How Much Money Do You Need to Retire? (Early Retirement/FIRE)
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- Опубликовано: 30 сен 2024
- Do you know how much money you'll need to retire? Do you know where to start figuring it out? In 2013, we didn't. Learning today's tip put us on the road to FIRE (Financial Independence, Retire Early).
Here's that popular Mr. Money Mustache post Tim mentions -
www.mrmoneymus...
#earlyretirement #retireearly #financialindependenceretireearly
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- Here's our referral code for Google Fi - links.gowithle...
- Here's our Mint Mobile link - links.gowithle...
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About us...we are Tim and Amy and we retired early (in our 40s) after reducing our expenses by $6,500 a month. Most surprising isn't what we're missing...it's how wonderful and rich our life is with our lower spending. We like to share what we're doing and learning here on our channel.
Please check out our other videos. They cover house sitting, award travel/travel hacking, and our early retirement/FIRE (financially independent, retired early). And, of course, travel! Lots of our videos show the fun stuff we do on a budget around the world.
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Thanks for watching! See you next Wednesday!
In the FIRE community, the 4 percent rule is well-known. We have learned that many of our viewers have never heard of the concept of FIRE before finding our channel. The idea that we might introduce this key finding to someone stumbling upon us is very exciting! Is this new for you? Or, are you FI already and have hit your number? Maybe you're working toward your number. Please share your story below!
I have enough money to do me the rest of my life......I just need to die next Wednesday.
Good one 😂
Haha
😂😂😂😂
If you dont spend it, covid will spend it for you.
The lure of doing 1 more is appealing. However I’ve seen several of my colleagues with this mindset die during that one more year. I’ve pretty much decided that I’m retiring in 3.5 years at the age of 60. I’ll get a small pension, a percentage of my healthcare will be paid and have access to my 401k accounts. Thus starting in 2020 will track my spending which I have Not been doing. I’ve already downsized and was able to pay off all my bills. Now just have to get serious about what I am spending.
you never talked your numbers
I was supposed to retire on December 31st 2019, but my company talked me into One-More-Year (there wasn't much arm twisting involved lol). But, I work from home, no commute, full pay and benefits. I also currently have a very low-stress daily workload. So the new retirement date is now December 31st 2020.
It worked out good as we all were stuck at home in 2020. I'm hoping you retired.
My sister retired early from a very challenging job with lots of travel. She sends me photos of the beautiful views from her travels and her home - I send her photos from my desk. She doesn’t miss her past life at all! BTW Home is where your heart is. You will be “house less” not homeless.
I already have the 25x and 33x net worth and got there before 50. However I work remotely on a project basis not hourly in tech and have for years so already consider myself semi-retired. I can work remotely from anywhere in the world and have from places like Paris and Barcelona.
What do you think is the best way to protect your savings? Cash doesn't seem great and most assets seem to be in a bubble
In our early retirement, we are using saved cash and company pensions to live off and allowing our pre-tax assets (401Ks) the chance to continue to grow. You mentioned social security being in addition to your plan. I am wondering what age to initiate that. Do you have an opinion? I calculated the impact of taking it at 62 versus at 70 years old. Earlier is better, up to age 83. From 84 years on, taking it later nets more money. But also, from taking it from 62 means you have had the use of that money for 8 years.
Hi! Our personal approach to Social Security is to leave it until we need it. If we're in our early 60s and things aren't going well, we would seriously consider the options. Same with the opposite. If we are doing well with our money and spending, we'd likely leave it unti we're older. Currently, we have an amount that we can spend but we don't spend up to that level. So, adding money to our "budget" might not be needed unless our spending was near or higher than what we can spend.
Yayyy my plan is also to save and save and save and save some more to FIRE!!👏🏻👍🏻🔥🔥🔥
A bunch of talk without telling us how much you saved....
I just turned 50, own my home, have no debt, and have 30x my spending and 4 rental properties with income on top of that... I am STILL afraid to retire early! The what ifs... what if the stock market falls, what if I've misjudged costs... I know I'll never be bored in retirement... just been a saver all my life, watching the numbers go up weekly since I was 20 every Saturday morning. The psychology of watching it go down, freaks me out! Want to FIRE, but afraid!
Thank you for your honesty! I understand all too well the mental piece of saving forever, only to begin withdrawing. It was tough at first. The way I got through it was to move our semi-annual spending review to monthly. The numbers were solid and gave me peace. I saw that we were spending less than our budget allowed and there was still lots of fat in there in case things went sideways. This video might help - ruclips.net/video/QKasFLahvL8/видео.html. Please let me know how it's going. Your financial situation sounds pretty darn terrific!
Believe me, one can learn to live with less, especially if there is no comparison (the Joneses) around you.
@@tube.brasil I think sharing our experiences with learning to live with less is the main goal of our channel!
Why retire if you love what you do. Maybe take a step back and go part time and enjoy your days off etc...
