Retiring now

MIFlyer said:
Use the 4% rule as a rule of thumb. You can spend about 4% of your investments each year. So, if you need 120k a year then you need around 3 million


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Of course, Social(ist) (In)Security will take care of part of that. And my wife's retirement helps, too. Having the house paid off helps even more, along with living in a state without a state income tax.

Just make sure you have good insurance. Health insurance is very important. You may be healthy now, but what about in the future?
 
Start by dividing your total yearly expenditures by 0.04. $50,000 per year divided by 0.04 is $1.25 million if you plan on solely living off your wealth assuming it is properly invested.
 
I tend to agree with @Sac Arrow . At $5M I'd say that I could retire fine. However I probably wouldn't, at least not fully, because I have a lot of expensive things that I like doing and I want to make sure that my kids/grandkids get some level of nest egg (assuming they turn out to be productive members of society). More likely, I'd go spend some of the money on toys that I want and then we'd change job arrangements to something that allowed more time off/part time so we could do fun things with the kids in the summers.
 
Ghery said:
Of course, Social(ist) (In)Security will take care of part of that. And my wife's retirement helps, too. Having the house paid off helps even more, along with living in a state without a state income tax.

Just make sure you have good insurance. Health insurance is very important. You may be healthy now, but what about in the future?
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My social security wouldn't pay the mortgage.
 
This is sometimes referred to as the "F* You" number.

So, if you have your F*Y money you can hang out a while but when boss man gets all cray you say "I'm outta here"

Now then, the calculation. You have any dependents? Is your housing paid off? You paid cash for your plane, right?

I'd say 20 years of my my current gross income would be enough. Could probably squeak by on the net.
 
Sac Arrow said:
I've always figured around $5M to avoid eating in to the principal. The problem is, bank interest is zilch, and unless you go crazy risky on investments, you are losing a LOT of money through inflation.
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Nah, you just have to have the right investments, and don't take out ALL the interest income. Roll some of it over.
 
I built a spreadsheet of current income and deductions while I was working and determined what was left for me. Then I assumed I spent all of what I had each month. I then calculated my retirement at various ages and dates and what deductions I would have from that and how much I would need from my 401k to come up with the "what was left for me" amount. I did a burn down spreadsheet to see that it would last until I turned 100 and when it did (at 3% interest) I pulled the plug. It has worked out so far (2 years).
 
EdFred said:
If you have a mortgage you shouldn't be retiring.
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Why? My investments have been earning considerably more than what my mortgage interest costs have been since I retired. Once I lose this financial benefit I will pay off the mortgage at that time.
 
Bell206 said:
Why? My investments have been earning considerably more than what my mortgage interest costs have been since I retired. Once I lose this financial benefit I will pay off the mortgage at that time.
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I would hate to go into retirement with a mound of debt on my shoulders. Having zero? Might not always be possible, but hopefully you’re de-leveraged as much as possible before you retire.
 
Here's the problem: You have no way to know how long you'll live, how good or bad your health will be, what your expenses will look like, or anything else you'd need to know about the period between retirement and death. In short -- you can't predict the future (who knew??) so you just can't say for sure, barring what some of us would consider Very Large Numbers(tm).

In my case... given what we already have socked away, another $2MM would be enough for me to take the leap. But I'd be much happier with $3MM, so pass the hat around a second time, please.
 
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Ryanb said:
I would hate to go into retirement with a mound of debt on my shoulders. Having zero? Might not always be possible, but hopefully you’re de-leveraged as much as possible before you retire.
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If your net worth is still negative then obviously you have no business retiring, but keep in mind mortgages are often in the 3-4% range and good investments may be providing 5-10% ROI. IOW, you're actually losing money by paying off your mortgage.

Now, if I win the lotto, first thing I'm doing is paying off the house and the truck and buying other toys in cash, but it doesn't mean it's an invalid philosophy.
 
Ted DuPuis said:
but it doesn't mean it's an invalid philosophy.
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Didn’t say it was an invalid philosophy. I just said it would be best to de-leverage yourself as best as you can prior to retirement, in any case.
 
