spend more, it's a double-whammy... Because you are saving less than you could have AND you now need more to retire to maintain that new level of spending.

Here's what I suggest for most people. Save at least half your raises.

Let's say you are making $60,000 a year, and saving 15% ($9000 a year). You get a promotion or move to another company and jump to $70,000.

Save at least $5000 more a year, and spend at most $5000 more a year. You still get to increase your lifestyle a bit, but your savings jumps to $16,000 a year. That's a huge jump from $9000 a year... Now you're saving 22% a year.

Over 5,10,20 years of that, you save a ton of money.

Too many people get a raise from $60,000 to $70,000 and immediately increase their spending by $9,000-$10,000. It's understandable. That's your money... You worked hard, it's starting to pay off, so you want a nicer car or a bigger house... But that's dangerous lifestyle creep. You need to increase your savings too.
Yes, if was a little different for me. After 20-30 years of pretty austere living I suddenly realized I was very FI. No real plan, just invested like crazy, never heard of the 4% rule until after I retired.

But my point is simply that balance is key. Sure you should save a lot of your raises (assuming that is your plan to reach FI) but also it’s OK to raise your standard of living a bit when your income goes up. Sounds like we basically agree. Maybe slightly different emphases.
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corn18
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

I'll repost this because it really matters to me. I can spend more but then I have to work more. I was visiting my mom this past weekend and she lives on $1,200 / mo SS and a few hundred for what she makes from grooming and boarding dogs. She is 82 and very happy. We talked about me retiring and I told her about my COLA military pension and SS @ 70 adding up to $106k a year. Her comment was "I guess you certainly can retire!". This is one of those cases where spending less can buy a lot of retirement time.

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Inframan4712
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Inframan4712 »

ColoRetiredGirl wrote: Mon Aug 03, 2020 1:29 pm
Inframan4712 wrote: Mon Aug 03, 2020 6:32 am
SantaClaraSurfer wrote: Sun Aug 02, 2020 3:53 pm Side note that is directly to the point of this thread:

My wife had a small vested pension from her 20's that had been closed down by her employer.

When we started down our pre-Boglehead, Dave Ramsey path of snowballing our way out of debt we were VERY tempted to cash out and take the lump sum offer on that pension.

We are VERY glad we did not.

Her "small pension" will pay $1500+ a month starting in 2043.

Let's just say the lump sum offer was nowhere near the amount required for us to hit an equivalent 300x number in 2043. Not even remotely close.
I would be very surprised if that pension fund is solvent or in existence in 2043.
I had a pension with a company which was bought out and the pension was closed. Fast forward 29.2 years later to 2020, I received my pension. It can happen but I do agree I would not necessarily count my chickens before they hatched.
Good to hear! Thanks for the data point.
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HomerJ
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by HomerJ »

SQRT wrote: Mon Aug 03, 2020 2:48 pm
HomerJ wrote: Mon Aug 03, 2020 12:00 pm
SQRT wrote: Mon Aug 03, 2020 9:42 amAs an aside. I think “lifestyle creep” is a pretty negative term around here and often refers to unnecessary or frivolous spending. Of course, that isn’t always the case. When I think back to my lifestyle just out of school and compare it to my lifestyle now (just turned 70, fully retired 14 years) there has been a lot of “creep”. Actually more like a quantum leap. I don’t view this as a negative at all.
You made a huge ton of money in a fairly short time period. Stock options or sold your business, right? It's different for you.

Lifestyle creep is a real danger for most people. Because it's hard to go backwards.

And when you spend more, it's a double-whammy... Because you are saving less than you could have AND you now need more to retire to maintain that new level of spending.

Here's what I suggest for most people. Save at least half your raises.

Let's say you are making $60,000 a year, and saving 15% ($9000 a year). You get a promotion or move to another company and jump to $70,000.

Save at least $5000 more a year, and spend at most $5000 more a year. You still get to increase your lifestyle a bit, but your savings jumps to $16,000 a year. That's a huge jump from $9000 a year... Now you're saving 22% a year.