The stock market will fall. I don't have the ability of precognition, but in retrospect the stock market has always gone through economic cycles of ups and downs. How much it falls and how long it will take to recover varies each time. Historically and on average, it has gone up about 7 or 8% in the long term; I'm confident that the market will bounce back, but the future doesn't always follow according to what has normally happened in the past.
My advice is to recognize your own level of risk tolerance and perhaps reallocate a portion of your investments towards equities with lower returns, but also lower volatility (meaning the price doesn't drop or drop as much during economic downturns), if you're still anxious about investing. I'm a fan of the buy and hold strategy, but it's okay to liquidate some of your assets into cash and deposit them into FDIC-insured banks (don't do it during a bear market though; a bull market is more ideal).
In my case, I see recessions as an opportunity to buy riskier stocks, since I'm just 29, and I have the time to wait for those same stocks to recover and appreciate beyond their pre-recession values. Ultimately the decision to retire (which to me means not working anymore) comes down to you. Do what you think will maximize your happiness and give you the greatest peace of mind, at least when it comes to personal finance.
I am currently contributing 20% of my paycheck to go into my 401k at work, & I'm actually considering to increase it to up to 25%! I'm currently 53 years old, & I would like to retire in about 10 years. I also have an ongoing Roth IRA on the side, as well as having 2 pension plans, so I think I'm on the right track to a fairly comfortable retirement. 😉😃 I currently live in Phoenix, Arizona where the cost of living is pretty decent, but I have my eye on the San Diego area, I just love it there!! The summer's here in Phoenix are just too hot for me.
Yes, agreed it was a conscious decision and actions to achieve FIRE! Not luck. Good point, Amy and Tim! 🔥👍🏻
Hello!! Oprah said something years ago that I've never forgotten. "I believe luck is preparation meeting opportunity." I've been fortunate in many ways throughout my life, I'm not denying that. But given my circumstances, I could have made different choices. Saving vs spending was a purposeful choice. Was it lucky there were no major life changes that required lots of money? Absolutely. Could I have blown it all on non-essential stuff? Yep. :)
Finances are just one part of the equation. Hardly anyone talks about the emotional side of the equation. You get all this "free time" that seemed so important and worth throwing away your career for, but, don't be surprised if you have little to do with all this new found free time. Think hard folks before you give up your work and careers, no matter how much money you have.
An amazing overview of the 4% rule! I discovered the concept of FIRE and the 4% rule a year ago, and decided to pursue real estate investing as my main vehicle for early retirement. It mashed well with my goals and situation at the time, and it's going well so far! I'm over halfway to my goal for an income that will cover the bills + allow continued saving with my first investment property. But I think I'll be going beyond that before I have kids, and will delve into the stock market eventually. I'll be following your channel for sure in the meantime :)
That's the great thing about FIRE, there are so many different ways to get there! Good luck, but it sounds like you are already well on your way!
It would be great to have more perspectives on what FIRE folks are doing in retirement. Aside from blogging and vlogging, it'd be awesome to hear more stories about what people are doing.
It would be interesting to know how many people will be saying years from now, I wish I worked one more year. Ooof.
I have the bucket system set up and will retire (early) next year, Yes, one more year, LOL. As for your video on health insurance (How ironic to have health insurance while unable to see a doctor!), quite a few Americans retire to Portugal. Check out "Our Rich Journey" videos on health care there (very affordable). I hope you can still set out on your nomadic journey despite Covid. I did something like that during my gap year before college and look forward to seeing some more of the world soon.
Well, I ff a couple times through the video, did I miss your number? THATS why I watched.
Hi guys, interesting that the Australian Superannuation system (whereby the employee and employer contribute to a pension account) is set up so that once you reach preservation age (generally 65) the minimum you are allowed to draw down is 4% per annum. They obviously work on the same principle that 4% equates to 25 years of available funds (ignoring growth of the underlying assets).
Best plan is to move to California (when your young) or encourage your kids to get a state or city job with a CALPERS or CALSTRS pension and make around 75%-90% of your last year salary per year for life!
thanks, but 4% is not the number people use today. Given the 60/40 sock/bond split is no longer applicable due to lower interest rates. This has brought down the risk free rate of return. Coupled with potential much higher future inflation the number is probably closer to 2.8% - 3.2%. NOT 4%
Are you planning to do Roth conversions while your spending is coming from taxable accounts?
Thank you for this thought provoking content.. I have only just found your channel so you may have covered this in the past, but can I ask: when you say you are currently living off post tax savings, is that passive income from investments or actual cash?
The Money Guys youtube channel clearly did not understand the FIRE person's strong desire for freedom when they questioned FIRE movement people daring to leave their jobs when they were at the peak of their earning potential. Yes, I reached FI last year at the age of 54, much sooner than I ever expected. It was mentally difficult to transition out of full-time work, but something that I wanted and turned out that I had to do anyway due to a health issue. Sometimes, I think this was the universe guiding me. I work part time still, mostly for insurance and I plan to transfer out of that once my small home side gig makes consistent profit. I think one of the best things about getting to "having enough" , besides the freedom of course, is the time you get to expand yourself into work you actually enjoy that doesn't feel like work at all. We have the benefit of spending our time doing whatever we wish. Another insightful video, thank you for sharing!
