how much do you think you need to retire?

[EnjoyIt]

But a pension/ss is pretty easy include in the calculation. If you get $40k a year in pension, then you subtract that from your spending target. For example, if you think you need $80k/yr in retirement, have $40k in pension then you need 33x $40k = $1.32MM to retire at 55.

What trips me up a bit is I don't plan to take SS until about 10-11 years into retirement, so draw needed is a lot higher at first, then drops significantly. Firecalc is the only thing I've found to account for that.

I love cfiresim which does a similar job but I think easier to use.
I love how I can add line items like 4 years of college expenses some time in the future. I can add a new car every 10 years for him and her. You can add as many line items as you want.

[privateID]

Based on what I have seen and read, Stock market returns are close to 10% and inflation is around 3%. So I think of real returns as 7% and the investments to double in 10 years. Where are you all getting 4% and 3%. That will take forever for anyone to retire !

The historic average may not be OUR average. A 60/40 portfolio which many appear to use around here in retirement has historically provided 8.7% returns with 3% inflation which is why I like a historic 5.7% real and I hedge my bets using 5% in my calculations.

To get to the average of 5.7%, we had years giving us 10%+ and years giving us almost no returns at all. Look at returns from 2000 to 2010. Just about 0%. Over 30 years I’m expecting closer to the 5.7% range but during the first decade of accumulation 3% is not outside the realm of possibility which is why I like to at least see what can happen.

Personally I would rather over save early on and front load that portfolio as opposed to be behind due to below average returns.

Looking at one of the many many places that make these predictions -https://advisors.vanguard.com/insights/ ... rspectives - I don't think my values are so crazy for portfolio with US/Intl and some Small value.

[Clever_Username]

For folks whose number includes large tax-deferred balances, are you including future taxes in your expenses? Or do you discount the "magic number" accordingly?

Taxes are an expense. I have an estimated annual expense number I need to be able to withdraw for retirement. Right now, it is in 2024 dollars, and I track expenses enough that I should be able to update it as I get closer (I am employed and I plan to remain such for a while). I have an estimate for "if I stay in my present location" and "if I move to a particular city I have in mind." Again, these are estimates, although they include quite some padding (significantly higher spending in many categories than I spend now, although it also assumes that I have the house itself paid off, and it has an estimate for health coverage based on what I + my employer currently pay).

In 2024 dollars, if I move to a particular city I have in mind and do so in such a way that I pay off a house (so no P&I in the budget), I estimate I'd need a little more than $62,000 after taxes per year. As such, my number for that city is $74,000 (a bit of an over-estimate in federal taxes, with some padding there too). If I were nearing 65 right now, I think $2M would likely cover that much (and I'd do some work to try to see if any of my numbers are significantly underestimated).

Are the taxes another form of padding? Probably. I have a sizable Roth balance (over $400k at last inspection) and low six figures between Series I bonds and a brokerage account, and the withdrawing from those would be taxed at a lower rate. If I get closer to the number I'd be comfortable retiring with, under the assumption that all of my portfolio is tax deferred (it's only about 2/3 such), maybe I start looking at a withdrawing plan closer. In the meantime, perhaps this way of estimating just delays the time when "I have enough" and "I have had enough" cross one another.

[EnjoyIt]

The historic average may not be OUR average. A 60/40 portfolio which many appear to use around here in retirement has historically provided 8.7% returns with 3% inflation which is why I like a historic 5.7% real and I hedge my bets using 5% in my calculations.

To get to the average of 5.7%, we had years giving us 10%+ and years giving us almost no returns at all. Look at returns from 2000 to 2010. Just about 0%. Over 30 years I’m expecting closer to the 5.7% range but during the first decade of accumulation 3% is not outside the realm of possibility which is why I like to at least see what can happen.

Personally I would rather over save early on and front load that portfolio as opposed to be behind due to below average returns.

Looking at one of the many many places that make these predictions -https://advisors.vanguard.com/insights/ ... rspectives - I don't think my values are so crazy for portfolio with US/Intl and some Small value.

Experts like to predict things. Historically they have been really bad at it.

[cshell2]

What trips me up a bit is I don't plan to take SS until about 10-11 years into retirement, so draw needed is a lot higher at first, then drops significantly. Firecalc is the only thing I've found to account for that.

https://www.flexibleretirementplanner.com/wp/

Thank you! I will download and play around with this when I'm on my home computer.

