Mr. Money Mustache, SWR, and equity allocation

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CnC
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Tue Apr 16, 2019 8:48 pm

Delete double post
Last edited by CnC on Tue Apr 16, 2019 8:51 pm, edited 1 time in total.

CnC
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Tue Apr 16, 2019 8:49 pm

HomerJ wrote:
Tue Dec 18, 2018 12:24 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
What I don't want to happen is to quit my job at age 40, throw everything into stock funds, draw 5% a year and assume I'll be okay. But isn't that essentially what MMM says?
MMM is wrong.

You would have been totally broke if you had done this right before the Great Depression, and you'd be close to broke right now if you did this in 2000.

The above is true for a 4% withdrawal from 100% stocks portfolio, let alone 5%.
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 8:54 pm

Starfish wrote:
Tue Apr 16, 2019 8:41 pm
Why do you call this a trick?
Calling it retirement while continuing to work (to avoid plan failure, not just by choice) ain't that kosher.
Working when one desires, probably around a hobby, is not at all the same as full time employment. Extreme FIRE require this type of flexibility, just in case.
"desires", or "has to" ?
However even a 5% withdrawal rate does not have a very large chance of failure at least based on historical data.
Compare present yields to historical data.
I don't know the exact numbers but for many people a 20% chance of having to interrupt "retirement" for several years out of several tens still sounds like a good deal. The other option is working 100% percent of the time for the next decades.
Or plan better investments and however why you put "working for decades" one one side and "interrupting retirement" (for how long ?) on the other ?
Why would one plan for money s/he is going to receive through SS? SS is probably safer than any investment at least because the number of retired people voting goes up every day.
Yes, plan to collect SSA and write down the numbers, instead of hiding them. Total figures are what count.

delamer
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by delamer » Tue Apr 16, 2019 8:56 pm

CnC wrote:
Tue Apr 16, 2019 8:49 pm
HomerJ wrote:
Tue Dec 18, 2018 12:24 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
What I don't want to happen is to quit my job at age 40, throw everything into stock funds, draw 5% a year and assume I'll be okay. But isn't that essentially what MMM says?
MMM is wrong.

You would have been totally broke if you had done this right before the Great Depression, and you'd be close to broke right now if you did this in 2000.

The above is true for a 4% withdrawal from 100% stocks portfolio, let alone 5%.
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.
The unemployment rate was 25% during the Great Depression. You couldn’t count on simply getting a new job after the crash.

Anytime there is a very large stock downtown, there are dislocations in the economy that can make finding a job tough.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 8:57 pm

CnC wrote:
Tue Apr 16, 2019 8:49 pm
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.
Yes, because in 1930 and 2001 employers couldn't get enough workers however hard they tried...

retire2022
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by retire2022 » Tue Apr 16, 2019 9:02 pm

I think there is an allure of "dropping out of society" and being self sufficient, survivalist meets Timothy Leary and John Bogle, that is Mr Mustache cult.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 9:11 pm

Thesaints wrote:
Tue Apr 16, 2019 8:54 pm
Starfish wrote:
Tue Apr 16, 2019 8:41 pm
Why do you call this a trick?
Calling it retirement while continuing to work (to avoid plan failure, not just by choice) ain't that kosher.

Yes, that is called "retirement police".
It is obvious for everybody that most 40y olds din't retire in the sense that they cannot touch any work (especially paid) because God's fury will strike them. They just have the flexibility to do what they want.
This what retirement is: to do what you what when you want. Yes, it could be what other people define as work.
Thesaints wrote:
Tue Apr 16, 2019 8:57 pm
CnC wrote:
Tue Apr 16, 2019 8:49 pm
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.
Yes, because in 1930 and 2001 employers couldn't get enough workers however hard they tried...
And employed people (with less savings) will be in better shape because of.... what? You don't have to work during the great depression, you can do something lucrative and decrease your SWR ahead of it.
Why do we even discuss a century old event?

CnC
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Tue Apr 16, 2019 9:22 pm

Thesaints wrote:
Tue Apr 16, 2019 8:57 pm
CnC wrote:
Tue Apr 16, 2019 8:49 pm
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.
Yes, because in 1930 and 2001 employers couldn't get enough workers however hard they tried...
And you would be no worse than every other singe person who lost their job during the recession/depression.

You do realize that come 2025 when I am 40 and I retire at 40 and you are however old you are and still working and the economy crashes and we both are jobless the fact I retired and you were laid off will not in any way affect either one of us and our ability to get a job.

* Note not meant towards you in any way just easier to write directly at someone than a generic somebody.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Tue Apr 16, 2019 9:36 pm

Correction for everyone:

MMM advocates a 4% withdrawal rate not 5% because of the Trinity Study and that 4% has been almost bulletproof in the past.

He uses 5% as a rate of growth of investments while employed so that one can figure out about how many years they may need to work prior to financial independence. This is not a withdrawal rate.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Tue Apr 16, 2019 9:47 pm

Thesaints wrote:
Tue Apr 16, 2019 8:57 pm
CnC wrote:
Tue Apr 16, 2019 8:49 pm
Just to play the devil's advocate, common sense dictates that you retired in 2000 or 1929 at 45 and watch your stocks lose 50% of their value immediately after you simply get a new job and continue like literally every other 45 year old out there.

Retirement at 45 is the same as quitting a job, over the next ±5 years you can simply go get a new one. You miss a year or two of wages and go about your business still better off than 95% of people out there.
Yes, because in 1930 and 2001 employers couldn't get enough workers however hard they tried...
Let's compare 1930? Someone who has reached financial independence (25x expenses) at 40 with a 60/40 portfolio and the market drops 90% vs someone who has only reached 5x expenses at 40 with a 60/40 portfolio and loses their job.

Seems to me that the person who FIRED at the very least has 8 years socked away in bonds and will survive while the other guy is likely going to starve unless something comes up to help. I would rather be the one who is financially independent.

