How to realistically FIRE?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Locked
Topic Author
Wanderingwheelz
Posts: 41
Joined: Mon Mar 04, 2019 9:52 am

How to realistically FIRE?

Post by Wanderingwheelz » Thu Mar 14, 2019 9:06 am

Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.

Jack FFR1846
Posts: 10474
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: How to realistically FIRE?

Post by Jack FFR1846 » Thu Mar 14, 2019 9:09 am

25X gets you 30 years of retirement. Will you and your spouse be dead in 30 years, for sure? If so, you're good to go.
Bogle: Smart Beta is stupid

livesoft
Posts: 68608
Joined: Thu Mar 01, 2007 8:00 pm

Re: How to realistically FIRE?

Post by livesoft » Thu Mar 14, 2019 9:11 am

Ha! Ha! You had to use the word "Simple" for a complicated question.

See this complicated 28+ part series with your answer: https://earlyretirementnow.com/2016/12/ ... t-1-intro/
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
market timer
Posts: 6172
Joined: Tue Aug 21, 2007 1:42 am

Re: How to realistically FIRE?

Post by market timer » Thu Mar 14, 2019 9:11 am

I'd feel pretty comfortable on 25 x $100K/year at age 50 (i.e., healthy discretionary budget that could be cut). I'd be worried if it's 25 x $35K/year (lean FIRE).

User avatar
samsoes
Posts: 1360
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

Re: How to realistically FIRE?

Post by samsoes » Thu Mar 14, 2019 9:12 am

Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

Grt2bOutdoors
Posts: 21490
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: How to realistically FIRE?

Post by Grt2bOutdoors » Thu Mar 14, 2019 9:17 am

samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
When you turn 59.5, get out! Retire.
You’re afraid of what? If you make it to 85, you have more than enough now. Unless you truly like to work. A 50/50 portfolio will see you through the end.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Dottie57
Posts: 7140
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: How to realistically FIRE?

Post by Dottie57 » Thu Mar 14, 2019 9:22 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
I think the formula is really (# of years left to live ) * expenses.

At age 50 I would want 40 * expenses.

At 65, 25 * expenses works well.

RadAudit
Posts: 3613
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: How to realistically FIRE?

Post by RadAudit » Thu Mar 14, 2019 9:24 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire?
Simple answer.

It depends.

See livesoft's reply for things to consider.

On a different note, I'm trying to learn to live with uncertainty because I've come to believe that there is no safe withdrawal rate that will totally mitigate the effects of all sequence(s) of return risk. Or, there are no guarantees that you won't go broke in every circumstance.
Last edited by RadAudit on Thu Mar 14, 2019 9:33 am, edited 2 times in total.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How to realistically FIRE?

Post by dbr » Thu Mar 14, 2019 9:24 am

livesoft wrote:
Thu Mar 14, 2019 9:11 am
Ha! Ha! You had to use the word "Simple" for a complicated question.

See this complicated 28+ part series with your answer: https://earlyretirementnow.com/2016/12/ ... t-1-intro/
Correct. There is no simple rule for safety that can give you absolute insurance. Any approach to early retirement, or any retirement, implies approximation, flexibility, and uncertainty. Probably the more important thing is how much margin or error do you have on what you want to spend and what is Plan B if the worst cases actually materialize.

harvestbook
Posts: 702
Joined: Sat Mar 18, 2017 7:12 pm

Re: How to realistically FIRE?

Post by harvestbook » Thu Mar 14, 2019 9:26 am

Odds are far more likely you will end up with multiple times your original nest egg rather than use it up, but "safety" is such an abstract and personal concept that no one can apply a mathematical formula. To me, running out of money at 25x, and living long enough for that to be a problem, is on the order of a black swan. The only reason it seems terrible is because we can imagine it--which I guess means being on medicaid in some low-quality nursing home or something, which is about the worst case for anyone who ever had a bunch of money. Dying before you use up your money is the most probable outcome.

I see it as a matter of how much risk you are willing to take to live the life you prefer. I have a general idea what mine is, but I wouldn't declare it a truth for anyone else. That's why I love these posts and forum--refining my own concept based on other people's attitudes.