[EnjoyIt]

For folks whose number includes large tax-deferred balances, are you including future taxes in your expenses? Or do you discount the "magic number" accordingly?

One can have a retirement spending of $100k/yr and pay very little to no taxes.
viewtopic.php?t=212723

So yeah, taxes should be considered but I have seen gross overestimates how much taxes will be. Always good to run a dummy tax return to see how your own taxes may look like in retirement.

For example, I will likely do large Roth conversions to the top of the 24% tax bracket every few years and pay practically $0 taxes in the other years. Plus expecting to get heavy subsidies on health insurance during those years. When the time comes I will model it out in more detail, but it appears to be a sound strategy last I did the math.

[cshell2]

What trips me up a bit is I don't plan to take SS until about 10-11 years into retirement, so draw needed is a lot higher at first, then drops significantly. Firecalc is the only thing I've found to account for that.

I love cfiresim which does a similar job but I think easier to use.
I love how I can add line items like 4 years of college expenses some time in the future. I can add a new car every 10 years for him and her. You can add as many line items as you want.

Thank you. This is less cumbersome than firecalc.

[EnjoyIt]

https://www.flexibleretirementplanner.com/wp/

Thank you! I will download and play around with this when I'm on my home computer.

Be careful using Monte Carlo planning. It can run scenarios where a Great Depression is followed by the Great Recession back to back which basically impossible to occur. That will give you very strange outlier results and have you thinking you need 50x in savings which is ridiculous.

Also, if you make ridiculous assumptions, you will get garbage results. As they say garbage in, garbage out. Don’t get me wrong, there is value in such an analysis, but you have to understand its drawbacks as well.

[Saintor]

Also people tends to forget that their fat 401K needs to be depleted at an advanced age or pay big $ in taxes.

? Not sure what you are getting at. You pay taxes at your regular income tax rate in the years you pull the money out of the your 401k, regardless of whether you draw it down voluntarily in early retirement, or sit on it until RMDs force it out. One way or another it will eventually all get withdrawn and taxed, even if you leave it to your heir to handle as an inherited ira.

...but taxed at a possibly higher bracket rate than if taken sooner. Also add the possibility of dying before the end of RMD, and there could be a large >$XXX XXX 401K to be taxed at once.

[Claudia Whitten]

I'm just curious, what is your target/goal/"magic number" that you want or need before you retire?

You need enough money, after recurring income streams (like Social Security) and taxes, to cover expenses. Lower your expenses, and you can lower the amount you need to retire. In your calculations, be sure to include extra funds for unforeseen expenses and for annual inflation adjustments.

[EnjoyIt]

I'm just curious, what is your target/goal/"magic number" that you want or need before you retire?

You need enough money, after recurring income streams (like Social Security) and taxes, to cover expenses. Lower your expenses, and you can lower the amount you need to retire. In your calculations, be sure to include extra funds for unforeseen expenses and for annual inflation adjustments.

All of the retirement strategies we tend to use around here such as 4% SWR or variable withdrawal rate already take future inflation into account. Since we have no idea what inflation will be like between now and the day we retire, it is much easier to simply think in today's dollars using today's data. Figure out what one's expenses would be today if they retire, then subtract expected social security and pension.

[Barnabe]

I RE'd @ 54 with 2.5M, which at 4% would give me 100k/yr. I figured that would be a clean number that I could definitely live under if necessary. My initial target was 75k/yr, but I've been hard pressed to spend it--even with a bunch of travel, spa days, extra books from Amazon, art classes, etc.

I've come to believe I have seriously over saved. Not a bad problem to have, but I'd rather Die With Zero. I have friends and family who are much older and I can see from all of them that travel significantly drops off by mid-70s.

One thing I didn't really plan for was how much $75k/yr is after taxes, which are about $500/yr. Keep that in mind while planning since we're all used to a big chunk of income going to uncle Sam while working.

[Random Poster]

One thing I didn't really plan for was how much $75k/yr is after taxes, which are about $500/yr.

Well, that really depends on the source of the $75,000.

If it is all from interest on one’s cash holdings, then the tax bill will likely be a lot more than $500.