Exactly, most media focuses on the RE part. What people should do is focus on the peace of mind you get from the FI
I use the 4% rule with a modification. I have been retired 8 yrs. I use mint to calculate my investments and spending. I look at my total investments, multiple by 4% and divide by 12. That is what I can spend that month. The advantage to this is you will never run out of money. The disadvantage is that your 4% can vary depending on the market. I do have a cushion built in to my budget so that I could easily live on less than the 4% if I needed to. Enjoy your videos.
Thanks for watching and sharing what's working for you! Have you seen wide swings in your monthly allotment? In general, it's been a good 8 years for growth. Without sharing specific numbers, have you adjusted your spending upward significantly?
Actually the 4% rule already has a built in cushion. You can live 25 years with zero returns over inflation...unless the money is in stocks and the market crashes.
@@GoWithLess The amount does not change much from month to month. At the most I have seen a 1% variation in the amount I take out from month to month (i.e if I take out $2000 per month the most it has varied is $20 from month to month.) Since the market has been good it has gradually increased. If there is a significant pull back in the market the "4%" will become smaller meaning I will have to cut back on what I am taking out. That would actually make me feel more comfortable to cut back a little than to continue spending as much or more, when inflation is factored in, when the market is dropping and your capital is being coming less. If your capital has decreased you may be actually taking out 5-6% or more with the original 4% rule. My spending has increased a little but still well within the budget. Our biggest expense, like yours, is travel. We are going to San Diego in the spring and France for a month in the fall. Thanks to Tim's travel hacking tips the San Diego trip is free.
@@danieloathout6528 Free travel for the win!!!!!!!!!!!!!!!!!!!
My retirement plan is to die of a heart attack at work just like my two grandfathers 58 and 61. I have outlived both of them. Between ex s, family members, lawsuits and the irs all of who have taken millions from me and who continue to take money from me there is no way on earth I can retire unless I retire in jail for not paying taxes or being in contempt of court for not paying others. This year alone the irs and family members will fleece me for over 600K. My plan should work unless I get a stroke instead of a heart attack.
Rat race, win or lose, still a rat
Karl West, I think a book followed by sit come is in the bag.
We should all get thrown in prison, overload the system. Treat it like our own private country club.
We already worked longer than we wanted to and have retired now. I understand the hesitancy to work longer. Part of it is the American thing that we should make as much money as we can so we can buy more stuff. It takes a lot of talking to yourself to get out of that.
Yes, we left at the peak of our combined earnings. Not the easiest decision to stop working, especially since there were many unknowns. Would we like full-time retirement? Would we get sick of each other? Tim traveled Tuesdays through Fridays most weeks in his job and now we're together nearly 24/7. Our plan required us to live on less than we had ever spent. Would we be okay with that? Could we even do it? Then, all the naysayers who predicted we'd be back to work within a year.
One of my favorite passages...I'll share it because you might like it, too!
“Nature loves courage. You make the commitment and nature will respond to that commitment by removing impossible obstacles. Dream the impossible dream and the world will not grind you under, it will lift you up. This is the trick. This is what’s all these teachers and philosophers who really counted, who really touched the alchemical gold, this is what they understood. This is the shamanic dance in the waterfall. This is how magic is done. By hurling yourself into the abyss and discovering it's a feather bed.” - Terence McKenna
@@GoWithLess Not betting my Future on that.
Guys plz show the numbers in excel sheet or list out on screen.. btw you both looked great and doing awesome work
Great advice, as usual! We buy a lot of our food from Costco actually, & we're really big on using coupons when we eat out. You'll be surprised how many 2-for-1 deals there are out there. A lot of places give you free food if you sign up on their apps. 🥗🍕😃
I am currently contributing 20% of my paycheck to go into my 401k at work, & I'm actually considering to increase it to up to 25%! I'm currently 53 years old, & I would like to retire in about 10 years. I also have an ongoing Roth IRA on the side, as well as having 2 pension plans, so I think I'm on the right track to a fairly comfortable retirement. 😉😃 I currently live in Phoenix, Arizona where the cost of living is pretty decent, but I have my eye on the San Diego area, I just love it there!! The summer's here in Phoenix are just too hot for me.
Great video, once again. Well done. Keep up the great work.
I tracked my spending very diligently during 2019 as I am hoping to FiRE mid 2020. My plan was to use the 4% SWR (plus a paid off place of residence) but it looks as though I will have to go closer to a 4.5% SWR. Hopefully the aged pension (probably similar to your social security) here in Australia at age 67 will help us out if there turns out to be a shortfall.
The Aussie pension is means tested, so chances are anyone who's worked hard to put money aside won't qualify. The current allowance is having your residence outside that means testing, but there have been attempts to remove that.
@@melilifabulosa5505 - Yes, I am hoping the rules don't change too much over the coming years. It is hard to plan for the future when they keep changing the playing field!
Do you take inflation into consideration when doing the calculation?