The other benefit to early FI is that you don't necessarily need to quit working. You can work another year, you can semi-retire, you can find more meaningful work at another company, you can get a job as a bartender at a Jazz venue or comedy club, or you can start your own business doing something you love. Early FI buys freedom and options. And guess what, freedom and options makes me happy.

CnC
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Wed Apr 17, 2019 9:05 am

Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by smitcat » Wed Apr 17, 2019 9:12 am

CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
Opinions vary....

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 10:03 am

smitcat wrote:
Wed Apr 17, 2019 9:12 am
CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
Opinions vary....
Choices vary....

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willthrill81
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 10:35 am

CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
I get your point. While I would urge those retiring prior to about age 60 to shoot for closer to 30-35x, I agree that the risk of a 'premature' death seems to be widely underestimated by many. Further, if the masses who retire with little or nothing beyond Social Security find someway to make ends meet, which most of them clearly do, how much easier should it be for a knowledgeable Boglehead with a seven figure portfolio to do so? The attitudes exhibited by some which strongly appear to indicate that reducing their standard of living (e.g. moving from their VHCOL area, no longer driving new model luxury automobiles, flying first-class exclusively) would be a fate worse than death smacks of snobbery, to put it mildly.

Also, I believe that trying to devise a plan as to how we would navigate through the Great Depression is fraught with issues. Frankly, in a situation where stocks fall by 89% in value, no routes would likely be considered as truly 'safe'. How secure would even government-issued bonds be in a situation where an economic implosion seems likely? Annuities certainly wouldn't be viewed as rock-solid. Further, I have grave doubts as to how many would 'stay the course' with a buy-and-hold strategy if that were to occur. It's one thing to see your stocks fall by 50%, but almost 90% is an order of magnitude worse.
“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

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 11:15 am

willthrill81 wrote:
Wed Apr 17, 2019 10:35 am
CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
I get your point. While I would urge those retiring prior to about age 60 to shoot for closer to 30-35x, I agree that the risk of a 'premature' death seems to be widely underestimated by many. Further, if the masses who retire with little or nothing beyond Social Security find someway to make ends meet, which most of them clearly do, how much easier should it be for a knowledgeable Boglehead with a seven figure portfolio to do so? The attitudes exhibited by some which strongly appear to indicate that reducing their standard of living (e.g. moving from their VHCOL area, no longer driving new model luxury automobiles, flying first-class exclusively) would be a fate worse than death smacks of snobbery, to put it mildly.

Also, I believe that trying to devise a plan as to how we would navigate through the Great Depression is fraught with issues. Frankly, in a situation where stocks fall by 89% in value, no routes would likely be considered as truly 'safe'. How secure would even government-issued bonds be in a situation where an economic implosion seems likely? Annuities certainly wouldn't be viewed as rock-solid. Further, I have grave doubts as to how many would 'stay the course' with a buy-and-hold strategy if that were to occur. It's one thing to see your stocks fall by 50%, but almost 90% is an order of magnitude worse.
I don't think 30x-35x is necessary for those younger than 60 year olds. I think 25x with having the flexibility to drop to 30x-35x during bad times is better because that does not necessitate working an additional 3-5 years. As you said, some may not be willing to give up the first class flight or the latest luxury automobile and willing to work 5 more years to guarantee those luxuries. To each their own.

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willthrill81
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 11:21 am

EnjoyIt wrote:
Wed Apr 17, 2019 11:15 am
willthrill81 wrote:
Wed Apr 17, 2019 10:35 am
CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
I get your point. While I would urge those retiring prior to about age 60 to shoot for closer to 30-35x, I agree that the risk of a 'premature' death seems to be widely underestimated by many. Further, if the masses who retire with little or nothing beyond Social Security find someway to make ends meet, which most of them clearly do, how much easier should it be for a knowledgeable Boglehead with a seven figure portfolio to do so? The attitudes exhibited by some which strongly appear to indicate that reducing their standard of living (e.g. moving from their VHCOL area, no longer driving new model luxury automobiles, flying first-class exclusively) would be a fate worse than death smacks of snobbery, to put it mildly.

Also, I believe that trying to devise a plan as to how we would navigate through the Great Depression is fraught with issues. Frankly, in a situation where stocks fall by 89% in value, no routes would likely be considered as truly 'safe'. How secure would even government-issued bonds be in a situation where an economic implosion seems likely? Annuities certainly wouldn't be viewed as rock-solid. Further, I have grave doubts as to how many would 'stay the course' with a buy-and-hold strategy if that were to occur. It's one thing to see your stocks fall by 50%, but almost 90% is an order of magnitude worse.
I don't think 30x-35x is necessary for those younger than 60 year olds. I think 25x with having the flexibility to drop to 30x-35x during bad times is better because that does not necessitate working an additional 3-5 years. As you said, some may not be willing to give up the first class flight or the latest luxury automobile and willing to work 5 more years to guarantee those luxuries. To each their own.
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
“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

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Wed Apr 17, 2019 12:19 pm

Starfish wrote:
Tue Apr 16, 2019 9:11 pm
Yes, that is called "retirement police".
It is obvious for everybody that most 40y olds din't retire in the sense that they cannot touch any work (especially paid) because God's fury will strike them. They just have the flexibility to do what they want.
This what retirement is: to do what you what when you want. Yes, it could be what other people define as work.
Rather than a definition of work vs. retirement issue, I think it is an issue of "do what they want" vs. "do what they have to do". Find a job, in this case at hand.
CnC wrote:
Tue Apr 16, 2019 9:22 pm
And you would be no worse than every other singe person who lost their job during the recession/depression.