DaleB said:
You have no way to know how long you'll live, how good or bad your health will be, what your expenses will look like, or anything else you'd need to know about the period between retirement and death.
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Social Security hopes you’ll croak so they don’t have to pay out! The house always wins!
 
Ted DuPuis said:
If your net worth is still negative then obviously you have no business retiring, but keep in mind mortgages are often in the 3-4% range and good investments may be providing 5-10% ROI. IOW, you're actually losing money by paying off your mortgage.
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Quite true in a good economy. All it takes, though, is 5-8 years of investments returning negative numbers to low 1-2 percent range, and you'll feel very differently about that. Remembering the last couple of brutal downturns and being within spitting distance of retirement (well under the 10 year mark), I'm very leery of getting anywhere near retirement with a shred of debt. If you have no debt payment, you minimize your monthly spend and therefore the amount you're forced to pull out of your retirement accounts when they're in pain.

One of my shorter term goals is to pay off the house ASAP. Yes, I know the mortgage interest is less (or was, until a few months ago) than my investments were earning. That can change quickly, as we're about to see once again. Once that's done, the house payment money goes into the retirement kitty and drastically improves our retirement plan. In this case, the timing is good. I should be able to buy up securities during the really crappy recession we're about to have (and I'll buy you lunch in 5 years if I'm wrong), and the market should be recovering right about the time I need to start pulling money back out.
 
Ryanb said:
to de-leverage yourself as best as you can prior to retirement
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True. But once you retire any additional investment earnings now become discretionary income on top of your planned retirement income. Main reason it is good to work out several versions of a retirement plan. For me, keeping the mortgage and following my investment performance was the better version.
 
Ryanb said:
Social Security hopes you’ll croak so they don’t have to pay out! The house always wins!
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In this case, the house is run by mentally challenged rodents and they're losing... but they can always just sweep it under the rug until they're long gone and stick our great-grandkids with the bill.
 
Somewhere along the lines of x=80-[current age] in millions. So now, at age 40 I'd need $40M. By the time I'm 65 it would be $15M. I intend to retire before I'm 65 and unless a major recession wipes me out, I will be fine on that front.
 
Ted DuPuis said:
If your net worth is still negative then obviously you have no business retiring, but keep in mind mortgages are often in the 3-4% range and good investments may be providing 5-10% ROI. IOW, you're actually losing money by paying off your mortgage.

Now, if I win the lotto, first thing I'm doing is paying off the house and the truck and buying other toys in cash, but it doesn't mean it's an invalid philosophy.
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This argument always leaves out the ROI on paying the mortgage off significantly faster.

And the feeling of waking up in your tickey tacky box on the hillside that you own, with a title in hand.

Only way you’re kicked out, even in job loss, or illness, is by not paying the government ground rent on ground you supposedly own.

Also doesn’t factor in risk. Paying the mortgage in a roller coaster or down market is smarter. Market right now wants to convince it’s way into recession with technicals instead of listening to earnings releases, so that’s always a fun risk... LOL.

Plus it’s really hard to describe the peace of mind a paid off mortgage gives to anyone with a nesting habit. Traditionally females, but whoever. Best gift you could give someone with that bent and not a wanderlust type.

Plus the numbers are against you on mortgages. Average household moves every seven years or so. Haven’t even gotten into much principal on the amortization schedule and you start again. Often paying much more, thanks to housing inflation in some areas. Cough. Here.

We’ve had serious talks about being priced out of the Denver market. We sell our rural place it’ll take $200K more to get into a similar quality and sized house in town now. Or more. Waiting to see what the neighbors place sells for on the MLS. We could downsize but not much. Builders aren’t building small stuff here and all of those are 1960s construction.

But we can pocket the stupid inflation and move somewhere sane.
 
Bell206 said:
Why? My investments have been earning considerably more than what my mortgage interest costs have been since I retired. Once I lose this financial benefit I will pay off the mortgage at that time.
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Well you're doing better than me cuz all of my retirement Investments are down for the year.
 