The 4% rule accounts for 3% inflation. You're actually assuming a 7% return from the stock market, but 3% goes to inflation.
@Manuel Campbell Had no idea volatility was in the equation. I thought the 3% was just lumped together as inflation haha. Thanks for the correction 👍
One major thing about saving money is to REALLY limit the amount of traveling..... All of our friends seem like they're constantly going on trips & traveling, posting pictures on Facebook & showing off, and it makes me kind of depressed. I just tell myself that our turn will come when our when we're in our 60's & beyond, I'm only 53 now, and that we're in our "saving period." 😉
Great job staying focused. Don’t be discouraged. It helps to limit your time on Facebook 😀
Also remember that your health is not guaranteed. My friends wife just died at 55 with brain cancer that came on real quick.
I absolutely track! As a matter of fact, I’m 5.1% of the way to my FIRE number! 😅😅 Soooo only a couple years to go, right?!? “One more year” syndrome is something that I have thought about a lot, and I know when the time comes, I’m seriously going to struggle with that. I feel like it’s so easy to “what if” yourself to death!😩 But at least I have some time before I have to address that.
You dont have to what if, why not work on something you love + can earn you money down the road? Its not really work if its fun right? Writing a book, blog, vlog, podcast, build something, etc. it can be a lot of fun!
Very interesting video. I just liked and subscribed. I have a variety of investments. My biggest concern would be health insurance. Any suggestions for such an expense?
ACA (Obamacare) the key is to keep your income/expense low in order to receive maximum subsidy. For a single person if you keep the income no more than $24K a year, you get the maximum subsidy.
so what is your number? you said a lot without saying anything
My assets are 401K, IRA's and real estate rental properties.
We are a single income family with 2 kids in elementary. I am 40 and wife is 38. We recently passes 1 million networth. We are still renting as we are in a VHCOL area. So far investing in the market is turning out to be good so we want to continue that. "Post-tax" I make close to 220k (including 401k investments) and our expenses come to about 75k per year. I am not sure what a good FIRE number is though. If we move to a low COLA, we may only need 60k. Since we plan to pay for kids college too, I'm adding 250k for that which puts us at 1.75m FIRE number (at 4%) and 2.25m FIRE number (at 3%). Assuming a decent market (7% return), I can reach those numbers in 3 and 5 years respectively. What are your suggestions on the FIRE number to aim at? Since growing kids can be expensive, should I aim for more? Like 2.7m or 3m?
Right now we're in one of the longest bull markets since the Great Recession. A little while back the yield curve for bonds inverted, which in retrospect has preceded the recessions of the past. I'm still confident that the market will bounce back and grow further, but it is unknown how long it'll take for stock prices to recover back to their pre-recession values. People think the recession will happen in 2020, but it could be the year after instead. You're predicting how much you think you'll need based on your current level of spending, but if that increases in the future due to perhaps healthcare costs, then you might be forced to return to the workforce at an age, where you can't work as productively as now. It's good to spend time with your family, but there are stories of senior parents who become financially dependent upon their kids, which could burden kids and lead to resentment, which is not the kind of lasting impression you want to leave with your children. Personally I'd rather be in the "I have more than enough" camp than the "Do I have enough?" camp. In the world of investing, diversification is important, since the idea is to generate income from multiple sources, but you can also apply to just income sources in general. For me I want social security, a teacher's pension, money from a roth ira, money from taxable investment accounts, and maybe some income through real estate like rental income. I treat active income, or working a typical job as a just another source of income.
Here's a real important question...no work...means no health benefits unless you pay through the nose with obamacare. What are you doing for health care or are you playing Russian Roulette and hope you never get sick (Which is unrealistic).
Buy a high deductible plan, find a cash doctor, go minimum two times a year,
@@justinacase2623 That true, you could use urgent care facilities as a means of doctor appointments and pay cash but I know first hand what happens when you don't have an actual healthcare plan. A family member hurt their back, then tried to make doctors appointments for an MRI and other specialists...each and every time their appointments were cancelled because they didn't have insurance. The providers refused to see a patient wanting to pay cash. Finally, a place was found for an MRI paying cash but if that person needed surgery they would have been screwed. This is a common theme among the F.I.R.E. community. Unless you are in a situation where you have health insurance from something like retired military or federal civilian you are screwed in the event of a serious injury or illness. To me the FIRE community is reckless and teaching others to fail epic. The entire premise for FIRE is amazing...live your life on your terms...great! Now try to navigate that life if you get hurt and no insurance. Most out of pocket insurances like Obama Care are so expensive it is ridiculous and then the coverage is almost non-existent.