You do realize that come 2025 when I am 40 and I retire at 40 and you are however old you are and still working and the economy crashes and we both are jobless the fact I retired and you were laid off will not in any way affect either one of us and our ability to get a job.
Yes, but do you realize that if you were employed to begin with, your chances of being employed following a recession are higher that if you were unemployed to begin with ?
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
If one does not withdraw at all any portfolio is fine for any length of time.
The point of (good) planning is to retire with enough assets to live the desired lifestyle under almost any circumstance. Planning for concrete chances to have to go back to work, or drastically reduce lifestyle is flawed at start. In short that's half of FIRE's cardinal sin. The other half is planning to live a below one's means/spartan/destitute life while working.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Wed Apr 17, 2019 12:46 pm

smitcat wrote:
Wed Apr 17, 2019 9:12 am
CnC wrote:
Wed Apr 17, 2019 9:05 am
Just one more note to all the people who are placing too much weight on a great depression crash the year or 5 after you retire.

You are arguing an unbalanced equation. That leads to some extremely irrational thought. I view dying before I retire as a failure. Certainly more of a failure than going broke after I am 100 years old.

Because of that working until 67 has a much higher failure rate than retirement at 45 with 25x income 4% spending and a grasp of finance.
Opinions vary....
Now is a matter of opinion? I thought MMM was all wrong and that. If it's is just a matter of opinion, what is to discuss?

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Wed Apr 17, 2019 12:58 pm

Thesaints wrote:
Wed Apr 17, 2019 12:19 pm
Starfish wrote:
Tue Apr 16, 2019 9:11 pm
Yes, that is called "retirement police".
It is obvious for everybody that most 40y olds din't retire in the sense that they cannot touch any work (especially paid) because God's fury will strike them. They just have the flexibility to do what they want.
This what retirement is: to do what you what when you want. Yes, it could be what other people define as work.
Rather than a definition of work vs. retirement issue, I think it is an issue of "do what they want" vs. "do what they have to do". Find a job, in this case at hand.
I am not sue how to make this more clear.
Talking unconstrained part time jobs, with no pressure, is pretty much retirement. You don't have to watch TV or play golf.
The difference between having to go to work o pay mortgage etc vs the luxury of choosing to work or not (to maybe decrease your SWR this year although it is not mandatory) makes a big difference.
There is no clear line between FI and retirement. It's a continuum. The emphasis is on FI in FIRE. First big step is to decrease expenses and save money to have a 4% SWR. This is the main part of MMM philosophy, not siting around and watching TV.

Yes, but do you realize that if you were employed to begin with, your chances of being employed following a recession are higher that if you were unemployed to begin with ?
The chance of surviving a great recession starting from a 25X portfolio is much higher than starting it with a job and debt. Like, you know, normal people.

The chance of getting a great depression where your assets will go to 10% is definitely lower (or, let's say, impossible to know) than dying. This kind of great depression would mean WW3, zombie apocalypse etc. No job will save you in that case. To be eaten in your cubicle by a group of zombies is a pathetic demise, I would rather be eaten on a beach in Caribbean :D
Last edited by Starfish on Wed Apr 17, 2019 1:00 pm, edited 1 time in total.

CnC
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Wed Apr 17, 2019 1:00 pm

Thesaints wrote:
Wed Apr 17, 2019 12:19 pm
CnC wrote:
Tue Apr 16, 2019 9:22 pm
And you would be no worse than every other singe person who lost their job during the recession/depression.

You do realize that come 2025 when I am 40 and I retire at 40 and you are however old you are and still working and the economy crashes and we both are jobless the fact I retired and you were laid off will not in any way affect either one of us and our ability to get a job.
Yes, but do you realize that if you were employed to begin with, your chances of being employed following a recession are higher that if you were unemployed to begin with ?
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
If one does not withdraw at all any portfolio is fine for any length of time.
The point of (good) planning is to retire with enough assets to live the desired lifestyle under almost any circumstance. Planning for concrete chances to have to go back to work, or drastically reduce lifestyle is flawed at start. In short that's half of FIRE's cardinal sin. The other half is planning to live a below one's means/spartan/destitute life while working.
I beg to differ. Say I retired in 1999 and you were fired in 2000 if we had the same skillset I seriously doubt any employer would say wow one guy left his job 1 year ago and one guy was terminated 6 months ago. The man who was terminated clearly is much more employable.

Now if I were to retire in 1994 5 years before the 2000 crash sure I would be less employable than you. But I would also still have a huge nest egg even larger than the 25x I retired with. Infact even at the bottom of the 2000 crash my portfolio would be up +40% from what I retired at.

Do you understand how cherry picking the worst case scenarios where the stars all have to align really doesn't make sense?
Last edited by CnC on Wed Apr 17, 2019 2:38 pm, edited 1 time in total.

Jack FFR1846
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Jack FFR1846 » Wed Apr 17, 2019 1:04 pm

I credit MMM for getting involved with Lending Club. I also credit MMM for warning that they had turned around, and I got out in short order. Why Pete simply stopped investing and didn't pull out, I gotta think they were a site sponsor. It was blatantly obvious that the time had come to get out and he didn't.

I credit lots of sites for added income and bonuses. MMM forum for tradeline sales and small balance forgiveness, and MMM, Reddit, Bogleheads and other random places for pointers to new, good bonuses for moving money into accounts or opening a new card.

Ok....to the original question. SWR. It's really easy to take 5% out a year when there's a separate $400k a year income to back you up if something goes wrong. It's altogether different when that portfolio where the 5% is coming from is everything. It ain't hard to say "weeeee, quit your job, work for free as a construction worker, spend all your money on overpriced beer and buy buildings with money (that came from where?) to rent out" when you have lots of back up.