I don't think there's a realistic way to FIRE because life happens. It's like the old joke: "He died penniless. He timed it perfectly."
I'm not smart enough to know, and I can't afford to guess.

StandingRock
Posts: 342
Joined: Sat Feb 02, 2019 6:54 pm

Re: How to realistically FIRE?

Post by StandingRock » Thu Mar 14, 2019 9:30 am

samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
I am just going to assume that you don't have anything better to do than work.

User avatar
ruralavalon
Posts: 16703
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: How to realistically FIRE?

Post by ruralavalon » Thu Mar 14, 2019 9:31 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
The 60/40 asset allocation is reasonable. You said "Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either", so the 25x rule of thumb is likely very suitable as a planning tool.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
mhadden1
Posts: 697
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: How to realistically FIRE?

Post by mhadden1 » Thu Mar 14, 2019 9:34 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire?
In my opinion it's pretty safe at 50. I think the degree of safety really depends on flexibility with spending. At 50 I had minor children and wanted to get them through college. Without such commitments I might have made the leap myself. I know that many Bogleheads would be horrified at such a sanguine attitude.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 9:35 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Wanderingwheelz,

The answer is highly dependent on your annual expense.

For example, if your annual expense is 60K and you are around 50 years old, your number is 1.5 million. But, your social security benefit with 2 persons, is probably around 30K per year. So, your 1.5 million is 50X when you can withdraw social security. You have a big safety margin because of the social security cover 50% of the annual expense. Meanwhile, for someone with 120K of annual expense, the 25X number = 3 million may not be good enough.

KlangFool

Jags4186
Posts: 3914
Joined: Wed Jun 18, 2014 7:12 pm

Re: How to realistically FIRE?

Post by Jags4186 » Thu Mar 14, 2019 9:36 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
The most vocal people on FIREing at 25x and young are those who still have income from a business they started. It’s easy to retire when you still work for money. However, if in you’re in your 50s you have $2 million plus and live on $80k and have plenty of room to reduce that expenditure I think you’d be fine...especially with Social Security on the horizon.

sjt
Posts: 288
Joined: Fri May 26, 2017 3:03 pm
Location: NC

Re: How to realistically FIRE?

Post by sjt » Thu Mar 14, 2019 9:37 am

I think the FIRE movement is different for a lot of people. For a lot of FIRE bloggers and practitioners the "retirement" portion is quitting the 9-5 job. There is still the open door for part time work, side hustles, starting a business, et al - but the money in the bank allows for the Financial Independence to pursue this - and still have basic needs met.

Also, FIRE bloggers don't guarantee that 4% is successful, and advocate flexibility in your spending in the event of poor markets.

However, looking at Firecalc with a spend of $40k and a investment of $1M at the start, Making it 30 years without running out of money is just about 95%. However, a better number is the average at the end of $1.8M after 30 years - this is also inflation adjusted. So even withdrawing 4% each year, using a historical average you would end up not depleting but actually growing your stash over time.

However even if you put a 4% withdraw rate for 60 years there is an 83% success rate (this is with rigid withdraw of 4% each year) - some flexibility with withdraw rate would increase this success rate. There are a lot of people willing to take this risk instead of working several extra years.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

User avatar
HomerJ
Posts: 13402
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 9:41 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
If you're not counting SS, you'll almost certainly be fine, even retiring at 50 (assuming SS is a decent chunk... If you plan of spending $50k-$100k a year, SS will be a big boost - if you plan on spending $300k a year, SS won't help that much).

It's also helps a lot if you have discretionary expenses.

I wouldn't be comfortable retiring at 50 with 25x expenses if that was bare-bones expenses, but if you have included a lot of fun money in there (and you're okay with cutting back a bit in bad times), then again, I think you're good.
The J stands for Jay

User avatar
HomerJ
Posts: 13402
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 9:42 am

samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
You could retire today. You have 47 years of expenses. The math is not hard.

And you're not counting SS.
The J stands for Jay

User avatar
WoodSpinner
Posts: 914
Joined: Mon Feb 27, 2017 1:15 pm

Re: How to realistically FIRE?

Post by WoodSpinner » Thu Mar 14, 2019 9:52 am

samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
Samsones,

Noticed your comment and wondered what additional information you might need for a decision.