[TheNightsToCome]

To Fund our retirement beyond both of our Social Security benefits and my pension we need to fund:

- A 4-year period Social Security Bridge to delay my SS to age 70
- Moving, furnishing and buying a retirement home
- Future SPIA or QLAC purchases in our 70s as needed to cover essential expenses (discounted)
- LTC funding
- 2nd car
- Lifestyle expenses (60% front loaded for go-go years, 30% for slow-go years, 10% for no-go years)
- Travel expenses (70% front loaded to go-go years, 30% for slow-go years)
- Liquidity buffer

About $4,000,000

How do you fit all of that plus LTC funding in $4M? What is your allowance for LTC?

[Clever_Username]

One thing I didn't really plan for was how much $75k/yr is after taxes, which are about $500/yr.

Well, that really depends on the source of the $75,000.

If it is all from interest on one’s cash holdings, then the tax bill will likely be a lot more than $500.

If it's gross income, such as from a tax-deferred account, for a single taxpayer, it's over $8000 in taxes in 2024. For that matter, MFJ would be over $5000 with that income.

[iim7V7IM7]

First off, we have my pension ($75k/year) @ age 66, wife’s SS @ age 67 ($40k/year) and my SS @ age 70 ($56k/year) so we have a large secure income floor. Regarding LTC we have a three legged approach to fund up to an estimated $1,036,000 of LTC costs using a 1) LTCI, 2) HECM and 3) LTC IRA.

There are three basic scenarios of potential LTC scenarios from a planning perspective.

1) Both are alive and at home and one can’t perform > 2 ADCs and home care or assisted living is required.
2) Both are alive and one is at home and the other is in a skilled nursing care facility
3) One has passed away and the surviving spouse is in a skilled nursing home

Yes, there is a scenario where we both need LTC which is a variant of scenario 2 or 3.

1) We first decided how long we wanted to cover and came upon 3-years each
2) We looked at daily rates for pvt rooms in the 2023 Genworth Survey
3) We used a 5% inflation rate to determine 2027 annual costs ($173k/year each)
4) So a $1,036,000 was our starting point if needed in 2027 (no discount rate)

How to fund this? We are taking a three legged approach.

LTCI
1) We purchased LTCI in 2022 with a 3% inflation rider, 2 x 3 year periods with an additional shared 3-year period, 180 day elimination period that covers $82,000/year in 2027 each. So that covers $493,000 in costs. So $543k additional funding is needed. This policy covers about 50% of skilled nursing care and more of home care or assisted living.

HECM
2) We own our home and have no mortgage. A HECM can provide us access to 40% to 50% so that is another $400,000-$500,000 is available funds for scenarios 1 or 2. So another $43k to $143k is needed. For scenario 3 the home would be sold. The 180 day elimination period is about $85k each in 2027 dollars.

LTC IRA
3) Self funded savings. I have a nominal company pension of about $75,000/year and my wife will take her benefit of about $40,000 year in 2028 and I will differ my benefit until age 70 of about $60,000/year. So for scenarios 1 and 2 these funds support our essential expenses. We need to pay for elimination period (about $85,000 in 2027). We are setting aside $250,000 to have liquidity to fund any year 1 needs for one or both (2 elimination periods plus any inflation beyond 3% ) of us. For scenario 3 my pension and my Social Security benefits can also be used to help fund it, so little self funding is required. Scenario 2 requires the more significant self funding. The partnership policy will protect assets up to the full benefit of the policy (about $700k in today’s dollars).

So for us, it is a three legged approach (LTCI, HECM and IRA) of funding LTC using a target years of funding at retirement using a 5% inflation rate (not 15 years into the future) looking at different scenarios is what we have done. We also may consider moving to a CCRC in our late 70s ahead of the “need” making the decision on our own. In 20-years, 2,190 days of LTCI is $920k, HECM is about $800k and the IRA is also about $800k so this will fund about $2.5M in LTC.

To Fund our retirement beyond both of our Social Security benefits and my pension we need to fund:

- A 4-year period Social Security Bridge to delay my SS to age 70
- Moving, furnishing and buying a retirement home
- Future SPIA or QLAC purchases in our 70s as needed to cover essential expenses (discounted)
- LTC funding
- 2nd car
- Lifestyle expenses (60% front loaded for go-go years, 30% for slow-go years, 10% for no-go years)
- Travel expenses (70% front loaded to go-go years, 30% for slow-go years)
- Liquidity buffer

About $4,000,000

How do you fit all of that plus LTC funding in $4M? What is your allowance for LTC?