I do give Pete credit and thank him for the added wealth he opened my eyes to........while I drive my Wrangler on oversized tires (the Wrangler is the hated poster child of stupid vehicles of MMM) to the offroad meets where I'm in 4x4 low all day getting 0.8 mpg. But it's sorta tough to mount my snowplow on a Leaf.
Bogle: Smart Beta is stupid

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 1:07 pm

Thesaints wrote:
Wed Apr 17, 2019 12:19 pm
If one does not withdraw at all any portfolio is fine for any length of time.
The point of (good) planning is to retire with enough assets to live the desired lifestyle under almost any circumstance. Planning for concrete chances to have to go back to work, or drastically reduce lifestyle is flawed at start. In short that's half of FIRE's cardinal sin. The other half is planning to live a below one's means/spartan/destitute life while working.
Who says you have to live a spartan/destitute life to be financially independent early in life? We are far from destitute or spartan. Also, the 25x starting point survives some of the worst times in history. The need to go back to work is such tiny percent chance especially if one can cut back a little which historically has also been very rare. We travel several weeks a year times a year. I'm okay traveling one or two weeks for a few years if need be. I think my family and I will survive. Wouldn't yours? We keep our cars for about 10 years. I'm sure if times are tough I can keep that car an extra year or two with insignificant loss in happiness.

Once you eliminate the wasteful spending that purchases little or minimal happiness in your life it becomes pretty easy to save more money and not feel like you are depriving yourself. Believe it or not, you gain happiness because you divert some of those savings towards things that create long standing joy. I have friends who purchase 1-2 coffees a day. We make our own cappuccinos which are much tastier than Starbucks for a fraction of the cost. We have friends who eat fast food / take out every day. We cook most of our meals at a fraction of the cost that are healthier and taste better. And, that is some basic everyday stuff we see. Those two choices alone are worth hundreds of thousand of dollars over 20 year time frame if invested. Even more if you consider working till 65 or one's entire life.

It is all about choices and what one finds important or valuable to them. I believe once an average person takes a real look into themselves they can easily find lots of waste in their lives that purchases little to no happiness that can easily be removed without deprivation.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 1:08 pm

Jack FFR1846 wrote:
Wed Apr 17, 2019 1:04 pm
I credit MMM for getting involved with Lending Club. I also credit MMM for warning that they had turned around, and I got out in short order. Why Pete simply stopped investing and didn't pull out, I gotta think they were a site sponsor. It was blatantly obvious that the time had come to get out and he didn't.

I credit lots of sites for added income and bonuses. MMM forum for tradeline sales and small balance forgiveness, and MMM, Reddit, Bogleheads and other random places for pointers to new, good bonuses for moving money into accounts or opening a new card.

Ok....to the original question. SWR. It's really easy to take 5% out a year when there's a separate $400k a year income to back you up if something goes wrong. It's altogether different when that portfolio where the 5% is coming from is everything. It ain't hard to say "weeeee, quit your job, work for free as a construction worker, spend all your money on overpriced beer and buy buildings with money (that came from where?) to rent out" when you have lots of back up.

I do give Pete credit and thank him for the added wealth he opened my eyes to........while I drive my Wrangler on oversized tires (the Wrangler is the hated poster child of stupid vehicles of MMM) to the offroad meets where I'm in 4x4 low all day getting 0.8 mpg. But it's sorta tough to mount my snowplow on a Leaf.
He never said withdrawing 5%. Somehow this mistakes keeps coming up, but he recommends a 4% withdrawal rate to be safe.

He does talk about 5% average growth while employed to guesstimate how many more years one may need to work before they are FI.

Random Poster
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Random Poster » Wed Apr 17, 2019 1:11 pm

willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by randomguy » Wed Apr 17, 2019 1:19 pm

Starfish wrote:
Tue Apr 16, 2019 9:11 pm


And employed people (with less savings) will be in better shape because of.... what? You don't have to work during the great depression, you can do something lucrative and decrease your SWR ahead of it.
Why do we even discuss a century old event?
Do something lucrative like keep working your job?:) If you have a job 2 things have to go bad (i.e. you get fired AND can't find a job). If you don't have a job only 1 thing (can't find a job) needs to go bad. Heck if you have a job, you also get unemployment. Thats like having another .5+ of savings:)

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 1:36 pm

randomguy wrote:
Wed Apr 17, 2019 1:19 pm
Starfish wrote:
Tue Apr 16, 2019 9:11 pm


And employed people (with less savings) will be in better shape because of.... what? You don't have to work during the great depression, you can do something lucrative and decrease your SWR ahead of it.
Why do we even discuss a century old event?
Do something lucrative like keep working your job?:) If you have a job 2 things have to go bad (i.e. you get fired AND can't find a job). If you don't have a job only 1 thing (can't find a job) needs to go bad. Heck if you have a job, you also get unemployment. Thats like having another .5+ of savings:)
Do something lucrative:
I know a two retirees who still do some minor consulting work.
Some retirees on this forum spend a small portion of their free time getting IRA transfer bonuses, banking bonuses and credit card bonuses.
I know 1 retiree that bartends at private events every so often.

Just because someone stopped working their full time job does not mean they must sit at the beach sipping coronas. Most early retirees will find meaningful things to do with their lives and often times end up making some money on the way.

Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.

You can not deny that having financial independence earlier in life is better. Period!

You can argue and each person's desires are different on how much they need to be financially independent. We argue about that all day long on this forum. MMM postures that many of the luxuries we buy don't actually make us happier but instead weaker less happy individuals. The most extreme example I can think of is one of my older colleagues who gets upset and proclaims a miserable time if they don't get the best table at a restaurant, VIP treatment at some event, or first class seating on even a short haul flight. This person has pampered themselves so much that anything below this ridiculous standard creates stress and unhappiness. Everyone is different, while some are just confused.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by randomguy » Wed Apr 17, 2019 1:50 pm

EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm

Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.

You can not deny that having financial independence earlier in life is better. Period!