Perhaps start your own thread so we can help?

WoodSpinner

Admiral
Posts: 2472
Joined: Mon Oct 27, 2014 12:35 pm

Re: How to realistically FIRE?

Post by Admiral » Thu Mar 14, 2019 9:58 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Why are you discounting/ignoring SS? That leads to inaccurate assumptions of income streams, and then you get inaccurate results of what's needed to cover expenses (GIGO).

If you have a SS benefit (or dual benefits) and want to go ahead and discount them to some reasonable percentage--with no accurate way of knowing what the discount should or might be--then go ahead and do that.

But, for example in my case, if I ignored SS/pensions in my calculations I would need $3m. When I don't, I need $700k. Big difference, no? Are you also assuming Medicare will go bust?

randomguy
Posts: 8402
Joined: Wed Sep 17, 2014 9:00 am

Re: How to realistically FIRE?

Post by randomguy » Thu Mar 14, 2019 10:06 am

HomerJ wrote:
Thu Mar 14, 2019 9:42 am
samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
You could retire today. You have 47 years of expenses. The math is not hard.

And you're not counting SS.
The market could drop 50% and stay there 2 decades, the US could devalue it's currency by 50%, and SS could be cut and things might be close with only 47x😁

You can always find something to worry about or ways to be more conservative. Maybe the future is 0%(or negative) SWR. Realistically something in the 25x-30x range has been safe historically and normally with a pretty big margin. We have had these discussions 2x week for years. There is nothing that anyone can say that can eliminate the fear of the unknown. You have to learn to deal with it.

User avatar
Darth Xanadu
Posts: 709
Joined: Sat Jan 27, 2018 1:47 am
Location: Middle Earth

Re: How to realistically FIRE?

Post by Darth Xanadu » Thu Mar 14, 2019 10:11 am

harvestbook wrote:
Thu Mar 14, 2019 9:26 am

I see it as a matter of how much risk you are willing to take to live the life you prefer. I have a general idea what mine is, but I wouldn't declare it a truth for anyone else. That's why I love these posts and forum--refining my own concept based on other people's attitudes.
+1

See The Time Lord's concurrent and lively thread for more thought-provoking discussion in this vein.
"A courageous teacher, failure is."

User avatar
JoeRetire
Posts: 3903
Joined: Tue Jan 16, 2018 2:44 pm

Re: How to realistically FIRE?

Post by JoeRetire » Thu Mar 14, 2019 10:13 am

Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire?
It depends (but then again, doesn't it always depend?). That rule of thumb has tended to work well for about 30 years of retirement.

Do you expect to have only 30 years of retirement? Do you know now what your expenses/spending will be for the next 30 years?

If you aren't sure, you might want to take a bit deeper dive on the "simple" question.
Don't be a lemming.

Thesaints
Posts: 2921
Joined: Tue Jun 20, 2017 12:25 am

Re: How to realistically FIRE?

Post by Thesaints » Thu Mar 14, 2019 10:22 am

The obvious answer is FIRL

Jordan4FI
Posts: 190
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: How to realistically FIRE?

Post by Jordan4FI » Thu Mar 14, 2019 10:23 am

***Reminder*** That Fire does not mean to never earn an income again... but that you can choose your path and not answer to anyone....

If you really want to "Retire" with the old way of thinking and never earn income, then you need to plan further out than fire #'s

But even at 25X you will be better off then 80% of people in the US and better off then 95% of the people around the world.

HAHA i myself am investing all my $$ just to go live semi-poor in Asia for my life.,... crazy huh? when I could just go live there semi-poor without 600K....

Funny how we fret that we got it so damn good...

Thesaints
Posts: 2921
Joined: Tue Jun 20, 2017 12:25 am

Re: How to realistically FIRE?

Post by Thesaints » Thu Mar 14, 2019 10:28 am

Jordan4FI wrote:
Thu Mar 14, 2019 10:23 am
***Reminder*** That Fire does not mean to never earn an income again... ...
So they got wrong the “R” as well ?

Sure. The poorest 20% in the US fares a lot better than the wealthiest 20% in Somalia, but who would want to live and retire under Somali standards ?

Jordan4FI
Posts: 190
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: How to realistically FIRE?