[runner540]

Yes, in my 30s and I make those assumptions:
no pension (very reasonable since I don’t have one) and the assumption that SS will cover my Medicare premium but no more.
I also don’t assume that the last 10 or 20 or 30 years are predictive of the next 50. (See thread on being very very lucky)

Medicare and social security are completely different programs with different funding streams so I'm not sure why you're thinking one will cover the other. Ofc you're free to make your own decisions about social security solvency but assuming basically no payment means you'll (likely) be working a lot longer and/or saving a lot more than necessary to support your retirement expenses.

The stock market is about 100 years old, depending on how one defines it. While the last 10, 20, or 30 years may not be 100% predictive--yes, there are black swan events, just as there have been in the past--the past is all we have, so one needs to look at the full record, not just recent decades.

Since 1926, the CAGR of the S&P 500 with dividends is 9.8%. In that time there have been many black swan events.

I'm not sure what else one might use to at least make a reasonable guess at future returns, with a reasonable margin of error/safety. One could assume returns will be, say, 2% and not 9.8% but that doesn't make a lot of sense based on the historical record.

ETA: FWIW in my own modeling, for a 70/30 portfolio I assume 6% real return (8% avg return with 2% inflation) with 10% standard deviation. That strikes me as a reasonable level of conservatism.

Admiral, I appreciate your input. My timeline is ~50 years. Not sure of yours. I use 3-4% real returns for a similar portfolio.

I understand SS & Medicare are distinct. If I say much more I will get in trouble for political speculation, but my assumption is that my benefits will be taxed and/or means tested to the point that it will not be meaningful, except providing some healthcare.

If I believed that SS/Medicare would remain stable for 50 years, and that real returns on a 70:30 portfolio would be 6-7%, I would already be retired or PT.

I would love to be wrong in 20-30 years and will live it up and share the good fortune.
That’s why this is *personal* finance.

[yankees60]

Just for laughs, I took the first ten quoted numbers in this thread: 3M, 3.5M, 1.6M, 1.5M. 3.5M, 10M, 2M, 4.1M, 4M, 3.5M.....

MEAN number thought to need to retire: $3, 670, 000. (92.34 percentile for 65 y.o. American HOUSEHOLDS)
MEDIAN number thought to need to retire: $3,500,000 (I couldn't find median percentile, but I imagine it would be considerably higher than mean percentile since the number would not be skewed by billionaires and the like....)
MODE: $3,500,000.

To illustrate the discrepancy between mean and median, the mean net worth for U.S. families is about $1.06 million. The median — a more representative measure — is $192,700.

Bogleheads are a rarified breed, indeed.

I imagine you would get a very different perspective if you surveyed the general public, the vast majority of whom could not imagine having, no less needing, $3.5M.

Good enlightening work!

[yankees60]

I retired in 2008 and I have a lot more money now than when I retired. However, one cannot draw any meaningful predictive conclusion from that fact.

Because we have experienced an insanely robust bull market in stock, bonds and real estate since 2008. From its low point in 2009, 15 years ago, the S+P 500 has increased nearly tenfold. Conclusion: I have been VERY lucky.

How much is your REAL net worth today compared with when you retired? Mine, I am pretty sure, is higher. But the point is, you have to take into account inflation or the comparison is meaningless.

The average rate of inflation over the last 15 years is 2.1%. Not nothing, but not very high. Averages, as you noted, can be deceiving. But still...

If you had asked a) people here b) the general public what each thought that number was for the last 15 years .... any question that both would have guessed a much higher number?

[yankees60]

Wife and I are both teachers with pensions and our state allows us to collect SS as well. Pensions alone will be around $90,000 in total. Once our SS kicks in we are really doing good. I just need a buffer from early retirement to when SS kicks in. So I say I need about $500,000 to retire

A friend of mine who is now a retired CPA once said to me ...

There are two types of people when it comes to retirement. Those who worry about it. Teachers.

[yankees60]

I’m not disputing that you have been lucky. The point is, if we look at the past as predictor, with average S+P returns (8% roughly) one should expect their money to double every 9 years. After 18 years, it doubles again. (Assuming all stock ofc so this is just using rule of 72 and average return of an all-stock portfolio, before inflation.)

