I don't have to worry about living past 80, even if I retire at 46 with just 23X

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rockstar
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Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

EnjoyIt wrote: Tue Mar 28, 2023 8:13 pm
fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
I hate that argument.

1) In the history of the US, once the government giveth, the government almost never taketh away. It would be political suicide to even mention in passing the desire to cut SS.

2) I can also say, what if I get hit by a car and die?
Or, what if a tiger is loose when I go visit the zoo and it mauls my leg off? What if I win the lottery. What if I inherit $452,192 and 33 cents from my parents?

I think we can all come up with unlikely what ifs, but the reality is that we should work within the confines we are currently aware of and adjust when that rare and unlikely “what if” comes to reality and not the other way around. Otherwise, we will keep finding more and more “what ifs” to worry about and end up with a sub 2% withdrawal rate, which frankly is ridiculous.
It's fearmongering to keep us working.
randomguy
Posts: 11295
Joined: Wed Sep 17, 2014 9:00 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by randomguy »

smitcat wrote: Mon Mar 27, 2023 3:33 pm
"randomguy makes a calculation based on 20 years, from ages 26 to 46, but then the average
indexed earnings had to be $120K/year ($10K/month). How many 26 year olds make $120K?"
Which calculator are you using?
The ones retiring at 46:) I know I hit the SS max by 25. The point was that you need an average of ~5300 over 35 years. You can get that average by doing 5300 for 35 years or by doing 9200 for 20. Either works. Feel free to put in numbers for some more complicated path say something like starting at like 80k. Doubling over the first 10 years and then keeping up with inflation. The number seem pretty reasonable. I will assume the OP put their numbers into the calculator correctly.
thedaybeforetoday
Posts: 847
Joined: Fri Sep 02, 2022 5:16 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by thedaybeforetoday »

EnjoyIt wrote: Tue Mar 28, 2023 5:39 pm
thedaybeforetoday wrote: Tue Mar 28, 2023 3:55 pm
Patzer wrote: Fri Mar 24, 2023 1:33 pm
greg24 wrote: Fri Mar 24, 2023 1:27 pm Ok. Is there a question? What is the OP seeking from the thread?
It's an investment theory post.
So I am positing a theory that longevity concerns are manageable and this forum's concerns about them are overstated.
Already, I see many folks making counterpoints to the theory. The goal is to have those discussions in an open and productive forum.
From the Bogleheads agreement we all made when we joined:

"It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation."

Not saying this isn't interesting but wanted you, the OP to be aware of your agreement.
I think this post has been very actionable to plenty of readers. There is plenty more to think about regarding withdrawal strategies than simply 25x if you’re 65 and 29x or 33x if you’re planing on early retirement.
Agreed
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
thedaybeforetoday
Posts: 847
Joined: Fri Sep 02, 2022 5:16 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by thedaybeforetoday »

Patzer wrote: Tue Mar 28, 2023 7:41 pm
thedaybeforetoday wrote: Tue Mar 28, 2023 3:55 pm
Patzer wrote: Fri Mar 24, 2023 1:33 pm
greg24 wrote: Fri Mar 24, 2023 1:27 pm Ok. Is there a question? What is the OP seeking from the thread?
It's an investment theory post.
So I am positing a theory that longevity concerns are manageable and this forum's concerns about them are overstated.
Already, I see many folks making counterpoints to the theory. The goal is to have those discussions in an open and productive forum.
From the Bogleheads agreement we all made when we joined:

"It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation."