Great video! Thanks so much
4% rule seems to leave a lot of money to heirs especially when you consider even a conservative social security benefit. I guess I would look at net worth and spending flexibility as the two biggest factors. You shouldn't have your whole net worth in the market and the 4% rule assumes it's all invested in the market
Whenever we're home, we spend lots of time volunteering with nonprofit organizations. We currently give our time but not our money. Both are essential for them to survive. Dying with a lot of money is not a worry. We would love to donate big sums to places that have enriched our lives so much. I look at it as a best-case scenario. :))
Flexibility is a HUGE key to our success. We did a video about it! ruclips.net/video/9KhJ58UvL5A/видео.html
This is from Wikipedia (so might not be factual) - The authors backtested a number of stock/bond mixes and withdrawal rates against market data compiled by Ibbotson Associates covering the period from 1925 to 1995. en.wikipedia.org/wiki/Trinity_study
@@GoWithLess thanks for the response. I just know that social security makes up about 30% or so if your earnings. Since we lived on half my salary for years and got used to that social security will provide a greater percent in our case. If you have 40% of your investments in bonds I believe you have far too much in fixed income, which social security already is. There are ways to retire early on one income and ignore the 4%. Too many great financial calculators on line that allow for all kinds of variables.
@@Jfhelwig We can get lost in those calculators for hours!
The 64K dollar question....what about health insurance after cutting the cord from an employer?
Move to Canada ;) or buy insurance yourself.
I don't consider myself in the FIRE community but I did retire early. You guys started saving a lot earlier than I did and that makes a huge difference. My greatest savings were in my 40s and 50s. If I had waited 2 more years, I would have had a pension that would have let me live at a much better spending level than what I got. I made the decision to learn to spend less and save more so that I could live on a lesser pension with a bit of savings to make up for the difference. Thankfully I have been able to do that.
I really like this couple :)
Glad you said "annual spending" instead of "annual income". If you are a SUPER SAVER, then annual spending is MUCH less than annual income. And lets face it, there are people whose annual spending EXCEEDS their annual income. In the end, its all about what you SPEND, and how much you have saved and invested. Be sure to include the cost of medical insurance. When you are working, your company tends to cover most of the cost. Once you retire, YOU will be picking up this expense. Your retired spending could well go UP once you retire due to insurance, along with increased travel, more spending on hobbies, etc. By far, medical insurance has been our #1 expense, and we have lousy insurance with a huge deductible.
4% is a terrible idea. So 40k you would need 1 million in the bank?? Who wants to retire in poverty. Listen people, invest in assets that pay you monthly like real estate or a business. We are pulling down 6k per month in cashflow at 48 and reinvesting it so that monthly cashflow is bigly!
A brilliant 101 on the 4% Rule. Great video!
Thank you!
As I posted to one of the earlier videos, I discovered this channel in July 2021 and started binging the old episodes. I am sitting here biting my nails as I watch this December 2019 video in which these two lovely people are talking about their nomad plan for 2020. I hope everything worked out okay! I'll find out soon.
Great content, as usual!
I was able to walk away from my corporate job at 41 years old, my hubby still works. Net worth of over $1 million and no debt, no mortgage. Own two homes so we collect rent on the second home. I also have residual income coming in from a network marketing company that replaced my corporate salary. Time Freedom is sweet!!!
Invest in blue chip shares that pay decent dividends, golden rule is never touch your capital IMHO so I'm not a fan of the 4% rule.
You should have enough growth in your share portfolio to cover inflation. I retired early in Australia and Dividend investing with Full Franking credits
is what got me there. I appreciate most other countries dont have the high yield stocks and friendly franking credit tax system that we have in Australia
but with bank interest so low you wont be retiring early without a decent property or share portfolio or combo of both.
Wouldnt be depending on social security either, governments world wide are putting up the govt support/pension age and want you looking after yourself.
You should look again at the 4% rule. Something that most FIRE aficionados don't seem to get is that it's not "for the rest of your lives" it's for a 30 year period, meant for FRA retirees. You've nodded to 3% but even that may be too liberal given longer retirement periods, especially given inflation rates on health care. All of these percentage rules are dependent upon favorable return sequences and even the 4% rule for 30 years isn't 100% guarantee although it is in the mid 90's percent.
What about inflation, and I mean the real inflation number? Is about 7 to 9 percent in North America right now. Also what about the coming market reset of revaluation? Your digital assets will be reduced greatly for quite a few years. Just not sure if you guys have planned for this.
It's really easy to fall into the one more year syndrome. I quit my job in summer and my husband will quit his soon too and we'll take off on our nomadic journey. The hardest part of quitting is that by the time you are leaving your job you are usually at the top of your career / income. For us, our yearly salary would be SO much more if we stayed another year than it would have been even a few years ago. But we have to balance that with life and what we want to spend our life energy, time, and attention on.
Yall have the face of a couple that's stress free
What are your thoughts on getting a job for a short period of time about once a year - just long enough to get on their insurance? Then quit and go on COBRA for up to 18 months. I am doing this and my COBRA payment is $500 per month - kind of expensive, but very good insurance and no pre-existing condition concerns.
To track your spending for a year can you track one or two months and then just times that by 10 or 12 (with a few exceptions like Xmas, etc)?
It helps to remind people that the money needed to retire is this amount minus the passive income, which includes SS, pension, rental income, etc. So the number is probably not as scary as it looks.
I need 2.5 mils.