Your experience has been very good (and lucky), but if we're looking at past performance to help predict the future, a portfolio that doubles or triples over a near-twenty year period is, in fact, the norm, not the outlier. On average.

How does one predict the future financial market? Here are the few methods
- throw two dice and pick up a number
- look at historical data for last 10 years
- look at historical data at last 50 years
- extrapolate based upon either of the previous two
- else assume “mean” reversion and predict opposite of the historical returns

Funny thing is all if the above sounds reasonable even to me although I am devils advocate here

But as a person you need to select one from the alternative and put your faith in that scenario

This forum is treasure trove of historical information and is fun to read older topics to get that Deja Vu feeling.

All true!

[rs9876lg]

How does one predict the future financial market? Here are the few methods
- throw two dice and pick up a number
- look at historical data for last 10 years
- look at historical data at last 50 years
- extrapolate based upon either of the previous two
- else assume “mean” reversion and predict opposite of the historical returns

Funny thing is all if the above sounds reasonable even to me although I am devils advocate here

But as a person you need to select one from the alternative and put your faith in that scenario

This forum is treasure trove of historical information and is fun to read older topics to get that Deja Vu feeling.

All true!

I am reading topics from the last decade where posters are worried about all time high and the imminent market crash! Things never change

[yankees60]

All true!

I am reading topics from the last decade where posters are worried about all time high and the imminent market crash! Things never change

"
plus ça change, plus c'est la même chose"!

[alfaspider]

25x is for a retirement at 65. It works quite well for a 20-year time horizon, but has a decent failure rate for 30+ years. My comment is in response to someone talking about a very early retirement and needing a perpetual withdrawal rate. 33x works pretty well for perpetual withdrawal.

Actually it works very well for a 30 year horizon which is exactly what it studied.
Someone retiring early will at one point get SS as well which can replace a part of their needed portfolio. 33x is way too conservative. 28.5x is far more reasonable if one is not expecting social security and looking for something more perpetual. Also, historically 25x after 30 years has in creased in value 78% of the time. So yeah, having something like SS and or maybe 2 more years of expenses saved up may be helpful in a 30+ year retirement.

I always have to remind that 25x survived the worst of history.

Filecalc shows a 5% failure rate at 4% withdrawal over 30 years and a 24% failure rate over 50. Someone retiring in their 40s is taking some level of risk if they were to plan on 4% withdrawals.

[Clever_Username]

Actually it works very well for a 30 year horizon which is exactly what it studied.
Someone retiring early will at one point get SS as well which can replace a part of their needed portfolio. 33x is way too conservative. 28.5x is far more reasonable if one is not expecting social security and looking for something more perpetual. Also, historically 25x after 30 years has in creased in value 78% of the time. So yeah, having something like SS and or maybe 2 more years of expenses saved up may be helpful in a 30+ year retirement.

I always have to remind that 25x survived the worst of history.

Filecalc shows a 5% failure rate at 4% withdrawal over 30 years and a 24% failure rate over 50. Someone retiring in their 40s is taking some level of risk if they were to plan on 4% withdrawals.

That really depends on two things: (a) what failure means in this context, and (b) if they'd even stick with following a robotic 4% withdrawal rate each year. These are related, of course.

If one retires and decides to "follow the 4% rule" (which I'm not convinced anyone actually does this, and I don't think you're saying they do, either) and encounters a few year sequence of poor returns early on, I imagine they'd cut down their expenses a bit and begin withdrawing less money. If they weren't cutting it close with their needs as a portion of their total expenses, this probably means "failure" is two luxury vacations a year instead of four. I could live with that sort of failure.

My projected expenses in retirement have a higher monthly needs and wants budget than I spend now (and I don't really budget now, except that I track expenses after the fact), so if I were to be the person above, my "failure" scenario would be a few more nights a week with a chicken dinner instead of a steak dinner.

I definitely agree that someone retiring in their 40s should start with something closer to 3.5% or 3.75% (the oft-cited ERN's data has a very high success rate for each of those at 75/25) than 4% though, or at least have a planned expenses where this is tolerable (hopefully, some adjective more positive than that) for a while.

(I think we're agreeing overall, by the way -- I hope this doesn't read as argumentative, as that is not my intent)

[ondarvr]

I commented earlier in this thread, but thought I'd add a bit to it.