Not saying this isn't interesting but wanted you, the OP to be aware of your agreement.
There has been plenty of actionable discourse on the thread.
Agreed
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by smitcat »

randomguy wrote: Tue Mar 28, 2023 11:40 pm
smitcat wrote: Mon Mar 27, 2023 3:33 pm
"randomguy makes a calculation based on 20 years, from ages 26 to 46, but then the average
indexed earnings had to be $120K/year ($10K/month). How many 26 year olds make $120K?"
Which calculator are you using?
The ones retiring at 46:) I know I hit the SS max by 25. The point was that you need an average of ~5300 over 35 years. You can get that average by doing 5300 for 35 years or by doing 9200 for 20. Either works. Feel free to put in numbers for some more complicated path say something like starting at like 80k. Doubling over the first 10 years and then keeping up with inflation. The number seem pretty reasonable. I will assume the OP put their numbers into the calculator correctly.
I did give two examples in this post already using the SS quickcalulator. They indicated a number of ways a person could/would qualify for higher SS after 20-25 years with a much lower ending salary than $200K ,, and they start at less than $10K.
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by smitcat »

Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am
Patzer wrote: Fri Mar 24, 2023 1:30 pm
afan wrote: Fri Mar 24, 2023 1:14 pm Inflation?

How can you know now the rates decades in the future for an SPIA?

Assumes no unexpected expenses. Life can become costly in old age as ine may need to pay people for things now ine for oneself.

Social Security benefits will drop long before you start retirement unless the government does something. No way to know what, if any, action it will take. For now, do your calculations include the reduction inpayments under current law?
You don't buy the SPIA until you are 80, so what inflation happens between now and when I am 80 doesn't matter, because the source of the funds (the house) inflates with everything else).

Life doesn't get more costly in old age. Look at any study on the topic. The rise in healthcare costs are more than offset by a decline in other spending. Spending beyond 80 dramatically falls and it only really increases in the last 1-2 years of life as you are dying.

Social Security's worst case scenario is a 75% payout. While my post assumes a 100% payout, because that's what is likely to happen, a 75% payout only adds about .5X to my needs. Since 22.4X would have survived the great depression with my AA, I don't need to add anything to my 23X to cover Social Security only paying out at 75%.
I may be a little more pessimistic than you.

For planning purposes, you need to stress test your financial plan for the worst case scenarios. Your worst cases aren't "worst" enough.

Some thoughts to consider:

Note to moderators: To avoid discussing politics, I am going to speak in general terms based on logic and probabilities. Hopefully this is acceptable and stays within forum rules.

1) Social Security under current law is headed for a 75% payout. Because that's what will occur under current law, that is what I consider the most likely scenario. For any other outcome (better or worse than that), the law will have to change. Inaction is easier than action. The only possible changes to a closed system are to change the inputs, the outputs, or both. Stated more simply, it's a variant of increasing revenue or decreasing payouts. Ways that they might raise revenue are irrelevant to this discussion. Raising the retirement age is the equivalent of a decreased payout, because you're going to have to cover the additional years that you have to wait. You need to pay attention to the different proposals that are being bandied about, assign it a probability, and make sure your plan can handle that if it comes to pass.

2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.

3) Plan for "lumpy" predictable expenses. You own a home. The roof needs to be replaced every 30 years. Your water heater needs to be replaced every 10 years. Your car will be replaced several times during a long retirement. (And this doesn't even address long-term care.) If you pull the money from your retirement accounts, it counts as income, your tax costs go up, you might lose your ACA subsidy, or if you're on Medicare by then, your premiums go up. Does your plan address those events?

4) Plan for "lumpy" unpredictable expenses. When you're working, this is your emergency fund, which you then refill with new income (and perhaps stop saving for a while until it's replenished.) But when you're no longer working, you need a plan for big unexpected expenses. How are you handling unexpected expenses?
Great post.
Some thoughts.
1) Planning for 75% at 70 or 100% at 72 seem like realistic stress test scenarios
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
3) I have a record of every expense back to December 2003 and I have done all the homework you suggest. Everything I have spent money on in the past 20 years is in the formula. Expenses like a new car every 8-10 years, new HVAC every 10 years, etc. are annualized into the budget.
4) A bit harder for obvious reasons is the unexpected, but that is why 10% of my budget is "Surplus". Years I don't spend it help years where I might exceed it.
There are certainly expenses that could blow it up beyond my expectations, like Cancer, but I am trying to cover the unexpected within reason.
So far (last 20 years of budgeting) I have only exceeded my budget in 2 years. So, I have a reasonable expectation going forward to not exceed my budget, but certainly no guarantees.
Curious if you have any specific expenses in mind.
My brother began a journey very similar to this 12 years ago at 52 - he will be fine, but it has not gone nearly as planned.
Hope your plan turns out to fit your goals well.
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by JackoC »