Post by Jordan4FI » Thu Mar 14, 2019 10:37 am

Thesaints wrote:
Thu Mar 14, 2019 10:28 am
Jordan4FI wrote:
Thu Mar 14, 2019 10:23 am
***Reminder*** That Fire does not mean to never earn an income again... ...
So even they got wrong the “R” as well ?

Sure. The poorest 20% in the US fares a lot better than the wealthiest 20% in Somalia, but who would want to live and retire under Somali standards ?
That who must be me.. My plan (at different stages) gets me to Thailand with a annual budget of 18K - 30K.. That covers well over my survival expenses, and some to enjoy at different levels, but ii'll be 40.. FIRE is not for people over 55 in my opinion, if its not before 45 is is really early? and In the FIRE community we do not talk about retire as the old version, yes it as a definition, and is only in FIRE cause FIRE is a cool acronym. FI is where it all really matters... Can you support yourself for a sustained about of time? that is key, and if you want to earn some cash doing something that is fine, you are still "retired" in the FIRE community.. cause it is about choice and taking full control of you life.. not some employers will..

User avatar
willthrill81
Posts: 13947
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: How to realistically FIRE?

Post by willthrill81 » Thu Mar 14, 2019 10:41 am

Admiral wrote:
Thu Mar 14, 2019 9:58 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Why are you discounting/ignoring SS? That leads to inaccurate assumptions of income streams, and then you get inaccurate results of what's needed to cover expenses (GIGO).

If you have a SS benefit (or dual benefits) and want to go ahead and discount them to some reasonable percentage--with no accurate way of knowing what the discount should or might be--then go ahead and do that.

But, for example in my case, if I ignored SS/pensions in my calculations I would need $3m. When I don't, I need $700k. Big difference, no? Are you also assuming Medicare will go bust?
I don't blame the OP at all for ignoring SS. In many situations, deferring SS benefits until age 70 is viewed as optimal since doing so can provide effective longevity insurance. But the net present value of SS benefits that won't begin for 20 years may not really move the needle much. The NPV of SS benefits for a 70 year old might only be around $250k, and a 4% discount rate means that would be worth just $114k to a 50 year old. Combine that with the uncertainty surrounding what SS benefits will be in 15 years. Ignoring that is unlikely to change the OP's decision or planning much.

Pensions can be a different matter entirely due to them starting earlier and potentially providing a much greater payout.
“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

Dottie57
Posts: 7140
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: How to realistically FIRE?

Post by Dottie57 » Thu Mar 14, 2019 10:46 am

sjt wrote:
Thu Mar 14, 2019 9:37 am
I think the FIRE movement is different for a lot of people. For a lot of FIRE bloggers and practitioners the "retirement" portion is quitting the 9-5 job. There is still the open door for part time work, side hustles, starting a business, et al - but the money in the bank allows for the Financial Independence to pursue this - and still have basic needs met.
Then the people with a blog, side business etc are FI, not FIRE.

User avatar
willthrill81
Posts: 13947
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: How to realistically FIRE?

Post by willthrill81 » Thu Mar 14, 2019 10:49 am

Dottie57 wrote:
Thu Mar 14, 2019 10:46 am
sjt wrote:
Thu Mar 14, 2019 9:37 am
I think the FIRE movement is different for a lot of people. For a lot of FIRE bloggers and practitioners the "retirement" portion is quitting the 9-5 job. There is still the open door for part time work, side hustles, starting a business, et al - but the money in the bank allows for the Financial Independence to pursue this - and still have basic needs met.

Also, FIRE bloggers don't guarantee that 4% is successful, and advocate flexibility in your spending in the event of poor markets.

However, looking at Firecalc with a spend of $40k and a investment of $1M at the start, Making it 30 years without running out of money is just about 95%. However, a better number is the average at the end of $1.8M after 30 years - this is also inflation adjusted. So even withdrawing 4% each year, using a historical average you would end up not depleting but actually growing your stash over time.

However even if you put a 4% withdraw rate for 60 years there is an 83% success rate (this is with rigid withdraw of 4% each year) - some flexibility with withdraw rate would increase this success rate. There are a lot of people willing to take this risk instead of working several extra years.
Then the people with a blog, side business etc are FI, not FIRE.
Fritz from The Retirement Manifesto believes that the 'RE' should stand for 'recreational employment'.
“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

Dottie57
Posts: 7140
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: How to realistically FIRE?