As for how much I need, my fixed income will exceed my expenses in retirement, I've been living on less than that number for about 5 years now. When I retire very soon I will experience a small rise in income. I planned it that way.

I'd didn't set a $$$ number for retirement, I did my best to estimate the amount I would actually have and set my/our life up to live easily on that number or less. So far this plan has worked well, I just had a meeting with my CPA to go over the details of retiring in the first quarter of next year and it was a big thumbs up from her. It also rates 99% + success rate on every Montecarlo stress test.

That gives me a very good feeling knowing that my savings are there and can be used for emergencies or fun without impacting everyday life requirements.

[YeahBuddy]

A few million or so. So approx 25x my future spending needs, which I can't predict today. I don't put much thought into the exact numbers but rather spend my energy on sticking to the core Boglehead strategy and beliefs. One can easily go astray on the journey to the goal.

[EnjoyIt]

Filecalc shows a 5% failure rate at 4% withdrawal over 30 years and a 24% failure rate over 50. Someone retiring in their 40s is taking some level of risk if they were to plan on 4% withdrawals.

That really depends on two things: (a) what failure means in this context, and (b) if they'd even stick with following a robotic 4% withdrawal rate each year. These are related, of course.

If one retires and decides to "follow the 4% rule" (which I'm not convinced anyone actually does this, and I don't think you're saying they do, either) and encounters a few year sequence of poor returns early on, I imagine they'd cut down their expenses a bit and begin withdrawing less money. If they weren't cutting it close with their needs as a portion of their total expenses, this probably means "failure" is two luxury vacations a year instead of four. I could live with that sort of failure.

My projected expenses in retirement have a higher monthly needs and wants budget than I spend now (and I don't really budget now, except that I track expenses after the fact), so if I were to be the person above, my "failure" scenario would be a few more nights a week with a chicken dinner instead of a steak dinner.

I definitely agree that someone retiring in their 40s should start with something closer to 3.5% or 3.75% (the oft-cited ERN's data has a very high success rate for each of those at 75/25) than 4% though, or at least have a planned expenses where this is tolerable (hopefully, some adjective more positive than that) for a while.

(I think we're agreeing overall, by the way -- I hope this doesn't read as argumentative, as that is not my intent)

This is how I always see it. We have a budget based on 4% SWR. What it really means is that we can spend up to 4%. What happens in reality is that expenses fluctuate. Half of our expenses are discretionary and reality is that we spend somewhere between 3.5-4% a year. We never hit exactly 4%. It is always less. Also, when the market is doing worse, we naturally tend to spend less. It is our human nature.

Naturally, over the many years we have tracked our portfolio and spending, when the market is down, we just naturally spend less

[birdbard]

For folks whose number includes large tax-deferred balances, are you including future taxes in your expenses? Or do you discount the "magic number" accordingly?

One can have a retirement spending of $100k/yr and pay very little to no taxes.
viewtopic.php?t=212723

So yeah, taxes should be considered but I have seen gross overestimates how much taxes will be. Always good to run a dummy tax return to see how your own taxes may look like in retirement.

For example, I will likely do large Roth conversions to the top of the 24% tax bracket every few years and pay practically $0 taxes in the other years. Plus expecting to get heavy subsidies on health insurance during those years. When the time comes I will model it out in more detail, but it appears to be a sound strategy last I did the math.

why every other year? why not x years in a row and then not?

[EnjoyIt]

One can have a retirement spending of $100k/yr and pay very little to no taxes.
viewtopic.php?t=212723

So yeah, taxes should be considered but I have seen gross overestimates how much taxes will be. Always good to run a dummy tax return to see how your own taxes may look like in retirement.

For example, I will likely do large Roth conversions to the top of the 24% tax bracket every few years and pay practically $0 taxes in the other years. Plus expecting to get heavy subsidies on health insurance during those years. When the time comes I will model it out in more detail, but it appears to be a sound strategy last I did the math.

why every other year? why not x years in a row and then not?

Who knows what life will bring on a year to year basis. Maybe we have a huge market correction and I get to tax loss harvest allowing for less taxes in the future. Maybe the opposite happens. Maybe the laws change. I can't predict 10 years into the future, but I do know the rules today and will take actions based on what I know.

