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I put my annual bonus into a custodial account for each kid tracking the sp500 when they were born - hopefully it’s worth something in 20 years. That’s all they are getting from this old man. I have myself and their mom to feed
If you never inherit any money (I never have) then how can one possibly accumulate 300x months expenses WITHOUT depriving oneself? By definition, to accumulate you have to convert an income stream into an unspent asset, which means depriving yourself of the pleasure of spending that income stream on goods & services. It’s all just a balancing act in the gray area of how much deprivation can you force on yourself, which for me is a struggle to decide on.
It takes time but investment income will get you there
There is being sensible with your money, depriving yourself, and everything in between. If you have a taste for flying first class and designer hand bags then you’re gonna have to spend a few extra years on the hamster wheel
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Do you keep the heating ultra low in winter to save a few $$?
Beans and rice for dinner? Or steak and lobster?
Yup, and as long as you’re paying attention, and know that everything is a trade-off, it’s fine. When we got really serious about saving to retire early, I took a really hard look at where our money went. Sold the BMW, it was fun but between gas and repairs it was costing me a LOT, bought a used Chevy Volt. Stopped buying clothes unless I needed something. Decreased restaurant spending, not to zero but we cut back. I did decide that if I was at the grocery store and wanted something fancy, do it. Steak and crab legs? Sure, it’s not cheap but cheaper than having a similar meal out. So we eat some pretty fancy food but at a better cost.
But travel, we didn’t stop that, we decided vacations were worth it. We aren’t flying first class or staying at four star hotels, but I don’t mind spending $10k or $20k a year to see new things. Just put it in the budget and know it’ll mean working a few extra months on the back end.
And we bought a big, old house. I told my wife that might add a year to our working life. It’s been worth it, because the location is great and I can walk/bike to so many places.
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I found this an interesting article on the use of guard rails in retirement. It allows for a higher initial withdrawal (say, 5%) and subsequent withdrawals are responsive to the investment portfolio performance.
It may be of value to use R or something similar to run your own scenarios with historical market performance. They are using a 60/40 stock/bond portfolio, which you might want to alter. Other factors to consider are how many years before you take SS, whether you want to leave an inheritance and if you believe your spending will go down/up as you get older.
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I don’t really agree with that write up - seems like something financial advisors wrote up to scare up some more business
I still think performance based guardrails are your safest bet. If anything, taking out more money based on risk based scenario testing results in more risk!
Yeah, I have no idea if their method works better than the other. It does motivate me to try it out on my own. I could probably even do it in excel.
I’m guessing there are 100 or so different starting years historically with completed 30 year stock/bond market performance. If I put in my particular situation (amount needed in estate, years until SS, spend more earlier/later) and try out different starting percentage and thresholds, I can see the spread of results and work out what a viable rate/method is.
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Deprivation…or simply not scaling up your lifestyle with every promotion? You have to find where you can spend the marginal dollars on things that make you happy, and that’s rarely being surrounded by more stuff. Have nice things, but not have nice everything.
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The 4% rule as usually defined, you start with an annual withdrawal of 4% of your retirement nest egg and increase the annual draw by the inflation rate in subsequent years. Another version of this idea of this idea is to take 4% (or 5% or whichever percent) of your balance each year. This latter version will never run entirely out of money but can leave you very short of funds in later life if your results are poor.
Anyone who is thinking much about this has probably modelled scenarios on a spreadsheet but there are a number of web calculators that can help you figure these things out. One free tool with a good reputation is from Empower. There are options to upgrade for additional features, but the basic tool is offered for free.
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You guys haven’t really explored living abroad for your retirement?
You could definitely cut down on expenses by living abroad for a while.
Also, I do have one question about SS about if you start collecting it but you live abroad. Do you have to fill in additional forms for this (do they even let you put SS into non-US bank account?) and does the US-based COLA they apply ro it every year apply to a person that collects SS but lives abroad.
St Thomas V.I’s - yes! Sort of why I’ve been vacationing in the Caribbean Islands 2x a year. I don’t think it will be a place that I will be permanently living in. I am finding out that I want to be near family, especially my daughters, more and more.
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This isn’t very common in the US. TBH, I could sell my 4800sf house and move back to the rural small town I grew up in today if I wanted a cheap super early retirement.
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This was the case previously but since I’ve been WFH for the last two years (I’m in my 50s), my expenses are pretty much what they’ll be in retirement. I don’t need to buy clothing for work or maintain a car to commute and we can eat all our meals at home. I might have more time to do some handiwork but that’s pretty minimal.
From my understanding, I’m eligible to get SS after working/paying into it for awhile under the Canada-US tax treaty. Haven’t looked into the specifics on it.
I think I’m also eligible to get done money from the Australian pension plan.
I’m not sure about that. I hear about a lot of people moving to South/Central America and Mexico for lower costs. Sure, most people stay in the U.S., but I suspect that’s true for most wealthy countries
That’s probably not a good question to gauge my lifestyle choices, but Yes, I keep my house at a balmy 63* in winter because that is where I truly like it. In summer I keep the AC at 72* because that is the warmest that I can stand.
I have. I know a couple that is seriously considering Costa Rica, as their jobs had them working there for periods of time over the last 20 years.
There are trade offs about the lifestyle, and access to American style consumerism is not as good. There are language considerations, y ustedes necesitar a aprender mas que un poquito de Espanol. Also, the secret is out about Costa Rica being inexpensive, and over the last 10 years, the prices have caught up and the real estate bargains are not what you think they are. None of this is a deal breaker, but this last one certainly is, at least to me. There are gringo taxes on everything. By this I mean that anyone there selling anything, from stores to restaurants to cab rides to fruit vendors - all of them have prices for native Costa Ricans and different, inflated prices for Americans. I don’t know that I can deal with that.
Well, I’ve started doing some estimating of how much we might need in retirement. Big question is whether or not there will be ACA subsidies… or an ACA at all. So we may need to tweak things as insurance costs change, but having stared at my Excel, and run through some things in FIREcalc, we should be set to retire in the 2029-2031 time frame, I’m looking at about a 3.5% withdrawal rate. Longer if the market tanks, sure.
Other big variable is my company’s IPO, I’m marking it zero, if it is substantial then we could either retire sooner or retire fatter.
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