Over 5,10,20 years of that, you save a ton of money.

Too many people get a raise from $60,000 to $70,000 and immediately increase their spending by $9,000-$10,000. It's understandable. That's your money... You worked hard, it's starting to pay off, so you want a nicer car or a bigger house... But that's dangerous lifestyle creep. You need to increase your savings too.
Yes, if was a little different for me. After 20-30 years of pretty austere living I suddenly realized I was very FI. No real plan, just invested like crazy, never heard of the 4% rule until after I retired.

But my point is simply that balance is key. Sure you should save a lot of your raises (assuming that is your plan to reach FI) but also it’s OK to raise your standard of living a bit when your income goes up. Sounds like we basically agree. Maybe slightly different emphases.
Yes, I 100% agree with you that balance is key. :sharebeer
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by H-Town »

SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
I disagree. When you have a FI goal, you do your best to achieve that goal. Keep your foot on the gas until you cross the finish line. That means two things:
1) Increase your earnings, and
2) Keep your lifestyle the same. Avoid lifestyle creeps and keeping up with the Joneses.

You don't have to starve your family, but you don't have to buy a new car with new safety features every 7 years.

Being on fast track to FI doesn't mean that you can't have a happy and balanced lifestyle.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by nigel_ht »

H-Town wrote: Mon Aug 03, 2020 3:44 pm
SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
I disagree. When you have a FI goal, you do your best to achieve that goal. Keep your foot on the gas until you cross the finish line. That means two things:
1) Increase your earnings, and
2) Keep your lifestyle the same. Avoid lifestyle creeps and keeping up with the Joneses.

You don't have to starve your family, but you don't have to buy a new car with new safety features every 7 years.

Being on fast track to FI doesn't mean that you can't have a happy and balanced lifestyle.
FI is a means to an end and necessarily an end of itself. I was FI by the strictest definitions a few years ago but not at the desired lifestyle for retirement. So there is not necessarily one finish line...even death.

At this point I'm just accruing additional future options beyond a minimalist LCOL lifestyle. For what do I need to keep my foot on the gas for?
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by H-Town »

nigel_ht wrote: Mon Aug 03, 2020 4:16 pm
H-Town wrote: Mon Aug 03, 2020 3:44 pm
SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
I disagree. When you have a FI goal, you do your best to achieve that goal. Keep your foot on the gas until you cross the finish line. That means two things:
1) Increase your earnings, and
2) Keep your lifestyle the same. Avoid lifestyle creeps and keeping up with the Joneses.

You don't have to starve your family, but you don't have to buy a new car with new safety features every 7 years.

Being on fast track to FI doesn't mean that you can't have a happy and balanced lifestyle.
FI is a means to an end and necessarily an end of itself. I was FI by the strictest definitions a few years ago but not at the desired lifestyle for retirement. So there is not necessarily one finish line...even death.

At this point I'm just accruing additional future options beyond a minimalist LCOL lifestyle. For what do I need to keep my foot on the gas for?
Personal goal should be personal, and not by anyone else's definition. If you save enough for minimalist LCOL lifestyle and not your desired lifestyle for retirement, I'm afraid that you didn't cross the finish line yet.

Once you achieve your number, the world is your oyster.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by willthrill81 »

nigel_ht wrote: Mon Aug 03, 2020 4:16 pm
H-Town wrote: Mon Aug 03, 2020 3:44 pm
SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
I disagree. When you have a FI goal, you do your best to achieve that goal. Keep your foot on the gas until you cross the finish line. That means two things:
1) Increase your earnings, and
2) Keep your lifestyle the same. Avoid lifestyle creeps and keeping up with the Joneses.

You don't have to starve your family, but you don't have to buy a new car with new safety features every 7 years.

Being on fast track to FI doesn't mean that you can't have a happy and balanced lifestyle.
FI is a means to an end and necessarily an end of itself. I was FI by the strictest definitions a few years ago but not at the desired lifestyle for retirement. So there is not necessarily one finish line...even death.