rockstar wrote: Tue Mar 28, 2023 9:48 pm
fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

smitcat wrote: Wed Mar 29, 2023 9:42 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am
Patzer wrote: Fri Mar 24, 2023 1:30 pm
afan wrote: Fri Mar 24, 2023 1:14 pm Inflation?

How can you know now the rates decades in the future for an SPIA?

Assumes no unexpected expenses. Life can become costly in old age as ine may need to pay people for things now ine for oneself.

Social Security benefits will drop long before you start retirement unless the government does something. No way to know what, if any, action it will take. For now, do your calculations include the reduction inpayments under current law?
You don't buy the SPIA until you are 80, so what inflation happens between now and when I am 80 doesn't matter, because the source of the funds (the house) inflates with everything else).

Life doesn't get more costly in old age. Look at any study on the topic. The rise in healthcare costs are more than offset by a decline in other spending. Spending beyond 80 dramatically falls and it only really increases in the last 1-2 years of life as you are dying.

Social Security's worst case scenario is a 75% payout. While my post assumes a 100% payout, because that's what is likely to happen, a 75% payout only adds about .5X to my needs. Since 22.4X would have survived the great depression with my AA, I don't need to add anything to my 23X to cover Social Security only paying out at 75%.
I may be a little more pessimistic than you.

For planning purposes, you need to stress test your financial plan for the worst case scenarios. Your worst cases aren't "worst" enough.

Some thoughts to consider:

Note to moderators: To avoid discussing politics, I am going to speak in general terms based on logic and probabilities. Hopefully this is acceptable and stays within forum rules.

1) Social Security under current law is headed for a 75% payout. Because that's what will occur under current law, that is what I consider the most likely scenario. For any other outcome (better or worse than that), the law will have to change. Inaction is easier than action. The only possible changes to a closed system are to change the inputs, the outputs, or both. Stated more simply, it's a variant of increasing revenue or decreasing payouts. Ways that they might raise revenue are irrelevant to this discussion. Raising the retirement age is the equivalent of a decreased payout, because you're going to have to cover the additional years that you have to wait. You need to pay attention to the different proposals that are being bandied about, assign it a probability, and make sure your plan can handle that if it comes to pass.

2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.

3) Plan for "lumpy" predictable expenses. You own a home. The roof needs to be replaced every 30 years. Your water heater needs to be replaced every 10 years. Your car will be replaced several times during a long retirement. (And this doesn't even address long-term care.) If you pull the money from your retirement accounts, it counts as income, your tax costs go up, you might lose your ACA subsidy, or if you're on Medicare by then, your premiums go up. Does your plan address those events?

4) Plan for "lumpy" unpredictable expenses. When you're working, this is your emergency fund, which you then refill with new income (and perhaps stop saving for a while until it's replenished.) But when you're no longer working, you need a plan for big unexpected expenses. How are you handling unexpected expenses?
Great post.
Some thoughts.
1) Planning for 75% at 70 or 100% at 72 seem like realistic stress test scenarios
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
3) I have a record of every expense back to December 2003 and I have done all the homework you suggest. Everything I have spent money on in the past 20 years is in the formula. Expenses like a new car every 8-10 years, new HVAC every 10 years, etc. are annualized into the budget.
4) A bit harder for obvious reasons is the unexpected, but that is why 10% of my budget is "Surplus". Years I don't spend it help years where I might exceed it.
There are certainly expenses that could blow it up beyond my expectations, like Cancer, but I am trying to cover the unexpected within reason.
So far (last 20 years of budgeting) I have only exceeded my budget in 2 years. So, I have a reasonable expectation going forward to not exceed my budget, but certainly no guarantees.
Curious if you have any specific expenses in mind.
My brother began a journey very similar to this 12 years ago at 52 - he will be fine, but it has not gone nearly as planned.
Hope your plan turns out to fit your goals well.
Can you please share if possible some of those hiccups? Maybe there is something for us to learn from other's experience.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by smitcat »