[MindBogler]

As many other posters have said, I think 25x is plenty at standard retirement age. I would want 33x or a bit more for a FIRE. I think health insurance is a big risk for FIRE and, without getting political, I am not planning on being able to retire early with the AHA. We are planning without it. Currently 44/43 and have 25x which we hit sometime this year. I originally intended to pull the plug at 33x but I have a kid to get through college and the 529 won't be enough. We have the means to pay for the remainder, so that is the next goal. Work has been more interesting lately, but maybe part of it is the future is now secure, the pressure is off. I have 3 years to go until the 2nd bend point on social security, I think my wife has another 6-7 years. It sure feels good to know our chance of failure is near zero. We're in that area where the emerging risk is we start spending much more money and these multiples are no longer accurate.

[EnjoyIt]

Filecalc shows a 5% failure rate at 4% withdrawal over 30 years and a 24% failure rate over 50. Someone retiring in their 40s is taking some level of risk if they were to plan on 4% withdrawals.

That really depends on two things: (a) what failure means in this context, and (b) if they'd even stick with following a robotic 4% withdrawal rate each year. These are related, of course.

If one retires and decides to "follow the 4% rule" (which I'm not convinced anyone actually does this, and I don't think you're saying they do, either) and encounters a few year sequence of poor returns early on, I imagine they'd cut down their expenses a bit and begin withdrawing less money. If they weren't cutting it close with their needs as a portion of their total expenses, this probably means "failure" is two luxury vacations a year instead of four. I could live with that sort of failure.

My projected expenses in retirement have a higher monthly needs and wants budget than I spend now (and I don't really budget now, except that I track expenses after the fact), so if I were to be the person above, my "failure" scenario would be a few more nights a week with a chicken dinner instead of a steak dinner.

I definitely agree that someone retiring in their 40s should start with something closer to 3.5% or 3.75% (the oft-cited ERN's data has a very high success rate for each of those at 75/25) than 4% though, or at least have a planned expenses where this is tolerable (hopefully, some adjective more positive than that) for a while.

(I think we're agreeing overall, by the way -- I hope this doesn't read as argumentative, as that is not my intent)

I may have written this somewhere else but here goes again.

Although we are not fully retired (work part time) we have created a lifestyle that allows us to spend 4% of our portfolio as if we retired with a 4% SWR. Every couple of years if the portfolio has been doing well, we recalculate the 4% and increase our discretionary expenses. What that really means is that we can spend up to 4% but in reality our expenses are variable and we appear to spend somewhere between 3.5-4% every year. Some years we get really close to 4%. Other years we are well under budget. I agree, no one spends exactly 4% like a robot.

Here is another fact about us. When the market isn't doing so hot, we tend to naturally spend less. It sort of just happens. We tend to delay some of those discretionary expenses and stretch them out. In my brain I think "well we spent a whole bunch of money this month already. Let's wait until next month to buy that doohikey I want." Or maybe we stay in a less fancy hotel on our next trip. Maybe we don't fly extended legroom. It all sort of just happens without sitting down and budgeting. In fact, we don't budget. Every quarter I put 3 months of expenses in our Fidelity CMA account. All our expenses autopay from there. At the end of the quarter I see how much money we have left and I write it down in excel. I then replenish to another 3 months. I also leave a bit of a buffer in that account incase we overspend that quarter. In the years I have followed this path, we have never hit the 4% mark which is why I have a lot of confidence in our 4% strategy that I am hoping will be utilized for well over 30 years.

I do agree though if one was a robot spending a precise percent and looking to retire for over 30 years, 3.5% for the first several years is probably a good idea.

[EnjoyIt]

As many other posters have said, I think 25x is plenty at standard retirement age. I would want 33x or a bit more for a FIRE. I think health insurance is a big risk for FIRE and, without getting political, I am not planning on being able to retire early with the AHA. We are planning without it. Currently 44/43 and have 25x which we hit sometime this year. I originally intended to pull the plug at 33x but I have a kid to get through college and the 529 won't be enough. We have the means to pay for the remainder, so that is the next goal. Work has been more interesting lately, but maybe part of it is the future is now secure, the pressure is off. I have 3 years to go until the 2nd bend point on social security, I think my wife has another 6-7 years. It sure feels good to know our chance of failure is near zero. We're in that area where the emerging risk is we start spending much more money and these multiples are no longer accurate.