Sure but the guy with 40x and a job is better than the retiree with 25x who hasn't worked the past 10 years. Period!:)

Of course I retired at 33 at ~10x and have been fine. The self employment work I have done for the past decade is just a hobby and doesn't count as working:)

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Wed Apr 17, 2019 1:51 pm

EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm
Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.
"25x" "5x" mean nothing. "x" of what ? Planning to live under a bridge, eating at the shelter may make any portfolio become a "100x"
The key is that the tenets of FIRE plan for a spartan worklife and early and spartan retirement. Good personal financial planning tries to maximize lifestyle during worklife and in retirement, based on an acceptable retirement age, available compensations and market returns.
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
MMM postures that many of the luxuries we buy don't actually make us happier but instead weaker less happy individuals.
That's why MMM should open a church instead of giving financial advice. St. Francis predicated the same, but he never went around Assisi advocating withdrawal rates and assets allocations.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by FiveK » Wed Apr 17, 2019 2:00 pm

Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
Hmm, maybe it means different things to different people...? And if assumptions differ, conclusions may well diverge....

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by azanon » Wed Apr 17, 2019 2:02 pm

I'm surprised MMM spends any time discussing or being concerned about SWR. He generally advocates self-employment, which is traditionally some of the most lucrative paid work that there is (reference, for example, TMND and the most common type of millionaire), and doesn't really recommend that anyone stop working. Heck, he works so hard, that not only does he do his main occupations (yes, plural), but he also then goes home and does all of the chores there too instead of hiring help. MMM is a very hard worker, and has a very high level of income, most of it being earned income. I imagine I'll retire far sooner than he ever will (I have 10 years left).

I'd consider going into self-employment myself, but it sounds too stressful, and I don't really like the variable work schedule. It's probably more work that I do too. I just work 40 hours a week.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Wed Apr 17, 2019 2:04 pm

FiveK wrote:
Wed Apr 17, 2019 2:00 pm
Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
Hmm, maybe it means different things to different people...? And if assumptions differ, conclusions may well diverge....
Sure it is subjective, but once we move away from objective financial targets, monks, hermits and hippies moving to Nepal come to mind.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by KyleAAA » Wed Apr 17, 2019 2:29 pm

Thesaints wrote:
Wed Apr 17, 2019 2:04 pm
FiveK wrote:
Wed Apr 17, 2019 2:00 pm
Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
Hmm, maybe it means different things to different people...? And if assumptions differ, conclusions may well diverge....
Sure it is subjective, but once we move away from objective financial targets, monks, hermits and hippies moving to Nepal come to mind.

Being a monk in Nepal sounds pretty cool to me.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by vitaflo » Wed Apr 17, 2019 2:42 pm

Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
"25x" "5x" mean nothing. "x" of what ? Planning to live under a bridge, eating at the shelter may make any portfolio become a "100x"
The key is that the tenets of FIRE plan for a spartan worklife and early and spartan retirement. Good personal financial planning tries to maximize lifestyle during worklife and in retirement, based on an acceptable retirement age, available compensations and market returns.
X is spending and always has been. The great thing about using multiples and percentages is that it doesn't matter if you want to live a spartan lifestyle or a luxurious one. The numbers don't change. Just because some FIRE people want to live a spartan lifestyle I'm not sure why that matters. I plan on FIREing and plan on living the same lifestyle I've always lived, upper middle class. I use the same X variable as everyone else.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 2:48 pm

Thesaints wrote:
Wed Apr 17, 2019 12:19 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
If one does not withdraw at all any portfolio is fine for any length of time.
The point of (good) planning is to retire with enough assets to live the desired lifestyle under almost any circumstance. Planning for concrete chances to have to go back to work, or drastically reduce lifestyle is flawed at start. In short that's half of FIRE's cardinal sin. The other half is planning to live a below one's means/spartan/destitute life while working.
That can be one objective, but it depends in part on how much certainty you want to maintain a certain level of spending. For me, I'm okay with the historically unlikely possibility of needing to reduce or largely eliminate discretionary spending (50% of our planned retirement spending) if our portfolio suffers like it did for year 2000 retirees. I would personally rather accept that possibility (which is actually a possibility no matter what your withdrawal rate is) and retire 5-10 years earlier than continue working those 5-10 years in an effort to maintain the luxuries that we might need to reduce or eliminate.
Random Poster wrote:
Wed Apr 17, 2019 1:11 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].
It's not logical to treat all expenses as fixed and necessary. For many of us, that's simply not true. As I noted in my reply above, 50% of our planned retirement spending will be on discretionary purchases that could be reduced or eliminated if the need was there.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Wed Apr 17, 2019 2:55 pm

willthrill81 wrote:
Wed Apr 17, 2019 2:48 pm
Thesaints wrote:
Wed Apr 17, 2019 12:19 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
If one does not withdraw at all any portfolio is fine for any length of time.
The point of (good) planning is to retire with enough assets to live the desired lifestyle under almost any circumstance. Planning for concrete chances to have to go back to work, or drastically reduce lifestyle is flawed at start. In short that's half of FIRE's cardinal sin. The other half is planning to live a below one's means/spartan/destitute life while working.
That can be one objective, but it depends in part on how much certainty you want to maintain a certain level of spending. For me, I'm okay with the historically unlikely possibility of needing to reduce or largely eliminate discretionary spending (50% of our planned retirement spending) if our portfolio suffers like it did for year 2000 retirees. I would personally rather accept that possibility (which is actually a possibility no matter what your withdrawal rate is) and retire 5-10 years earlier than continue working those 5-10 years in an effort to maintain the luxuries that we might need to reduce or eliminate.
Random Poster wrote:
Wed Apr 17, 2019 1:11 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].
It's not logical to treat all expenses as fixed and necessary. For many of us, that's simply not true. As I noted in my reply above, 50% of our planned retirement spending will be on discretionary purchases that could be reduced or eliminated if the need was there.

This is exactly what I was going to post.

Anyway I'm sure this has drifted far enough off topic it will be locked. But before it is I wanted to put one last comment in.

If you separate what you want to spend from what you *need* to spend it's a very different ball game. If you have have to spend a minimum $40,000 a year or else you will be hungry and on the streets then no, do not plan on retiring at 45 years only with only $1,000,000 in the bank.