EnjoyIt wrote: Wed Mar 29, 2023 10:20 am
smitcat wrote: Wed Mar 29, 2023 9:42 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am
Patzer wrote: Fri Mar 24, 2023 1:30 pm

You don't buy the SPIA until you are 80, so what inflation happens between now and when I am 80 doesn't matter, because the source of the funds (the house) inflates with everything else).

Life doesn't get more costly in old age. Look at any study on the topic. The rise in healthcare costs are more than offset by a decline in other spending. Spending beyond 80 dramatically falls and it only really increases in the last 1-2 years of life as you are dying.

Social Security's worst case scenario is a 75% payout. While my post assumes a 100% payout, because that's what is likely to happen, a 75% payout only adds about .5X to my needs. Since 22.4X would have survived the great depression with my AA, I don't need to add anything to my 23X to cover Social Security only paying out at 75%.
I may be a little more pessimistic than you.

For planning purposes, you need to stress test your financial plan for the worst case scenarios. Your worst cases aren't "worst" enough.

Some thoughts to consider:

Note to moderators: To avoid discussing politics, I am going to speak in general terms based on logic and probabilities. Hopefully this is acceptable and stays within forum rules.

1) Social Security under current law is headed for a 75% payout. Because that's what will occur under current law, that is what I consider the most likely scenario. For any other outcome (better or worse than that), the law will have to change. Inaction is easier than action. The only possible changes to a closed system are to change the inputs, the outputs, or both. Stated more simply, it's a variant of increasing revenue or decreasing payouts. Ways that they might raise revenue are irrelevant to this discussion. Raising the retirement age is the equivalent of a decreased payout, because you're going to have to cover the additional years that you have to wait. You need to pay attention to the different proposals that are being bandied about, assign it a probability, and make sure your plan can handle that if it comes to pass.

2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.

3) Plan for "lumpy" predictable expenses. You own a home. The roof needs to be replaced every 30 years. Your water heater needs to be replaced every 10 years. Your car will be replaced several times during a long retirement. (And this doesn't even address long-term care.) If you pull the money from your retirement accounts, it counts as income, your tax costs go up, you might lose your ACA subsidy, or if you're on Medicare by then, your premiums go up. Does your plan address those events?

4) Plan for "lumpy" unpredictable expenses. When you're working, this is your emergency fund, which you then refill with new income (and perhaps stop saving for a while until it's replenished.) But when you're no longer working, you need a plan for big unexpected expenses. How are you handling unexpected expenses?
Great post.
Some thoughts.
1) Planning for 75% at 70 or 100% at 72 seem like realistic stress test scenarios
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
3) I have a record of every expense back to December 2003 and I have done all the homework you suggest. Everything I have spent money on in the past 20 years is in the formula. Expenses like a new car every 8-10 years, new HVAC every 10 years, etc. are annualized into the budget.
4) A bit harder for obvious reasons is the unexpected, but that is why 10% of my budget is "Surplus". Years I don't spend it help years where I might exceed it.
There are certainly expenses that could blow it up beyond my expectations, like Cancer, but I am trying to cover the unexpected within reason.
So far (last 20 years of budgeting) I have only exceeded my budget in 2 years. So, I have a reasonable expectation going forward to not exceed my budget, but certainly no guarantees.
Curious if you have any specific expenses in mind.
My brother began a journey very similar to this 12 years ago at 52 - he will be fine, but it has not gone nearly as planned.
Hope your plan turns out to fit your goals well.
Can you please share if possible some of those hiccups? Maybe there is something for us to learn from other's experience.
Cannot even begin to scratch the surface about the multiple issues that caused changes, challenges, and problems with his plan.
From an overall view here are a few of them....
- goals and life changes in general
- Taiwan living was part of his plan, both political changes and issues with Baht
- covid 19
- cost of things he wanted to do
- feeling of being left behind, some isolation
- inability to forecast some medical and health interactions
Sorry I did not even touch some areas.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