At this point I'm just accruing additional future options beyond a minimalist LCOL lifestyle. For what do I need to keep my foot on the gas for?
Yes, for most of us, there isn't a discrete 'number' we have to reach in order to become FI. There are many shades of FI, and the FI community widely acknowledges that. Our first 'finish line' will be when our portfolio will be capable of funding our essential spending needs. The next will be when it is capable of funding our desired discretionary spending needs. And even these aren't set in stone. If we had to, we could certainly reduce what we consider to be our essential spending, and the same goes for our desired discretionary spending.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.

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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by sailaway »

corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Your lean FIRE is our fat FIRE if I am reading that chart correctly.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by nigel_ht »

H-Town wrote: Mon Aug 03, 2020 4:31 pm
nigel_ht wrote: Mon Aug 03, 2020 4:16 pm
H-Town wrote: Mon Aug 03, 2020 3:44 pm
SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
I disagree. When you have a FI goal, you do your best to achieve that goal. Keep your foot on the gas until you cross the finish line. That means two things:
1) Increase your earnings, and
2) Keep your lifestyle the same. Avoid lifestyle creeps and keeping up with the Joneses.

You don't have to starve your family, but you don't have to buy a new car with new safety features every 7 years.

Being on fast track to FI doesn't mean that you can't have a happy and balanced lifestyle.
FI is a means to an end and necessarily an end of itself. I was FI by the strictest definitions a few years ago but not at the desired lifestyle for retirement. So there is not necessarily one finish line...even death.

At this point I'm just accruing additional future options beyond a minimalist LCOL lifestyle. For what do I need to keep my foot on the gas for?
Personal goal should be personal, and not by anyone else's definition. If you save enough for minimalist LCOL lifestyle and not your desired lifestyle for retirement, I'm afraid that you didn't cross the finish line yet.

Once you achieve your number, the world is your oyster.
I have sufficient savings to fund Maslow's basic needs for our remaining projected life time. There is enough margin (aka the 4% rule) that safety for providing for physiological needs is there.

How much the rest of the pyramid costs all depends. Travel cuts across a lot of the other layers. Same for some spendy hobbies and how much is left behind for charity and descendants.

So I would argue that once your retirement basic needs are met you can let your foot off the gas to balance meeting current day psychological and self-fulfillment needs vs meeting these needs in a hypothetical future...
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by nigel_ht »

sailaway wrote: Mon Aug 03, 2020 4:47 pm
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Your lean FIRE is our fat FIRE if I am reading that chart correctly.
Depends on your cost of living...if you live in the Bay Area the lean FIRE amount is actually pretty lean...
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by SQRT »

Everybody has their own definitions of FI. Luckily I didn’t really have to decide. I looked up one day (in my early 50’s) and realized I was FI and my retirement spending could be much higher than I was currently spending. A few years later retired and went about Increasing our lifestyle. Morbidly morbidly, obese. Very lucky indeed.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Cubicle »

I've forwarded this thread multiple times to people. It's good for perspective.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Houe »

Texanbybirth wrote: Tue Sep 10, 2019 8:14 am I like this simple way of approaching expenses in retirement. (And usually if I like something simple it means I’m missing an important subtlety.) Of course, it implies one is actually good at tracking their expenses before/in retirement, but that’s a separate issue.

One thing that struck me: this helps me appreciate the value of Social Security retirement benefits. If my benefit will be $2,500 at FRA, then I could say it’s equivalent to $750k in my portfolio. Not bad!
Not bad until you calculate how much you had to pay in... just saying.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by fatcoffeedrinker »

Another way to look at this is if you are still quite a ways from retiring. Say you have 25 years left. If you can eliminate $100/month in spending and invest it at 5% real, then when you retire, you will have $60K. Add that to the $30K less you need because that $100/month will not continue post-retirement, and that $100/month in cost cutting brought you $90K closer to retirement.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by MBB_Boy »

Houe wrote: Tue Aug 04, 2020 1:06 pm
Texanbybirth wrote: Tue Sep 10, 2019 8:14 am I like this simple way of approaching expenses in retirement. (And usually if I like something simple it means I’m missing an important subtlety.) Of course, it implies one is actually good at tracking their expenses before/in retirement, but that’s a separate issue.