But if you spend $40,000 on necessities and another $20,000 on shoes every year you will likely be pretty safe at $1,500,000. Just realize that if the market tanks you may have to wear the same pair of shoes all year. Perhaps you won't get any new shoes for a few years and if you really *need* some pair advertised you might just have to find a job you enjoy and work a couple hours a week to buy them till the markets come back.
Last edited by CnC on Wed Apr 17, 2019 3:08 pm, edited 2 times in total.

Random Poster
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Random Poster » Wed Apr 17, 2019 3:07 pm

willthrill81 wrote:
Wed Apr 17, 2019 2:48 pm
Random Poster wrote:
Wed Apr 17, 2019 1:11 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].
It's not logical to treat all expenses as fixed and necessary. For many of us, that's simply not true. As I noted in my reply above, 50% of our planned retirement spending will be on discretionary purchases that could be reduced or eliminated if the need was there.
I'm losing track of what you really think the 25x should be.

25x all expenses?

25x base, non-discretionary expenses?

It seems to me that it would be a lot easier to simply say, "I'd like to live on Y for the rest of my life. Thus, I'll have at least 35 times that amount before I retire, should I do so before I turn 60."

Doing it that way avoids the whole discretionary v. non-discretionary split of one's expenses while still providing a reasonable level of safety, would it not?

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Wed Apr 17, 2019 3:08 pm

randomguy wrote:
Wed Apr 17, 2019 1:50 pm
EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm

Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.

You can not deny that having financial independence earlier in life is better. Period!

Sure but the guy with 40x and a job is better than the retiree with 25x who hasn't worked the past 10 years. Period!:)
Is he? 10 years of prime life is what, 20% of your most precious asset, right? are those years worth nothing? Give that up for an improbable great recession?

Of course I retired at 33 at ~10x and have been fine. The self employment work I have done for the past decade is just a hobby and doesn't count as working:)
If you work only a small percentage of your time, and otherwise do what you want, yes. If you work the entire day 5/7 and are afraid of being fired, no.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Wed Apr 17, 2019 3:17 pm

Random Poster wrote:
Wed Apr 17, 2019 3:07 pm
willthrill81 wrote:
Wed Apr 17, 2019 2:48 pm
Random Poster wrote:
Wed Apr 17, 2019 1:11 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].
It's not logical to treat all expenses as fixed and necessary. For many of us, that's simply not true. As I noted in my reply above, 50% of our planned retirement spending will be on discretionary purchases that could be reduced or eliminated if the need was there.
I'm losing track of what you really think the 25x should be.

25x all expenses?

25x base, non-discretionary expenses?

It seems to me that it would be a lot easier to simply say, "I'd like to live on Y for the rest of my life. Thus, I'll have at least 35 times that amount before I retire, should I do so before I turn 60."

Doing it that way avoids the whole discretionary v. non-discretionary split of one's expenses while still providing a reasonable level of safety, would it not?
It does, but I think it's a pretty unreasonable way to calc assets.

What if I want to buy a $40,000 truck one year. That's going to mess up my Y amount for the rest of my life. What if I want to go on a $20,000 cruise around the world does this affect my Y?

Rather than try to average and say I want to take $150,000 worth of trips buy $75,000 worth of fine dining and $200,000 worth of vehicles in my lifetime amortized over 40 years of retirement means my Y must be 35x the yearly average of all those things + all other expenses.

Many of us calculate what our actual required expenses are and assume x% of fun money extra to enjoy each year and she a few years of fun money to buy the newest toy we want. This keeps us at a historically Rock solid 4% srw but allows us to cut back if needed.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 3:19 pm

Random Poster wrote:
Wed Apr 17, 2019 3:07 pm
willthrill81 wrote:
Wed Apr 17, 2019 2:48 pm
Random Poster wrote:
Wed Apr 17, 2019 1:11 pm
willthrill81 wrote:
Wed Apr 17, 2019 11:21 am
Yes, if a person has significant flexibility (e.g. can reduce their withdrawals by 30% or more) in the event of poor portfolio performance, then 25x is probably fine for a younger retiree.
Which would indicate that they "retired" with around 35X the baseline amount, wouldn't it?

[Math: $70K expenses, with a 30% reduction is $49K. $70K times 25 is $1.75M, which is also around 35x $49K].
It's not logical to treat all expenses as fixed and necessary. For many of us, that's simply not true. As I noted in my reply above, 50% of our planned retirement spending will be on discretionary purchases that could be reduced or eliminated if the need was there.
I'm losing track of what you really think the 25x should be.

25x all expenses?

25x base, non-discretionary expenses?

It seems to me that it would be a lot easier to simply say, "I'd like to live on Y for the rest of my life. Thus, I'll have at least 35 times that amount before I retire, should I do so before I turn 60."

Doing it that way avoids the whole discretionary v. non-discretionary split of one's expenses while still providing a reasonable level of safety, would it not?
I'll use our planned numbers to illustrate.

Our planned retirement spending is $80k, 50% of which is discretionary. As such, I'd have no problem retiring at age 55 with $2 million (i.e. 4% withdrawals). To the extent that the future is like the past, we shouldn't need to worry about reducing our portfolio withdrawals, but if we encounter a really poor sequence of returns, especially during the first decade of retirement, we could reduce our spending all the way down to $40k. With the number 'retirement spending' calculator at Portfolio Charts, this can be historically backtested easily.

It may be slightly easier for the purposes of calculation to ignore the essential/discretionary split, but if you treat all of your spending as essential, you significantly raise the bar for your needed 'number'. I'd personally rather take a small chance on not having as much discretionary funds available as I'd like and retire 5-10 years earlier than otherwise, but some clearly don't want to take that route.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 3:22 pm

randomguy wrote:
Wed Apr 17, 2019 1:50 pm
EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm

Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.