smitcat wrote: Wed Mar 29, 2023 10:34 am
EnjoyIt wrote: Wed Mar 29, 2023 10:20 am
smitcat wrote: Wed Mar 29, 2023 9:42 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am

I may be a little more pessimistic than you.

For planning purposes, you need to stress test your financial plan for the worst case scenarios. Your worst cases aren't "worst" enough.

Some thoughts to consider:

Note to moderators: To avoid discussing politics, I am going to speak in general terms based on logic and probabilities. Hopefully this is acceptable and stays within forum rules.

1) Social Security under current law is headed for a 75% payout. Because that's what will occur under current law, that is what I consider the most likely scenario. For any other outcome (better or worse than that), the law will have to change. Inaction is easier than action. The only possible changes to a closed system are to change the inputs, the outputs, or both. Stated more simply, it's a variant of increasing revenue or decreasing payouts. Ways that they might raise revenue are irrelevant to this discussion. Raising the retirement age is the equivalent of a decreased payout, because you're going to have to cover the additional years that you have to wait. You need to pay attention to the different proposals that are being bandied about, assign it a probability, and make sure your plan can handle that if it comes to pass.

2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.

3) Plan for "lumpy" predictable expenses. You own a home. The roof needs to be replaced every 30 years. Your water heater needs to be replaced every 10 years. Your car will be replaced several times during a long retirement. (And this doesn't even address long-term care.) If you pull the money from your retirement accounts, it counts as income, your tax costs go up, you might lose your ACA subsidy, or if you're on Medicare by then, your premiums go up. Does your plan address those events?

4) Plan for "lumpy" unpredictable expenses. When you're working, this is your emergency fund, which you then refill with new income (and perhaps stop saving for a while until it's replenished.) But when you're no longer working, you need a plan for big unexpected expenses. How are you handling unexpected expenses?
Great post.
Some thoughts.
1) Planning for 75% at 70 or 100% at 72 seem like realistic stress test scenarios
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
3) I have a record of every expense back to December 2003 and I have done all the homework you suggest. Everything I have spent money on in the past 20 years is in the formula. Expenses like a new car every 8-10 years, new HVAC every 10 years, etc. are annualized into the budget.
4) A bit harder for obvious reasons is the unexpected, but that is why 10% of my budget is "Surplus". Years I don't spend it help years where I might exceed it.
There are certainly expenses that could blow it up beyond my expectations, like Cancer, but I am trying to cover the unexpected within reason.
So far (last 20 years of budgeting) I have only exceeded my budget in 2 years. So, I have a reasonable expectation going forward to not exceed my budget, but certainly no guarantees.
Curious if you have any specific expenses in mind.
My brother began a journey very similar to this 12 years ago at 52 - he will be fine, but it has not gone nearly as planned.
Hope your plan turns out to fit your goals well.
Can you please share if possible some of those hiccups? Maybe there is something for us to learn from other's experience.
Cannot even begin to scratch the surface about the multiple issues that caused changes, challenges, and problems with his plan.
From an overall view here are a few of them....
- goals and life changes in general
- Taiwan living was part of his plan, both political changes and issues with Baht
- covid 19
- cost of things he wanted to do
- feeling of being left behind, some isolation
- inability to forecast some medical and health interactions
Sorry I did not even touch some areas.
Although I see the similarities you addressed above, I feel that OP has a few big differences.
OP plans on living inside the US which will allow for US healthcare at a subsidized cost due to the affordable care act. Also, by living in the US there will be less of a feeling of isolation as OP plans on living right where they are now. Lastly, I don't know your brother's finances, but I can assume the he chose to do Taiwan due to the lower cost of living. OP is planning on a relatively more comfortable spending plan.