Question: how to you know whether to use the 4% or 3% rule? Say you want to retire early but you’re in your mid 50s already? Not sure which rule to use?
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25 years x $130,000 = $3.25 million! YIKES!
So this just came to mind...being nomafic..you must be extremely well organized...what programs do you use to track and hold everything? Sorry if redundant question.
I am planning to retire in a year, at 53, my wife a year after that. At that time we will sell our current house and move to a
much smaller house we already own in Tennessee and live off the sale proceeds, assuming a 4% return a year, probably similar to what you did.
I have tracked expenses at a granular detail from time to time, just with pencil and paper, to be able to figure a retirement budget. I have budgeted to live on $4200 a month, including $1200 for health insurance, if the ACA goes away. My plan is in a spreadsheet that shows expenses, by year, increasing at 3% a year until age 67 then 1% after that. It shows our IRA balance and real estate sale proceeds/cash balance increasing at 4%. It shows what we will get from social security yearly. At age 92, there is still a lot left over as a buffer and to do some extra stuff. If the market goes poorly for a couple years we can cut back. The bigger question for me is what to do with the time. I continue to research what early retirees do with their time, which led me to your videos and the concept of lower cost slow travel. Thanks for you time and effort doing these videos!
I appreciate you breaking down your plan! One year until retirement sounds wonderful!
Our days have been jam-packed. Almost 5 years into retirement, not a week goes by that I don't wonder how I ever had time for a job.
I was going to list some of the things I've done in retirement, but I think we'll make a video of them instead! We have lots of videos recapping things from 2019 and looking ahead at 2020 on the schedule so it might be a few months but it's a great question you ask of yourself. Can I mention your first name when we record it?
@@GoWithLess Sure!
@@darrellstrauch810 Thank you!
I retire in a couple of months. In my experience most people who retire are busier and happier people. I see my retirement as a opportunity to really do those things that I have put off (made excuses) while I was working. My suggestion is to do some brain storming and really think about what things interest you... write a list.. anythings that pops into your head. I was surprised at what made my list, with some ideas bringing a smile (I hadn't thought about since I was a teenager). I think you'll find when you take your first steps of your new life, you'll realize just how much work got in the way of what you really wanted to do. For example, I always wanted to learn to weld since I was a teenager. So I recently took a welding course. It's amazing how much adult learning is available. One of my friends wrote a bucket list for his retirement. I never see him now... My list includes, learning another language, restoring my old truck, doing some more travel and generally doing 'what every the hell I want'.... with the wife's permission of course.
How did you invest your money to withdraw the 4% rule ( I mean to say what is your portfolio allocation?) Thanks
I'd like to retire with an investment worth at least $4MILLION and I'm ready to work towards this goal, I've come across investors making as much $75,000 on a monthly basis and I'd like to know what step and guidelines I need to make better profit.
First, map out a plan on how to achieve this goal.
Hello Tim and Amy! I just found you online, and I can certainly relate to the FIRE movement. I really have to say that I soon as I started to track ALL my expenses, I saw the places where I could save up, and align on my partner for a smooth transition into retirement. The goal: Liberty 55! I too am concerned about the "one more year" credo and must admit that our system is asking us to do just that! But what about one more year of freedom??? Priceless if you ask me! Thanks for the great tips, I will follow along your journey. Can't wait to learn more! All the best for 2020! Remi (A friendly Cannuck)
Awesome content! Merry Christmas!!!
So the 3% rule is supposed to account for paying taxes on non-advantaged accounts?
The 1/n method is a popular method too.(take take the remaining amount ÷ the number of years left in retirement). The downside is the market: if your investments go down 20% one year, your money for the year is 20% less. Same for if your investments gain 20% one year.
If you retired at 40 with 60 years of retirement, that would be a SWR of 1.7% by that method. Quite a different number from the 4% (or 3%) rule. Even retiring at 60 with 40 years left would be 2.5%.
I’m still dialing in a system. I retired in October at 57. I have cash to bridge to 59.5. I have about half of my IRA’s in a Roth, and will be doing Roth conversions each year until it’s all Roth. Were planning on taking Social Security at 70.
The part of my system that is a little more fully baked are the contingency plans if we get whacked by the dreaded sequence of returns risk.
Contingency Plans
Plan B - Keep 3 years of living expenses in cash (will be able to ride out the majority of downturns).
Plan C - Reverse mortgage.
Plan D - Belt tightening.
Plan E - Get job. (absolute last resort)
I need to find a tribe here in SLC, and locate a retirement pro to do a sanity check on my math.
Ditch reverse mortgage, it's a scam, sell off that property, downsize
The problem with retiring early is as you mentioned in the video, unless you have money saved outside of 401k, IRA etc. you don't have access to that money until 59 1/2. So even if you want to retire you might not be able to.
Correct!!! As a 2-income family, we saved every penny of one income for years. That allowed us to withdraw from investments that were already taxed.