I really don't see what the big deal is here. I have bought insurance in the open market for decades. We do not get a subsidy. Health insurance is part of our budget.

Also, you will be getting over $80k a year from SS between you and your wife at 70. Yes it is many years away, but it also means you can use up some of your portfolio to get to 70. $80k/yr covers a whole lot of needs and wants. Personally I think 33x is overkill but some people like overkill. Which is a choice.

Try running any backtest model such as cfiresim using 3%. Over 40 years the average historical portfolio quadruples. Yes, there are a couple of bad sequence of returns, but if you have a healthy discretionary budget, you can weather any storm.

[MindBogler]

I really don't see what the big deal is here. I have bought insurance in the open market for decades. We do not get a subsidy. Health insurance is part of our budget.

Also, you will be getting over $80k a year from SS between you and your wife at 70. Yes it is many years away, but it also means you can use up some of your portfolio to get to 70. $80k/yr covers a whole lot of needs and wants. Personally I think 33x is overkill but some people like overkill. Which is a choice.

Try running any backtest model such as cfiresim using 3%. Over 40 years the average historical portfolio quadruples. Yes, there are a couple of bad sequence of returns, but if you have a healthy discretionary budget, you can weather any storm.

These are all good points, and I agree. It's not a big deal so much as I am simply not planning for any ACA subsidy. It will be part of the expense we budget for to pull the plug. For the first few years we'll use her existing insurance as she plans to continue working a few years longer than I do (I assume that plan will change). I think we will have too much money, especially after another 4.5 years of work, but that opens up options to help our child with a mortgage down payment, charity, extra travel, etc. I'm also planning to retire with a mortgage. It's at 2.25% though and the remaining balance is 21% of our portfolio.

[runningshoes]

All true!

I am reading topics from the last decade where posters are worried about all time high and the imminent market crash! Things never change

As I'm getting ready for retirement in the next couple of years and trying to figure out some of these issues, my view is that it's not a focus on market returns (solely), but how to buffer the portfolio against whatever setbacks come our way. Over the last 30 years we've been lucky to live in an environment of rising assets (real estate and stocks), low inflation (good for borrrowing towards ownership of those rising assets like homes), and low taxes. If you look out another 30 years, it's not clear at all that this environment will continue, and in fact, you could easily identify trends that should suggest buffering a retirement portfolio differently than a standard 60/40 (e.g. commodities to buffer against inflation, real estate for cash flow stability, etc.).

Not sure how far into this I can go w/o running head on into forum restrictions, but I think the other posters are simply saying we've been really fortunate and it's not clear we will continue to be for a similar period into the future.

[Admiral]

I am reading topics from the last decade where posters are worried about all time high and the imminent market crash! Things never change

As I'm getting ready for retirement in the next couple of years and trying to figure out some of these issues, my view is that it's not a focus on market returns (solely), but how to buffer the portfolio against whatever setbacks come our way. Over the last 30 years we've been lucky to live in an environment of rising assets (real estate and stocks), low inflation (good for borrrowing towards ownership of those rising assets like homes), and low taxes. If you look out another 30 years, it's not clear at all that this environment will continue, and in fact, you could easily identify trends that should suggest buffering a retirement portfolio differently than a standard 60/40 (e.g. commodities to buffer against inflation, real estate for cash flow stability, etc.).

Not sure how far into this I can go w/o running head on into forum restrictions, but I think the other posters are simply saying we've been really fortunate and it's not clear we will continue to be for a similar period into the future.

I think much of what you're defining as "being fortunate" is actually not so accurate. I've been investing as an adult since 1993. Here is what I have seen in this period:

1990s: Mortgage rates of 7-9% (my first mortgage was 8.25%)
2000-2010, stock market virtually flat
2007-2008, greatest market meltdown since Depression
2022: worst year for bonds in...forever, along with poor stock returns
Current: unaffordable housing for the majority of Americans

Through ALL of that, the S&P has had an inflation adjusted return (1993 through 2024) of 7.76%.

The point is, the future is likely to be similar to the past: some periods of very poor or even historically bad returns and/or high interest rates, plus a black swan event here and there. And things are STILL likely to be fine.

Yes, it's true, sequence of returns matters and the year (or even month) you retire and begin drawdown also matters. But to think that returns are going to be 2%, SS will disappear, and so on? That strikes me as Chicken Little territory.