Despite the above, there is one thing you addressed that I believe is huge. It is very hard to predict future desires and needs. I see that with our won spending over the last decade. As you stated, "goals and life changes in general." To me I think this is the biggest issue with OP plan.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

JackoC wrote: Wed Mar 29, 2023 10:03 am
rockstar wrote: Tue Mar 28, 2023 9:48 pm
fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
randomguy
Posts: 11295
Joined: Wed Sep 17, 2014 9:00 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by randomguy »

smitcat wrote: Wed Mar 29, 2023 9:18 am
I did give two examples in this post already using the SS quickcalulator. They indicated a number of ways a person could/would qualify for higher SS after 20-25 years with a much lower ending salary than $200K ,, and they start at less than $10K.
You do realize 200k was chosen because it was well beyond the SS limit? I thought it was obviously that we were just calculating what the SS for someone with 20 max years would be. Does it really need to be said there is no SS difference between 200k and about 150k (or whatever the new limit will be)?
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

randomguy wrote: Wed Mar 29, 2023 11:06 am
smitcat wrote: Wed Mar 29, 2023 9:18 am
I did give two examples in this post already using the SS quickcalulator. They indicated a number of ways a person could/would qualify for higher SS after 20-25 years with a much lower ending salary than $200K ,, and they start at less than $10K.
You do realize 200k was chosen because it was well beyond the SS limit? I thought it was obviously that we were just calculating what the SS for someone with 20 max years would be. Does it really need to be said there is no SS difference between 200k and about 150k (or whatever the new limit will be)?
The limit is what counts toward your average. Anything over doesn’t matter. It’s $160,200 this year. That’s a nice bump to increase your average going forward. You have to use past maxes to calculate a max.
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by smitcat »

EnjoyIt wrote: Wed Mar 29, 2023 10:49 am
smitcat wrote: Wed Mar 29, 2023 10:34 am
EnjoyIt wrote: Wed Mar 29, 2023 10:20 am
smitcat wrote: Wed Mar 29, 2023 9:42 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm

Great post.
Some thoughts.
1) Planning for 75% at 70 or 100% at 72 seem like realistic stress test scenarios
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
3) I have a record of every expense back to December 2003 and I have done all the homework you suggest. Everything I have spent money on in the past 20 years is in the formula. Expenses like a new car every 8-10 years, new HVAC every 10 years, etc. are annualized into the budget.
4) A bit harder for obvious reasons is the unexpected, but that is why 10% of my budget is "Surplus". Years I don't spend it help years where I might exceed it.
There are certainly expenses that could blow it up beyond my expectations, like Cancer, but I am trying to cover the unexpected within reason.
So far (last 20 years of budgeting) I have only exceeded my budget in 2 years. So, I have a reasonable expectation going forward to not exceed my budget, but certainly no guarantees.
Curious if you have any specific expenses in mind.
My brother began a journey very similar to this 12 years ago at 52 - he will be fine, but it has not gone nearly as planned.
Hope your plan turns out to fit your goals well.
Can you please share if possible some of those hiccups? Maybe there is something for us to learn from other's experience.
Cannot even begin to scratch the surface about the multiple issues that caused changes, challenges, and problems with his plan.
From an overall view here are a few of them....
- goals and life changes in general
- Taiwan living was part of his plan, both political changes and issues with Baht
- covid 19
- cost of things he wanted to do
- feeling of being left behind, some isolation
- inability to forecast some medical and health interactions
Sorry I did not even touch some areas.
Although I see the similarities you addressed above, I feel that OP has a few big differences.
OP plans on living inside the US which will allow for US healthcare at a subsidized cost due to the affordable care act. Also, by living in the US there will be less of a feeling of isolation as OP plans on living right where they are now. Lastly, I don't know your brother's finances, but I can assume the he chose to do Taiwan due to the lower cost of living. OP is planning on a relatively more comfortable spending plan.