12:45 - children... children... no squabbling over pocket money. ;-)
Good video. I have a couple of numbers in mind - one based on what should allow me to live comfortably in retirement and another that would allow me to live a little more liberally. I think this is essential for retirement planning. Otherwise, I would not know how much I need to save or what returns I will need to realize to achieve my target retirement age. I personally would use the 3% rule to retire before 60. The number may seem daunting at first, but if you project out your current contribution rate and a reasonable return, you will likely find that is it is more achievable than you had thought. I'm also a big fan of after tax savings, provided that I take advantage of my 401(k) match and max out my Roth first.
It sounds as though you're in good shape!
I feel like the 4% rule is not really ideal for the average Joe's with kids etc. Reasons being you won't leave much money to your siblings. (That's if you retire fairly early and live to an old age)
Actually, the 4% rule will result in dying with more money than you started with in the event returns are high in the early years. Sequence of returns, which of course is beyond your control, is everything.
One year more is exactly what we are doing now..
And I'm also sometimes wondering if it's worth it 🤔
I do think that this year will be great, as lots of friends and family want to come and visit us - now that there are tourist visa 😊
We have a contract for our post tax retirement savings, we can buy a pension with this money at retirement age. But since the retirement age has been raised in Holland, the date of the post tax money has been raised to at least 67 years as well!! So we are now saving to fill this gap, and suplement after retirement. Taking in mind that we might need a house again in Holland at a later age. Do you take this into account (buying or renting a house at a later age)?
Great video, What % of asset allocation are you doing doing? (Cash, bonds, stocks).
Been binging your videos non-stop lately. Something that was briefly touched on in this video - I'm curious as to why you rolled your 401k into an IRA. I also have read a good few articles by Mr. MM, but he never mentions this tactic. Thanks!
I don't like this idea, because based on my experience, most 401k and pension funds can be tapped WITHOUT the dreaded 10% penalty at 55. The 59 1/2 myth perpetuated by the financial advisor industry mostly applies to IRAs. I retired at 56 and started drawing from my 401K the first month. No penalty! Yes, I pay taxes on the withdrawals, but our overall tax rate is lower than it has ever been. I can't promise this is true for your plans, but it is easy to find out. Get copies of the SPDs for your plans (Summary Plan Descriptions). Ideally, get an Adobe Acrobat PDF format. Search for "55" "penalty". My guess is you will find a bullet point under the list of the exceptions that says something like this: " ...terminate employment in or after the year you turn 55". That means that even if you turn 55 on December 31, you could retire the previous January and start withdrawals from you 401K in February, and NOT pay the 10% tax. I guess the IRA thing makes sense if your company does not allow periodic withdrawals from your 401K. That is very stone age.
I admire you guys so much! Love following you Best Wishes to you and Godspeed
Thank you so much!!
You can go to the govt SS retirement calculator and say you are retired.
You wouldn't have access to Social Security until your 60s.
Hi, I'm hoping that you can shed some light on a concern. With the 4% or 3% withdrawal rate, how would a market decline (bear market) affect the cash flow?
The idea is that your invested money creates a higher amount of income ON AVERAGE in a year, let's say 6% per year after inflation. So on average your investment will actually grow while you take out the 4%. The biggest concern is a big market decline right after you start the payout phase, let's say you have 1mio and plan to take out 4% a year, what happens if the markets drop by 50% and you take out 40k - you just took out not 4% but 8% of your money. Market drops right after starting the payout phase are the biggest problem.
But that is why you only take out 4% of your original value - plus whatever the inflation was since you started the payout phase. The 3% or 4% already include a safety blanket to the 6% you get on average.
I would worry more about live expectency rising and medical treatments becoming more expensive the more sophisticated they get. You could try to get to the 3% rule instead of 4%, giving you more safety for future developments and maybe even throw in an additional amount that you will not include in the payout calculation, just to insure for unforseen things including health.
@@christophbauer7805 Thank you for your reply. I like the idea of it, but the risk is a little more than l like. But maybe I don't have a totally clear picture. I'm thinking that this strategy along with real estate (rental income) would do it for me. The rental income would create stability.
Really inspiring, have a wonderful and well earned holiday season!
i have a one dollar and am retired for a day !
Do you have children? Family?
Family of five they said
Lot of smoke here with no numbers. Good luck.
I think you missed something. They talk about 25 times your annual spending....the 4 percent rule and the 3 percent rule. These are YOUR numbers. Their numbers in this case are redundant....
I agree, lots of video time when their video simply could have been 2 minutes long. I really didn't expect them to tell us personal info. I wonder if they were making over $250,000 a year to do this? If you make $250K a year, after taxes you can have $200K left and live off $50,000.00 that means about 10 years would be about: $1,500,000 and that is doable. Perhaps they are just so cheap they just exist without real living or enjoying living.
As much as it takes.
Does the trinity study say that if you spend 4% per year the principal will eventually be spent down or most of the principal will stay??
If your investment return is lower than 4% aa, you will spend the principal.