You can not deny that having financial independence earlier in life is better. Period!

Sure but the guy with 40x and a job is better than the retiree with 25x who hasn't worked the past 10 years. Period!:)

Of course I retired at 33 at ~10x and have been fine. The self employment work I have done for the past decade is just a hobby and doesn't count as working:)
Can't argue with that, but how many hours and days of one's life must you use to get to 40x? What does one give up to get to 40x? is it family relationships, is it health, is it being less happy or is it nothing and all?

Choices, values, and more choices.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 3:25 pm

EnjoyIt wrote:
Wed Apr 17, 2019 3:22 pm
randomguy wrote:
Wed Apr 17, 2019 1:50 pm
EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm

Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.

You can not deny that having financial independence earlier in life is better. Period!

Sure but the guy with 40x and a job is better than the retiree with 25x who hasn't worked the past 10 years. Period!:)

Of course I retired at 33 at ~10x and have been fine. The self employment work I have done for the past decade is just a hobby and doesn't count as working:)
Can't argue with that, but how many hours and days of one's life must you use to get to 40x? Choices, values, and more choices.
I calculated it not long ago, and assuming a 20% withdrawal rate and ~5% real returns, it would take 5 years to go from 25x to 33x. If real returns were 2%, it would take 10 years. So it would obviously take even longer to get to 40x. For many people, that sounds like a very poor trade-off.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 3:30 pm

Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
EnjoyIt wrote:
Wed Apr 17, 2019 1:36 pm
Also, in a great depression event I would rather be 25x with 40% bonds and unemployed vs 5x and 40% bonds with a job that just laid me off. 25x with 40% bonds has 10 years of living expenses built in. 5x is screwed.
"25x" "5x" mean nothing. "x" of what ? Planning to live under a bridge, eating at the shelter may make any portfolio become a "100x"
The key is that the tenets of FIRE plan for a spartan worklife and early and spartan retirement. Good personal financial planning tries to maximize lifestyle during worklife and in retirement, based on an acceptable retirement age, available compensations and market returns.
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
This is where we differ. You call it reduced lifestyle or some form of deprivation. And I call it not wasting money on stupid crap that buys nothing more than maybe a temporary rush at best.

No one is forcing you to get early financial independence. Your life, your choices. I am happy in my non depraved lifestyle being financially independent in my 40s, eating well, skiing, car racing, traveling, spending time with family and friends, volunteering, and plenty more I am not listing. Wow my life is so depraved. How will I ever survive?

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FiveK
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by FiveK » Wed Apr 17, 2019 3:37 pm

Thesaints wrote:
Wed Apr 17, 2019 2:04 pm
FiveK wrote:
Wed Apr 17, 2019 2:00 pm
Thesaints wrote:
Wed Apr 17, 2019 1:51 pm
You can not deny that having financial independence earlier in life is better. Period!
I do deny it, if "independence" is conditional to a reduced lifestyle.
Hmm, maybe it means different things to different people...? And if assumptions differ, conclusions may well diverge....
Sure it is subjective, but once we move away from objective financial targets, monks, hermits and hippies moving to Nepal come to mind.
From what objective financial targets do you think people are moving away?

Random Poster
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Random Poster » Wed Apr 17, 2019 4:38 pm

CnC wrote:
Wed Apr 17, 2019 3:17 pm
. . . means my Y must be 35x the yearly average of all those things + all other expenses.

Many of us calculate what our actual required expenses are and assume x% of fun money extra to enjoy each year and she a few years of fun money to buy the newest toy we want. This keeps us at a historically Rock solid 4% srw but allows us to cut back if needed.
That seems like a reasonable way to calculate the desired asset amount to me, but I think that we are essentially saying the same thing.

But I do not believe that a 4% withdrawal rate is safe for anyone younger than 60 (and, even at that age, I'm not so sure), and I am not convinced that upon "retirement" I will be willing to cut back on anything. It is one thing to say that one would be okay doing so, but it is another to actually be required to do it.

EnjoyIt
Posts: 1983
Joined: Sun Dec 29, 2013 8:06 pm

Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Wed Apr 17, 2019 4:48 pm

Random Poster wrote:
Wed Apr 17, 2019 4:38 pm
CnC wrote:
Wed Apr 17, 2019 3:17 pm
. . . means my Y must be 35x the yearly average of all those things + all other expenses.

Many of us calculate what our actual required expenses are and assume x% of fun money extra to enjoy each year and she a few years of fun money to buy the newest toy we want. This keeps us at a historically Rock solid 4% srw but allows us to cut back if needed.
That seems like a reasonable way to calculate the desired asset amount to me, but I think that we are essentially saying the same thing.

But I do not believe that a 4% withdrawal rate is safe for anyone younger than 60 (and, even at that age, I'm not so sure), and I am not convinced that upon "retirement" I will be willing to cut back on anything. It is one thing to say that one would be okay doing so, but it is another to actually be required to do it.
Considering that 4% included some of the worst times in history, for 4% to fail, times have to worse than what history has offered. Although 4% is not bullet proof, the odds are really high.

As for cutting back, it all depends. If cutting back for you is the difference between 3 vacation a year to only 1, and instead of going out to dinner once a week to once a month for 2 years, I doubt that will so bad. If cutting back means from eating nothing but rice and beans while staying at home doing nothing, well that is not a happy place to be and I fully agree with you.

In all honesty I bet anyone who has been able to amass 33x or 40x expenses will be cutting back on spending when times are tough because it is that type of mentality that allowed them to get rich in the first place. So, I don't care if you are at 25x or 40x. You will likely be cutting back no matter what.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Wed Apr 17, 2019 4:53 pm

The great thing about RE is that it does not have to definitive.
You take trial run for 1-2-3 years. You spend too much? You don't like it? You can came back and work for a decade more. There is not much risk in it and is reversible.
But working? That is not reversible. You cannot go back in time and RE.