Post by Dottie57 » Thu Mar 14, 2019 11:00 am

willthrill81 wrote:
Thu Mar 14, 2019 10:49 am
Dottie57 wrote:
Thu Mar 14, 2019 10:46 am
sjt wrote:
Thu Mar 14, 2019 9:37 am
I think the FIRE movement is different for a lot of people. For a lot of FIRE bloggers and practitioners the "retirement" portion is quitting the 9-5 job. There is still the open door for part time work, side hustles, starting a business, et al - but the money in the bank allows for the Financial Independence to pursue this - and still have basic needs met.

Also, FIRE bloggers don't guarantee that 4% is successful, and advocate flexibility in your spending in the event of poor markets.

However, looking at Firecalc with a spend of $40k and a investment of $1M at the start, Making it 30 years without running out of money is just about 95%. However, a better number is the average at the end of $1.8M after 30 years - this is also inflation adjusted. So even withdrawing 4% each year, using a historical average you would end up not depleting but actually growing your stash over time.

However even if you put a 4% withdraw rate for 60 years there is an 83% success rate (this is with rigid withdraw of 4% each year) - some flexibility with withdraw rate would increase this success rate. There are a lot of people willing to take this risk instead of working several extra years.
Then the people with a blog, side business etc are FI, not FIRE.
Fritz from The Retirement Manifesto believes that the 'RE' should stand for 'recreational employment'.
That works too. :happy

smitcat
Posts: 4326
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 12:16 pm

KlangFool wrote:
Thu Mar 14, 2019 9:35 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Wanderingwheelz,

The answer is highly dependent on your annual expense.

For example, if your annual expense is 60K and you are around 50 years old, your number is 1.5 million. But, your social security benefit with 2 persons, is probably around 30K per year. So, your 1.5 million is 50X when you can withdraw social security. You have a big safety margin because of the social security cover 50% of the annual expense. Meanwhile, for someone with 120K of annual expense, the 25X number = 3 million may not be good enough.

KlangFool
Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 12:23 pm

smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool

User avatar
Wiggums
Posts: 1932
Joined: Thu Jan 31, 2019 8:02 am

Re: How to realistically FIRE?

Post by Wiggums » Thu Mar 14, 2019 12:26 pm

KlangFool wrote:
Thu Mar 14, 2019 9:35 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Wanderingwheelz,

The answer is highly dependent on your annual expense.

For example, if your annual expense is 60K and you are around 50 years old, your number is 1.5 million. But, your social security benefit with 2 persons, is probably around 30K per year. So, your 1.5 million is 50X when you can withdraw social security. You have a big safety margin because of the social security cover 50% of the annual expense. Meanwhile, for someone with 120K of annual expense, the 25X number = 3 million may not be good enough.

KlangFool
I agree.

Accurately projecting your expenses is very important. Multiplying by years in retirement will give you a target dollar amount. Having a safety margin is an important factor to me.
Last edited by Wiggums on Thu Mar 14, 2019 12:29 pm, edited 1 time in total.

smitcat
Posts: 4326
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 12:26 pm

KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.

sailaway
Posts: 750
Joined: Fri May 12, 2017 1:11 pm

Re: How to realistically FIRE?

Post by sailaway » Thu Mar 14, 2019 12:31 pm

smitcat wrote:
Thu Mar 14, 2019 12:16 pm
KlangFool wrote:
Thu Mar 14, 2019 9:35 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Wanderingwheelz,

The answer is highly dependent on your annual expense.

For example, if your annual expense is 60K and you are around 50 years old, your number is 1.5 million. But, your social security benefit with 2 persons, is probably around 30K per year. So, your 1.5 million is 50X when you can withdraw social security. You have a big safety margin because of the social security cover 50% of the annual expense. Meanwhile, for someone with 120K of annual expense, the 25X number = 3 million may not be good enough.