One thing that struck me: this helps me appreciate the value of Social Security retirement benefits. If my benefit will be $2,500 at FRA, then I could say it’s equivalent to $750k in my portfolio. Not bad!
Not bad until you calculate how much you had to pay in... just saying.
Yeaaaahhh....not fun at all.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by willthrill81 »

fatcoffeedrinker wrote: Tue Aug 04, 2020 1:18 pm Another way to look at this is if you are still quite a ways from retiring. Say you have 25 years left. If you can eliminate $100/month in spending and invest it at 5% real, then when you retire, you will have $60K. Add that to the $30K less you need because that $100/month will not continue post-retirement, and that $100/month in cost cutting brought you $90K closer to retirement.
The power of an increased saving rate is pretty remarkable. And while it's generally easier for those with higher incomes to achieve a higher saving rate, they also generally need a higher saving rate because a lesser proportion of their working will be replaced by Social Security.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by flaccidsteele »

corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Apparently what I consider FIRE is the Fattest Person on the Planet FIRE
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

flaccidsteele wrote: Wed Aug 05, 2020 12:08 am
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Apparently what I consider FIRE is the Fattest Person on the Planet FIRE
We call that Wall-e FIRE. :sharebeer

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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by MikeG62 »

willthrill81 wrote: Sun Aug 02, 2020 2:29 pm
If nothing else, I think that it illustrates the value in taking a very critical look at one's planned expenses in retirement. That $55 a month fee for a storage facility means you need $16,500 in your portfolio. The $200 a month for mowing needs $60,000. $3,000 of annual property taxes for a vacation property is $75,000. Importantly, re-framing these expenses in this way demonstrates how much additional life energy (i.e. time) you must give up in order to pay for such things. All of these expenses and countless others may be worth it to someone, but they may elect to mow their own yard and retire a year earlier than otherwise, for instance.

It's still almost unreal to me that maxing out a 401k for a year only provides $65 of monthly, inflation-adjusted, pre-tax income in retirement.
Great points.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by MikeG62 »

EnjoyIt wrote: Mon Aug 03, 2020 9:26 am
SQRT wrote: Mon Aug 03, 2020 8:04 am While I agree with the math, obsessively focussing on this issue throughout one’s working life might tend to prevent someone from a balanced lifestyle. That is “over saving” and overly deferring enjoyment to retirement. Sometimes we forget there is more to life than saving for retirement. Balance is important.
Our pathway was to allow a very slow lifestyle creep once out of school and into real work. Our income kept growing much faster than our expenses did. By giving in to slow lifestyle creep we kept “improving” our lifestyle and feeling like we are enjoying life which we most definitely were and still are.
Same for us (allowed lifestyle creep over time), up to a point (we did not increase it every year simply because we had more incoming cash flow). Eventually we got to a point where we were satisfied (buying pretty much what we wanted when we wanted it) and then we remained at roughly that level (in real dollars) going forward.

Agree with the point about balance too. IMHO, it shouldn't be all one and not the other. One must enjoy the ride so to speak.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by Harry Livermore »

sailaway wrote: Mon Aug 03, 2020 4:47 pm
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Your lean FIRE is our fat FIRE if I am reading that chart correctly.
hahaha, ditto. But we also have pensions, so our spends will be higher than our portfolio draw.
And corn, what happens each spring to create the little hockey stick? Bonus that gets fully invested or something?
Cheers

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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

Harry Livermore wrote: Wed Aug 05, 2020 7:13 am
sailaway wrote: Mon Aug 03, 2020 4:47 pm
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
Your lean FIRE is our fat FIRE if I am reading that chart correctly.
hahaha, ditto. But we also have pensions, so our spends will be higher than our portfolio draw.
And corn, what happens each spring to create the little hockey stick? Bonus that gets fully invested or something?
Cheers