Despite the above, there is one thing you addressed that I believe is huge. It is very hard to predict future desires and needs. I see that with our won spending over the last decade. As you stated, "goals and life changes in general." To me I think this is the biggest issue with OP plan.
Some additional details:
- my brother was never planning to live in Taiwan FT - he planned to be there for large periods of time each year. (one piece of plan).
He does/did get healthcare for near zero in the US - and also got some much less expensive care in Taiwan over the years.
- his spending budget was above the OP's, combination of savings, home sale, pension and eventual SS.
- some isolation was after moving back to his 0-22 years old hometown in NY from Calif.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

smitcat wrote: Wed Mar 29, 2023 11:21 am Some additional details:
- my brother was never planning to live in Taiwan FT - he planned to be there for large periods of time each year. (one piece of plan).
He does/did get healthcare for near zero in the US - and also got some much less expensive care in Taiwan over the years.
- his spending budget was above the OP's, combination of savings, home sale, pension and eventual SS.
- some isolation was after moving back to his 0-22 years old hometown in NY from Calif.
This is an interesting call out.
I have some other countries and even cities in the US that cost 10-50% less as backup plans if my budget got way off track, but for now the plan is to retire in place in the city I have lived for the last 20 years.
Having enough to stay where my relationships are does seem like a reason to work until that is possible.
I have a friend in his 30s that is retired already, because he chose to move to SE Asia. He loves not work, but he only makes it back to the US 1-2 times a year to see people. That would be hard for me.
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by JackoC »

rockstar wrote: Wed Mar 29, 2023 10:53 am
JackoC wrote: Wed Mar 29, 2023 10:03 am
rockstar wrote: Tue Mar 28, 2023 9:48 pm
fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

JackoC wrote: Wed Mar 29, 2023 3:56 pm
rockstar wrote: Wed Mar 29, 2023 10:53 am
JackoC wrote: Wed Mar 29, 2023 10:03 am
rockstar wrote: Tue Mar 28, 2023 9:48 pm
fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

rockstar wrote: Wed Mar 29, 2023 5:00 pm
JackoC wrote: Wed Mar 29, 2023 3:56 pm
rockstar wrote: Wed Mar 29, 2023 10:53 am
JackoC wrote: Wed Mar 29, 2023 10:03 am
rockstar wrote: Tue Mar 28, 2023 9:48 pm

So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

EnjoyIt wrote: Wed Mar 29, 2023 6:11 pm
rockstar wrote: Wed Mar 29, 2023 5:00 pm
JackoC wrote: Wed Mar 29, 2023 3:56 pm
rockstar wrote: Wed Mar 29, 2023 10:53 am
JackoC wrote: Wed Mar 29, 2023 10:03 am
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
Personally, my current plan now is to maximize my PIA for the second bend and then evaluate where I stand. I won't gain much trying to maximize the third, so it will come down to incremental savings. I never calculated my PIA using my actual earnings from the social security website before reading this thread. Took me a bit to find the proper calculation website, but it was good info. I wonder if it's linked to in the wiki.

Are there any resources for how best to bridge healthcare and dental up until Medicare? This would be super useful.