KlangFool
Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
I agree. We recently reached 25x our original projections. At the time we made those calculations, we were living on that amount and could see a couple of places to cut, but not much. Our lifestyle has recently expanded by quite a bit, for reasons related to work that we will cut as soon as we stop working. Nonetheless, we are making our new goal to be 25x the new lifestyle, which is 50x the life we plan to lead when we actually move on. It will leave us options, rather than being tied to adventure for the rest of our lives.

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 12:32 pm

smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
smitcat,

<<- the person in the HCOL area and higher expenses has many choices.>>

I disagreed. Once a person overspends on a house and the person is stuck on a big expensive mortgage, the choice is gone. By the way, in my area, the house has not recovered to the 2004/2005 level. So, counting on the house appreciation is not possible either.

KlangFool

User avatar
alpenglow
Posts: 850
Joined: Tue May 31, 2011 12:02 pm

Re: How to realistically FIRE?

Post by alpenglow » Thu Mar 14, 2019 12:34 pm

FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Last edited by alpenglow on Thu Mar 14, 2019 12:37 pm, edited 2 times in total.

pward
Posts: 393
Joined: Fri Dec 21, 2018 8:18 pm

Re: How to realistically FIRE?

Post by pward » Thu Mar 14, 2019 12:35 pm

You cannot use the SWR for FIRE as it's set to run out of money in 30 years, you need to use the PWR (perpetual withdrawal rate, i.e. the amount you can safely withdrawal and never run out of money). Also, different portfolios have different SWR/PWR's. There is no set percentage that is safe or perpetual for every portfolio. Too many people wrongly assume that the commonly touted SWR works for all portfolios... it doesn't. Also, counter-intuitively the more conservative a portfolio generally the higher the SWR and PWR.

See here for more info: https://portfoliocharts.com/2016/12/09/ ... etirement/

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 12:42 pm

alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
alpenglow,

Do you plan to pay for your kid's college education after you retire?

KlangFool

User avatar
alpenglow
Posts: 850
Joined: Tue May 31, 2011 12:02 pm

Re: How to realistically FIRE?

Post by alpenglow » Thu Mar 14, 2019 12:45 pm

KlangFool wrote:
Thu Mar 14, 2019 12:42 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
alpenglow,

Do you plan to pay for your kid's college education after you retire?

KlangFool
I'm in a state (NY) with excellent state schools and the excelsior scholarship program, so we will likely be able to pay for their college. I'm willing to delay FIRE depending on their needs and abilities.

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 12:47 pm

alpenglow wrote:
Thu Mar 14, 2019 12:45 pm
KlangFool wrote:
Thu Mar 14, 2019 12:42 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
alpenglow,

Do you plan to pay for your kid's college education after you retire?

KlangFool
I'm in a state (NY) with excellent state schools and the excelsior scholarship program, so we will likely be able to pay for their college. I'm willing to delay FIRE depending on their needs and abilities.
alpenglow,

Okay. I just want to understand your complete picture. Thanks.

KlangFool

smitcat
Posts: 4326
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 12:54 pm

KlangFool wrote:
Thu Mar 14, 2019 12:32 pm
smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
smitcat,

<<- the person in the HCOL area and higher expenses has many choices.>>

I disagreed. Once a person overspends on a house and the person is stuck on a big expensive mortgage, the choice is gone. By the way, in my area, the house has not recovered to the 2004/2005 level. So, counting on the house appreciation is not possible either.

KlangFool

You have now limited the discussion of FIRE to only home owners.
- you have arbitrarily assigned all overspending to mortgage costs ….if you take that very narrow view you would be correct.
- most folks at any income level have not saved enough for retirement, that data is clear.
- on this thread we are speaking about the minor subset of those that have saved.

The world is much larger than your immediate area and peers.

smitcat
Posts: 4326
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 12:59 pm

alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
We have overdone it as well but we have much freedom in our jobs and we like what we do.
A bonus reason for waiting a bit longer is that we can save at a rate that is 15-20 times faster than our daughter.
Seems easy to save a bit for her future since each month we save is about 1.5 years of what she is able to save.

User avatar
alpenglow
Posts: 850
Joined: Tue May 31, 2011 12:02 pm

Re: How to realistically FIRE?