RudyP said:
Somewhere along the lines of x=80-[current age] in millions. So now, at age 40 I'd need $40M. By the time I'm 65 it would be $15M. I intend to retire before I'm 65 and unless a major recession wipes me out, I will be fine on that front.
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That's the put it in ma' mattress and spend as I need formula. It's much less if invested correctly.
 
Timing affects the outcome of the rain dance. Folks who retired “properly invested” in ‘08/‘09 probably weren’t too happy. A few years later, they’d have been made whole and then some.

And no, “properly invested” wouldn’t have been sucking it all to cash in ‘07.

Never met a market timer who made significantly more than the indexes on any consistent basis. No crystal balls exist.
 
denverpilot said:
Timing affects the outcome of the rain dance. Folks who retired “properly invested” in ‘08/‘09 probably weren’t too happy. A few years later, they’d have been made whole and then some.

And no, “properly invested” wouldn’t have been sucking it all to cash in ‘07.

Never met a market timer who made significantly more than the indexes on any consistent basis. No crystal balls exist.
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Barely noticed 08/09. The key is not to panic and sell low. 08/09 was a great buy opportunity.
 
455 Bravo Uniform said:
Whatever it would take to make $100k/yr in income, not touching the principal. At 4% conservative return, that’s $2.5MM principal.

But then, I’d also want to spend down the principal to theoretically end up with $0 on the last day. I’ll practically have a really hard time spending $200k/yr when I’m 90 (if I make it that far), medical bills not included.

Or so I’m guessing.
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The spending curves I've seen for retirees are much like a mortgage interest amortization table, heavy spending early on and significantly declines as you get older.
 
You guys and all your effing money. My wife is my retirement plan. If something happens to her, I’ll cash out, buy a sailboat to live on, and become one of those flight instructors you guys always say don’t exist anymore.

I’ll also look like this in ten years (well, minus the hair):

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About paying off that mortgage - the delta between mortgage interest and investment interest is small enough to where the “mental” benefit of being totally debt free allows you to do “investy” things with the extra money that can far out-earn that delta. Those who haven’t lived mortgage (and rent) free just don’t know.
 
PaulS said:
Barely noticed 08/09. The key is not to panic and sell low. 08/09 was a great buy opportunity.
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Yep if you weren’t hosting your retirement party the week before. Hahaha. That’s all I was saying. When everyone panics, buy buy buy.

455 Bravo Uniform said:
About paying off that mortgage - the delta between mortgage interest and investment interest is small enough to where the “mental” benefit of being totally debt free allows you to do “investy” things with the extra money that can far out-earn that delta. Those who haven’t lived mortgage (and rent) free just don’t know.
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When people stick to the rule of thumb to keep housing to 25% of income, you can really rip into a mortgage quickly in good years with a little gravy.

If you’ve pushed up into the maximum of what lenders will lend, you can rapidly become “House poor”. All your cash goes on the pyre of interest at the front end of the mortgage.

And if it’s a 30 year, you’ll move long before you own much if you can’t seriously smack money at the principal on top of the regular payment.

The math is just impressive if you have the cash to get after it and didn’t over-buy on real estate.

“Look how much we qualified for, honey...” ohhh I’ve made that mistake. Highly not recommended.
 
Mooney Fan said:
In full disclosure, if I didn't receive a pension to go along with my 401K and SS, I would still be working.
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The closer I get to “retirement age”, the more I wonder what I’m gonna do to prevent from keeping odd hours. Like staying awake for 20 hours and sleeping for 12...
 
EdFred said:
are down for the year.
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For the year yes. For the past 5 years no. It's all a cr*pshoot: life, the market, health. I retired early on the low side financially because I saw a disproportionate number of people who waited for the "perfect" time to retire--only not be able to enjoy those golden years due to various reasons but mainly health related. I talked to these people over the years on what they would have done different. Collectively, they replied retire earlier. So, regardless how you view retirement I elected to take a chance and hope to have a good 10 or 15 years at it. If not, for me personally, at least I tried.
 