Thank you for asking such a good question! A scenario would be considered successful if it resulted in a dollar at the end or $20 million dollars. It would depend upon market performance. Of course, this would only be known at the end of your life. No wonder the "one more year" issue is so tempting. This FIRECalc link is a super-helpful tool - from their site, "Seeing the results will illustrate better than thousands of words." firecalc.com/. It will allow you to model based upon your very specific circumstances.
What do you do for medical and dental insurance?
That is the big 'what if' scenario...especially in the US. I thing most US based FIRE people just hold out hope that they won't have a serious illness.
We sold our business as of December 31st so my husband is staying on for the month of January but I am done as of December 31st! I can’t tell you what a relief it has been to unburden myself from running a bricks and mortar business. Even though I am 50, I don’t think I want to retire per se; but it will be nice to do things that I want to do, one of them being tracking our money and investments more closely and being intentional with all of our money moves. I feel like a kid again!
Good morning. I have a question how do you track your spending, did you make excel spreadsheet and manually put in every expense or is there a way of automating that, not sure how to start doing that, seems very tedious like tracking your calories intake lol.
Thank you and Merry Christmas and can't wait till next week for revelation of the big news.
Hi Lenka! Tim uses Quicken which isn't free but he's in too deep with it. There are several free service, like Mint. We talked about options in this video - ruclips.net/video/n-Wl-b2NUgI/видео.html
And, Merry Christmas to you!
I use quicken but take totals into excel because I like to manage my budget offline. Quicken connects to my checking credit. Happy to send you my blank excel template.
Wonderful content!
The color of that room is so inviting. .
Great video.
Unfortunately, things will be harder from now on.
1) Interest rates have dropped significantly all around the world. In some countries, they are even negative, meaning you pay to put money in the bank. Here in Brazil, the basic interest rate fell from 12% to 4% in 3 or 4 years. This makes it very difficult to live from interest income.
2) Official inflation rates are not to be trusted. Even in countries where they are serious and they don't manipulate the numbers, the official rates often include things that you don't buy, like steel, bricks or whatever. Things like health care and education are severely misrepresented. Your personal basket will be different from the government's and your "personal inflation" will be higher. Because of that, many times the interest rate will not even cover inflation.
3) Many Americans got rich flipping houses and trading in real estate. This is over. Boomers are retiring, going to nursing homes and dying, and their houses go to the market. The trend is downward. Many millennials don't want to live in the suburbs or, sadly, to have kids.
4) Stocks are trading at all time highs, with ridiculous and unreasonable P/E rates. Much of the boom is artificial, because credit is cheap and companies use cheap money supplied by central banks to buy back stocks and inflate prices. It's expected that the stock market will eventually fall and maybe crash.
5) Stocks paying good dividends are becoming rare, but are still the best bet. Unfortunately, many pay only 2 or 3% aa.
6) A final observation: if a person doesn't want to touch the principal, one must have returns of 4% above inflation. Lots of people forget about inflation in the calculation.
The 4% target is a very conservative one. If you get 4% return over inflation, you don't need to touch the principal. Even if one can't get 4% return, at least you have 25 years to live with that money if invested conservatively. The problem is how to accumulate that kind of money in our present scenario. Without the help of interest rates and a rising stock market, that means saving 50% of your post-tax salary for 25 years! The only way to do that is to have a very lucrative career or business and drastically reduce your spending after retiring.
However, I understand that the video is targeting American folks who already have the money (there is a lot of them in the wealthiest country in the world) but are afraid to jump. I have a friend who inherited $ 7 million and is super concerned about how he will make more money, to the point that he is stressed, developed diabetes and doesn't see his children much. Makes me want to slap him.
Thank you for your time and insights. At some point, the market will have a correction. It will be interesting to see what happens to the FIRE community. In general, it's made up of a group that's used to hard work and delayed gratification. Hedging it with lower spending, along with flexibility is our plan.
Your friend's life sounds hard. So many would look at his $7m and think he has no problems.
So live like a hobo your whole life to have enough money when you’re old and feeble?
I guess you haven’t watched any of our videos. Like, not even a minute. 🤔
Did the sale of your house help you to reach your number or did you reach it without the proceeds from the home sale? I don’t think i will factor the value of my home into my number, but I’m also likely not going to do long term travel like you guys. I haven’t heard anyone in the fire community address that question.
Thanks!
The one issue I have with FI is most advocates and mentors especially in the US based all of their numbers off the stock market and the so called magic of compound interest. But I just can't accept the stock market as guaranteeing 4% plus pa, it is prone to huge corrections every 10 years or so and that can be devastating to a portfolio
I mean there's a proven track record you can go and review. You can track the S&P to see that there is a reasonable average (on a long enough timeline). 4% is pretty conservative, i've seen some forecasters try to claim 8% gains. Oh yea, many years S&P has generally crushed the market growth the down years average those down to a more conservative 4%.
I've read if you held an account from 1998 to 2008, some say ppl gained avg 0%...but if you held on, you should be making huge money right now.
Good morning!!
4% is the number the doesn't get out of my mind.
This syndrome is killing me, lol.
You know that :))
We understand completely!!