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Affirmative. Bonus + RSUs vesting.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by bltn »

dbr wrote: Tue Sep 10, 2019 11:53 am
unclescrooge wrote: Tue Sep 10, 2019 11:43 am
I told my wife that the house she picked out would delay retirement by 10 years, and she said she was okay with that.
Her retirement or yours?
Reminds of one of my friends who after he and his wife moved into a a very nice house. He told his wife. that he may not be able to retire for a number of years because of the house. His wife, a very nice person, if somewhat naive , said “why would you want to retire?” She was a sahm.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by willthrill81 »

bltn wrote: Wed Aug 05, 2020 9:31 am
dbr wrote: Tue Sep 10, 2019 11:53 am
unclescrooge wrote: Tue Sep 10, 2019 11:43 am
I told my wife that the house she picked out would delay retirement by 10 years, and she said she was okay with that.
Her retirement or yours?
Reminds of one of my friends who after he and his wife moved into a a very nice house. He told his wife. that he may not be able to retire for a number of years because of the house. His wife, a very nice person, if somewhat naive , said “why would you want to retire?” She was a sahm.
Wow. That makes me very glad that my wife, also a SAHM, is very supportive of me retiring early (planning for age 52).
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by bltn »

SQRT wrote: Mon Aug 03, 2020 2:48 pm
HomerJ wrote: Mon Aug 03, 2020 12:00 pm
SQRT wrote: Mon Aug 03, 2020 9:42 amAs an aside. I think “lifestyle creep” is a pretty negative term around here and often refers to unnecessary or frivolous spending. Of course, that isn’t always the case. When I think back to my lifestyle just out of school and compare it to my lifestyle now (just turned 70, fully retired 14 years) there has been a lot of “creep”. Actually more like a quantum leap. I don’t view this as a negative at all.
You made a huge ton of money in a fairly short time period. Stock options or sold your business, right? It's different for you.

Lifestyle creep is a real danger for most people. Because it's hard to go backwards.

And when you spend more, it's a double-whammy... Because you are saving less than you could have AND you now need more to retire to maintain that new level of spending.

Here's what I suggest for most people. Save at least half your raises.

Let's say you are making $60,000 a year, and saving 15% ($9000 a year). You get a promotion or move to another company and jump to $70,000.

Save at least $5000 more a year, and spend at most $5000 more a year. You still get to increase your lifestyle a bit, but your savings jumps to $16,000 a year. That's a huge jump from $9000 a year... Now you're saving 22% a year.

Over 5,10,20 years of that, you save a ton of money.

Too many people get a raise from $60,000 to $70,000 and immediately increase their spending by $9,000-$10,000. It's understandable. That's your money... You worked hard, it's starting to pay off, so you want a nicer car or a bigger house... But that's dangerous lifestyle creep. You need to increase your savings too.
Yes, if was a little different for me. After 20-30 years of pretty austere living I suddenly realized I was very FI. No real plan, just invested like crazy, never heard of the 4% rule until after I retired.

But my point is simply that balance is key. Sure you should save a lot of your raises (assuming that is your plan to reach FI) but also it’s OK to raise your standard of living a bit when your income goes up. Sounds like we basically agree. Maybe slightly different emphases.

I like reading these perspectives on retirement saving. I also had no number goal for FI. I just saved as much as I could and still keep my wife happy, who was always the one who provided balance in our spending. I simply figured that I would accumulate what I could and when I retired, we would live on what we had. Integral to the success of our program was understanding the problems with lifestyle creep.
I also had never heard of the 4% rule until shortly before retirement. In an effort to spend a reasonable amount in our retirement, I used A modification of that rule as a guideline to start our retirement spending. This allowed us more spending money than we had ever had. We may not increase our spending that much, but the feeling of financial security is invaluable.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by sean.mcgrath »

