doobiedoo wrote: ↑Sun Jan 16, 2022 7:39 pm
AlphaLess wrote: ↑Sun Jan 16, 2022 4:50 pm
010101 wrote: ↑Sun Jan 16, 2022 2:38 pm
I have found that “Enough” is a mirage and the closer you get, the further away it looks.
- When I was much younger, I dreamed of $1M. Then I got married and bought a house and was amazed at how much debt I was in.
- I got older and wiser and dreamed of $5M. Surely that was enough money to retire and sail away. Then we had a baby, got a bigger house and I was amazed at how expensive children were.
- I got even older and thought that when we hit $10M, surely then there would be enough money. That day has come and gone.
If anything, I’ve gotten even more aggressive in allocation as time has gone on.
The big picture I see here is that "Expenses" are a moving target.
Marriage, House, Furniture, Vacations, Kids
...
But data don't lie. When kids leave, and you have an empty nest, it gets cheaper.
Yes, I went thru that. And it's easy to get on the treadmill of bigger houses, better vacations, more this, more that.
But at some point, you have to limit expenses if you want financial independence. That means the house is big enough, no additional kids, don't need a boat, etc.
Prokofiev says it well.
Jazztonight wrote: ↑Sun Jan 16, 2022 4:50 pm
Prokofiev wrote: ↑Sun Jan 16, 2022 4:30 pm
...
If enough is not enough, you need to revisit the definition of the word. I used to think I could always use an extra million$ or so for some new adventure, business or hobby. But at some point in life, you simply can't improve your happiness. We travel at least 3 months a year, have all the house we will ever want and do whatever we please.
Peace of mind is now far more important than making more money.
A second factor is that your initial "number" is likely to be optimistic, i.e. low. The 25x expenses number is the standard, but everyone would feel better and more comfortable if that number was higher. So the number [goalpost] gets moved in order to lower risk. Nothing wrong with that the first time it happens.
But it does mean it's time to pick a number that you *ARE* comfortable with. Just like with expenses, if you keep moving the goalposts, you are only fooling yourself. The key is to pick a number *YOU* are comfortable with -- 25x, 40x, 50x, 75x, 100x?
And I agree with lobsterman2112 below.
lobsterman2112 wrote: ↑Sun Jan 16, 2022 4:03 pm
...
I do plan to get more aggressive in my investing now that I've hit "Enough". Increase my stocks while keeping my bonds at a fixed dollar amount.
When you hit "Enough", your need to take on more risk goes down, but your ability to take on more risk goes up.
I lowered my equity allocation when I retired because I was worried about sequence risk. When SORR didn't happen and my portfolio and net worth went up instead, I went to a higher equity allocation. Equity risk is of less concern to me now than at any point in my financial life.
Excellent thread. Good words of wisdom.
Our initial number was $5, but we underestimated in a few departments:
- when you are not working, health-care is not free. Of course, when working, health-care is NOT free either, but somehow, you under-account for that. I am looking at COBRA rate x 1.25 + everything else we spend, which is close to $30K a year, so that is additional,
- for X dollars of withdrawal, need to have at least 15% of tax. So, net after tax we can keep is X / 1.15.
When you do the math that way, say, "y" was our old number. Then X is:
- y + 30K for healthcare,
- (y + $30K) * 1.15 for tax portion,
- maybe add in some inflation.
If you decide to retire 5 years later, you need to account for 5 years of inflation.
General inflation might be 2.2%, but your own inflation might be 3.5%.
Problem is, when looking 5 years ahead, and saying, I need $5 in five years, you account for the growth of assets, but not inflation.
And the last point is: asset multipliers. In 5 years, asset multipliers (PE ratio, Shiller PE, whatever PE, bond yield), could be lower, which means need more conservative assumptions.
Looking at x=264K, plus health care portion of 30K, adds up to 300K. x 1.15 for taxes, you have 345.
We are north of $10M, but I figured, it does not hurt to get to $20M, especially since can be done in the next 2-3 years.
Say, with $20M on Jan 1 2025, even with 3.5% annual inflation between Jan 1 2022 and Jan 1 2025, our number would be around $382K. Call it $400. I figured we can probably make do with 2.00% W/D rate to begin with.
I don't carry a signature because people are easily offended.