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The challenge is knowing what your "playing out the string" expenses will be. If you're in a retirement home, that ain't too bad. But once you start needing sitters to hang with you all the time it gets very expensive. That period can last for years and years and chew through an incredible amount of money.
 
Bell206 said:
For the year yes. For the past 5 years no. It's all a cr*pshoot: life, the market, health. I retired early on the low side financially because I saw a disproportionate number of people who waited for the "perfect" time to retire--only not be able to enjoy those golden years due to various reasons but mainly health related. I talked to these people over the years on what they would have done different. Collectively, they replied retire earlier. So, regardless how you view retirement I elected to take a chance and hope to have a good 10 or 15 years at it. If not, for me personally, at least I tried.
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It has worked out well for you. And I'm guessing you're structured in a way to be able to handle some bumps along the way.

I am a little concerned about this FIRE movement which appears to full of people looking at returns and economic expansion from the past 10 years and basing their plan on that continuing. I predict some pain in the future for these folks.
 
I'm 58. Retired from my day gig at 55, but still bring in a little pocket change (about 10K a year) doing things I like to do. My wife and I JUST BARELY crossed into six figures total yearly for our last couple years of full earnings. ALWAYS lived beneath our means... no new cars, inexpensive houses, paid off mortgages as fast as possible, no smart phones, no cable, etc... but plenty of toys (classic cars, sailboats, airplane, but all purchased in dire need of TLC provided by yours truly). Vacations were tent camping and backpacking while the kids were home and the bills were high, with eventual yearly trips to Mexico or the Caribbean, with nice hotels and restaurants, once the kids were grown, moved out, and out of college. Basically, we lived on my salary and banked hers.

Our goal for retirement was to be able to live as we had always lived. Obviously, we don't live in the strata many, MANY of the pilots here live in. There is no Cirrus, let alone a Pilatus, in our future, but a Grumman Tiger is not out of reach. We are extremely happy, fortunate, and grateful to do pretty much everything we want to do AND help out our family, friends, and neighbors when necessary.

Our net worth, including the house, is probably around one million. No debt. We lived on $50K a year or less our entire lives. Living on about $60K/yr now (pensions), and just watching our investments grow despite us not cutting back in the least. Still no cable or smart phone. Love it that way. The stuff people think they need to buy to be happy sometimes amazes me.

Retiring from doing things you hate is a good goal. Retiring from being productive and useful isn't. Neither of us have done that.

TLDR... keep living. Do good things. The amount of money you need is MUCH less than than the money you want. Only you can control your wants.
 
PaulS said:
Barely noticed 08/09. The key is not to panic and sell low. 08/09 was a great buy opportunity.
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Yes it was. I felt sorry for the poor SOBs that were about to retire then.
 
Sam D said:
I am a little concerned about this FIRE movement
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FYI: the FIRE movement has been going on for several decades. It's nothing new. I followed one of the 1st FIRE forums that brought like minded people together. It boils down to the person and what they want out of life. But not all FIRE strategies are for everyone. But those who solely follow a " previous10 year" period are bound to have issues in the future.
 
DaleB said:
I felt sorry for the poor SOBs that were about to retire then.
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FWIW: those who actually planned to retire in 08/09 were either set up already and suffered minimal lose, or for those looking for that last "roll" it delayed their leaving by 22 months. This was my CTJ moment to see if my plan to retire would work. But to all those people (over 50% at my company) who panicked and pulled their money... it cost them years in lost earnings or worse their entire retirement plan. You don't lose money until you move it. I lost 49% in value during that time frame but recovered within 18 months and the only thing I truly lost was the earning potential and not principal.
 
Had a forced retirement in 2011 at age 60. Got a pretty good package to go bye-bye and worked it out. We don't live a big life style. What I enjoy most is the time I get to spend with my wife. I can't put a dollar amount on that. Had zero debt until my car was totaled, car payment now. We've worked hard at cutting expenses, changed home and auto insurance companies for a significant savings. Just cut our cell phone bill by $60 a month.
 
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