willthrill81 wrote: Sun Aug 02, 2020 2:29 pm
The $200 a month for mowing needs $60,000. ... but they may elect to mow their own yard and retire a year earlier than otherwise, for instance.
For some reason, that one really struck me. If that person is earning $100k net and saving 15%, mowing their own lawn would let them retire four years earlier. Not bad for getting some healthy exercise. :happy
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by HobbesMB »

sean.mcgrath wrote: Wed Aug 05, 2020 10:20 am
willthrill81 wrote: Sun Aug 02, 2020 2:29 pm
The $200 a month for mowing needs $60,000. ... but they may elect to mow their own yard and retire a year earlier than otherwise, for instance.
For some reason, that one really struck me. If that person is earning $100k net and saving 15%, mowing their own lawn would let them retire four years earlier. Not bad for getting some healthy exercise. :happy
Just to quibble a bit, those numbers assume a year-round mowing cost, which is not typical.

But I'm a guy who has always mowed my own lawn, even though in my east coast area I'd say well north of 95% have a mowing service.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by CFM300 »

corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
What is the solid blue line -- "Retirement spend" -- and how is it calculated/projected?
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

CFM300 wrote: Wed Aug 05, 2020 11:51 am
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
What is the solid blue line -- "Retirement spend" -- and how is it calculated/projected?
The blue line is how much I could spend. It is calculated with a giant spreadsheet but is basically the output of firecalc @ 95%.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by willthrill81 »

HobbesMB wrote: Wed Aug 05, 2020 10:36 am
sean.mcgrath wrote: Wed Aug 05, 2020 10:20 am
willthrill81 wrote: Sun Aug 02, 2020 2:29 pm
The $200 a month for mowing needs $60,000. ... but they may elect to mow their own yard and retire a year earlier than otherwise, for instance.
For some reason, that one really struck me. If that person is earning $100k net and saving 15%, mowing their own lawn would let them retire four years earlier. Not bad for getting some healthy exercise. :happy
Just to quibble a bit, those numbers assume a year-round mowing cost, which is not typical.

But I'm a guy who has always mowed my own lawn, even though in my east coast area I'd say well north of 95% have a mowing service.
It's true that most don't mow their lawns year round, but in many northern climates, homeowners pay someone for fall cleanup and snow removal. $2,400/year for such combined services is not at all atypical, IMHO.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by CFM300 »

corn18 wrote: Wed Aug 05, 2020 12:39 pm
CFM300 wrote: Wed Aug 05, 2020 11:51 am
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
What is the solid blue line -- "Retirement spend" -- and how is it calculated/projected?
The blue line is how much I could spend. It is calculated with a giant spreadsheet but is basically the output of firecalc @ 95%.
What causes the huge periodic jumps -- e.g., Apr/May 2020, Feb/Mar 2022? If you don't mind my asking.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by corn18 »

CFM300 wrote: Wed Aug 05, 2020 2:20 pm
corn18 wrote: Wed Aug 05, 2020 12:39 pm
CFM300 wrote: Wed Aug 05, 2020 11:51 am
corn18 wrote: Mon Aug 03, 2020 4:42 pm This chart helps me decide whether I should keep working or not. Fat FIRE is my plan as of today.
What is the solid blue line -- "Retirement spend" -- and how is it calculated/projected?
The blue line is how much I could spend. It is calculated with a giant spreadsheet but is basically the output of firecalc @ 95%.
What causes the huge periodic jumps -- e.g., Apr/May 2020, Feb/Mar 2022? If you don't mind my asking.
I get a large bonus and RSUs vest every year at that time. That totals about $200k after taxes each year. That all goes to savings.
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Re: In retirement, a $100 monthly expense needs $30,000 in your portfolio

Post by CFM300 »

corn18 wrote: Wed Aug 05, 2020 2:27 pm I get a large bonus and RSUs vest every year at that time. That totals about $200k after taxes each year. That all goes to savings.
Got it. Didn't mean to pry, just found your chart interesting and wanted to understand. Thanks.
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