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willthrill81
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by willthrill81 » Wed Apr 17, 2019 5:00 pm

EnjoyIt wrote:
Wed Apr 17, 2019 4:48 pm
Random Poster wrote:
Wed Apr 17, 2019 4:38 pm
CnC wrote:
Wed Apr 17, 2019 3:17 pm
. . . means my Y must be 35x the yearly average of all those things + all other expenses.

Many of us calculate what our actual required expenses are and assume x% of fun money extra to enjoy each year and she a few years of fun money to buy the newest toy we want. This keeps us at a historically Rock solid 4% srw but allows us to cut back if needed.
That seems like a reasonable way to calculate the desired asset amount to me, but I think that we are essentially saying the same thing.

But I do not believe that a 4% withdrawal rate is safe for anyone younger than 60 (and, even at that age, I'm not so sure), and I am not convinced that upon "retirement" I will be willing to cut back on anything. It is one thing to say that one would be okay doing so, but it is another to actually be required to do it.
Considering that 4% included some of the worst times in history, for 4% to fail, times have to worse than what history has offered. Although 4% is not bullet proof, the odds are really high.

As for cutting back, it all depends. If cutting back for you is the difference between 3 vacation a year to only 1, and instead of going out to dinner once a week to once a month for 2 years, I doubt that will so bad. If cutting back means from eating nothing but rice and beans while staying at home doing nothing, well that is not a happy place to be and I fully agree with you.

In all honesty I bet anyone who has been able to amass 33x or 40x expenses will be cutting back on spending when times are tough because it is that type of mentality that allowed them to get rich in the first place. So, I don't care if you are at 25x or 40x. You will likely be cutting back no matter what.
Since my wife and I lived below the poverty line for four years and were happy as clams, I have no doubt that we could spend triple that amount today (which would still be a 50% reduction of what we plan to spend in retirement) and still do just fine. IMHO, far too many people equate spending with life satisfaction, happiness, joy, and contentment.

And your point, EnjoyIt, regarding cutting back on spending when times are tough is spot on. I'm not so sure that some here are being honest with themselves if they think that they'll continue a level of spending associated with a lavish lifestyle by first-world standards (meaning one that only a relatively small proportion of the population can afford) when their portfolio is tanking and everyone is saying that Great Depression Part Two is on the horizon.
“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

CnC
Posts: 623
Joined: Thu May 11, 2017 12:41 pm

Re: Mr. Money Mustache, SWR, and equity allocation

Post by CnC » Wed Apr 17, 2019 6:45 pm

EnjoyIt wrote:
Wed Apr 17, 2019 4:48 pm
Random Poster wrote:
Wed Apr 17, 2019 4:38 pm
CnC wrote:
Wed Apr 17, 2019 3:17 pm
. . . means my Y must be 35x the yearly average of all those things + all other expenses.

Many of us calculate what our actual required expenses are and assume x% of fun money extra to enjoy each year and she a few years of fun money to buy the newest toy we want. This keeps us at a historically Rock solid 4% srw but allows us to cut back if needed.
That seems like a reasonable way to calculate the desired asset amount to me, but I think that we are essentially saying the same thing.

But I do not believe that a 4% withdrawal rate is safe for anyone younger than 60 (and, even at that age, I'm not so sure), and I am not convinced that upon "retirement" I will be willing to cut back on anything. It is one thing to say that one would be okay doing so, but it is another to actually be required to do it.
Considering that 4% included some of the worst times in history, for 4% to fail, times have to worse than what history has offered. Although 4% is not bullet proof, the odds are really high.

As for cutting back, it all depends. If cutting back for you is the difference between 3 vacation a year to only 1, and instead of going out to dinner once a week to once a month for 2 years, I doubt that will so bad. If cutting back means from eating nothing but rice and beans while staying at home doing nothing, well that is not a happy place to be and I fully agree with you.

In all honesty I bet anyone who has been able to amass 33x or 40x expenses will be cutting back on spending when times are tough because it is that type of mentality that allowed them to get rich in the first place. So, I don't care if you are at 25x or 40x. You will likely be cutting back no matter what.
This is true, I am certain that even if my plans go flawlessly my pension is solid and social security is fixed and I have +30x expenses when I retire early.

If I'm only withdrawing 3% per year and going on 3 luxury vacations a year I can guarantee you that if stocks drop 60% and stay down for a whole year I certainly will not be going on those same 3 vacations the next year. I probably won't eat beans and Ramin but I certainly wouldn't bump my spending up as per inflation and blindly keep spending.

Thesaints
Posts: 2318
Joined: Tue Jun 20, 2017 12:25 am

Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Wed Apr 17, 2019 7:01 pm

vitaflo wrote:
Wed Apr 17, 2019 2:42 pm
X is spending and always has been. The great thing about using multiples and percentages is that it doesn't matter if you want to live a spartan lifestyle or a luxurious one. The numbers don't change. Just because some FIRE people want to live a spartan lifestyle I'm not sure why that matters. I plan on FIREing and plan on living the same lifestyle I've always lived, upper middle class. I use the same X variable as everyone else.
But it does matter. A spartan life is worse than a luxurious life. If you doubt the previous statement find someone who would chose the former over the latter everything else being equal.
Furthermore, planning for a spartan life is intrinsically riskier than planning for a luxurious life: if you live a spartan life and things go worse than forecasted you go directly to "destitute life".
Finally, if we begin to assess financial results based on personal preferences rather than on objective and measurable parameters as much as possible, what stops one from eventually considering a -10% return more desirable than a +10% one ? You'll say that it makes no sense, but to me it does not make no sense trying to work as little as possible in order to live a spartan and uncertain life.

Starfish
Posts: 954
Joined: Wed Aug 15, 2018 6:33 pm

Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Wed Apr 17, 2019 7:09 pm

I guess the difference comes from some people believing the main uncertainty in life is how much time we have left, and others believing the issue is how much money they have left.

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