Post by alpenglow » Thu Mar 14, 2019 1:00 pm

KlangFool wrote:
Thu Mar 14, 2019 12:47 pm
alpenglow wrote:
Thu Mar 14, 2019 12:45 pm
KlangFool wrote:
Thu Mar 14, 2019 12:42 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
alpenglow,

Do you plan to pay for your kid's college education after you retire?

KlangFool
I'm in a state (NY) with excellent state schools and the excelsior scholarship program, so we will likely be able to pay for their college. I'm willing to delay FIRE depending on their needs and abilities.
alpenglow,

Okay. I just want to understand your complete picture. Thanks.

KlangFool
Sure. With everything in life, you need to be flexible. Especially when it comes to FIRE!

KlangFool
Posts: 14147
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 1:09 pm

smitcat wrote:
Thu Mar 14, 2019 12:54 pm
KlangFool wrote:
Thu Mar 14, 2019 12:32 pm
smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
smitcat,

<<- the person in the HCOL area and higher expenses has many choices.>>

I disagreed. Once a person overspends on a house and the person is stuck on a big expensive mortgage, the choice is gone. By the way, in my area, the house has not recovered to the 2004/2005 level. So, counting on the house appreciation is not possible either.

KlangFool

You have now limited the discussion of FIRE to only home owners.
- you have arbitrarily assigned all overspending to mortgage costs ….if you take that very narrow view you would be correct.
- most folks at any income level have not saved enough for retirement, that data is clear.
- on this thread we are speaking about the minor subset of those that have saved.

The world is much larger than your immediate area and peers.
smitcat,

Show me some real example and observation of folks spending 120K per year that is not homeowners. Where do they spend their money? As per my observations across my friends and families, it is always about the house.

KlangFool

Irisheyes
Posts: 126
Joined: Wed Feb 14, 2018 1:36 pm

Re: How to realistically FIRE?

Post by Irisheyes » Thu Mar 14, 2019 1:10 pm

smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
Agreed. This is a thread about "realistic" retirement on Bogleheads. Most bogleheads are not gong into retirement with a big mortgage drag on their spending. In fact, they are so cautious that they seem to be worrying about whether 47X expenses is enough!

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.

User avatar
HomerJ
Posts: 13402
Joined: Fri Jun 06, 2008 12:50 pm

Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 1:14 pm

smitcat wrote:
Thu Mar 14, 2019 12:16 pm
KlangFool wrote:
Thu Mar 14, 2019 9:35 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Wanderingwheelz,

The answer is highly dependent on your annual expense.

For example, if your annual expense is 60K and you are around 50 years old, your number is 1.5 million. But, your social security benefit with 2 persons, is probably around 30K per year. So, your 1.5 million is 50X when you can withdraw social security. You have a big safety margin because of the social security cover 50% of the annual expense. Meanwhile, for someone with 120K of annual expense, the 25X number = 3 million may not be good enough.

KlangFool
Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
If you're ignoring SS, then having lower expenses means you're safer.
The J stands for Jay

User avatar
Clever_Username
Posts: 1384
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: How to realistically FIRE?

Post by Clever_Username » Thu Mar 14, 2019 1:36 pm

pward wrote:
Thu Mar 14, 2019 12:35 pm
You cannot use the SWR for FIRE as it's set to run out of money in 30 years, you need to use the PWR (perpetual withdrawal rate, i.e. the amount you can safely withdrawal and never run out of money). Also, different portfolios have different SWR/PWR's. There is no set percentage that is safe or perpetual for every portfolio. Too many people wrongly assume that the commonly touted SWR works for all portfolios... it doesn't. Also, counter-intuitively the more conservative a portfolio generally the higher the SWR and PWR.

See here for more info: https://portfoliocharts.com/2016/12/09/ ... etirement/
SWR isn't set to run out of money in 30 years except in extremely unlikely circumstances. Most of the time, the inflation-adjusted principal is higher at the end.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

marcopolo
Posts: 2508
Joined: Sat Dec 03, 2016 10:22 am

Re: How to realistically FIRE?

Post by marcopolo » Thu Mar 14, 2019 1:40 pm

alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Just curious is that 35x the residual amount of expenses beyond your pension, or 35x of total expenses and Pension on top of that?
Once in a while you get shown the light, in the strangest of places if you look at it right.

Locked