I'm not planning to move out of the country. That's way too much work.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

rockstar wrote: Wed Mar 29, 2023 7:38 pm
EnjoyIt wrote: Wed Mar 29, 2023 6:11 pm
rockstar wrote: Wed Mar 29, 2023 5:00 pm
JackoC wrote: Wed Mar 29, 2023 3:56 pm
rockstar wrote: Wed Mar 29, 2023 10:53 am

I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
Personally, my current plan now is to maximize my PIA for the second bend and then evaluate where I stand. I won't gain much trying to maximize the third, so it will come down to incremental savings. I never calculated my PIA using my actual earnings from the social security website before reading this thread. Took me a bit to find the proper calculation website, but it was good info. I wonder if it's linked to in the wiki.

Are there any resources for how best to bridge healthcare and dental up until Medicare? This would be super useful.

I'm not planning to move out of the country. That's way too much work.
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by wolf359 »

fabis wrote: Tue Mar 28, 2023 7:44 pm What if SS isn't there due to changes in laws?
That is one of the worst case scenarios that is possible because variants of it have been proposed. However, you'd also have to balance that against the probability of it occurring. It's very unlikely. Again, I'm avoiding discussion of politics so I won't go into more detail.

However, it is reasonable to review possible scenarios for yourself, determine the likelihood of it occurring, and taking appropriate mitigations if you can. Most people would not be able to mitigate such a situation without working longer. If you are voluntarily retiring earlier, then you could simply decide not to retire until your nest egg could withstand whatever hypothetical stress test you come up with.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by marcopolo »

EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
rockstar wrote: Wed Mar 29, 2023 7:38 pm
EnjoyIt wrote: Wed Mar 29, 2023 6:11 pm
rockstar wrote: Wed Mar 29, 2023 5:00 pm
JackoC wrote: Wed Mar 29, 2023 3:56 pm
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
Personally, my current plan now is to maximize my PIA for the second bend and then evaluate where I stand. I won't gain much trying to maximize the third, so it will come down to incremental savings. I never calculated my PIA using my actual earnings from the social security website before reading this thread. Took me a bit to find the proper calculation website, but it was good info. I wonder if it's linked to in the wiki.

Are there any resources for how best to bridge healthcare and dental up until Medicare? This would be super useful.

I'm not planning to move out of the country. That's way too much work.
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Once in a while you get shown the light, in the strangest of places if you look at it right.
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

marcopolo wrote: Wed Mar 29, 2023 9:56 pm
EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
rockstar wrote: Wed Mar 29, 2023 7:38 pm
EnjoyIt wrote: Wed Mar 29, 2023 6:11 pm
rockstar wrote: Wed Mar 29, 2023 5:00 pm

Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

I’m trying to avoid going down this economic rabbit hole.

But to bring this back to the topic, if you’re retiring early, what strategies can you take to offset future unknowns? Working longer is not a good strategy since the idea here is to retire early. You can save more while working. But there is a savings ceiling and quality of life floor.

What portfolio moves/adjustments can be made offset this risk? Is there insurance that can be bought? How can you mitigate the risk?

I still think the risks create unnecessary fear.
Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
Personally, my current plan now is to maximize my PIA for the second bend and then evaluate where I stand. I won't gain much trying to maximize the third, so it will come down to incremental savings. I never calculated my PIA using my actual earnings from the social security website before reading this thread. Took me a bit to find the proper calculation website, but it was good info. I wonder if it's linked to in the wiki.

Are there any resources for how best to bridge healthcare and dental up until Medicare? This would be super useful.

I'm not planning to move out of the country. That's way too much work.
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by wolf359 »

rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
I will Roth convert up to the max for a 6% rate of my pay as the insurance cost the first handful of years, then depending on market returns either stay that or eventually drop down to 4%. So, definitely not free healthcare, but not crazy expensive either. That makes health insurance $1,400-2,600 a year until 65, when I would take Medicare.

Not sure where people get 20K-30K for health insurance that must be a couple.
My current employer provided health insurance is super good and is about 9.5K.
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
Found this: https://www.youtube.com/watch?v=oFetFqrVBNc

Not feeling it after watching John Oliver rip them apart.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by marcopolo »

rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm
EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
rockstar wrote: Wed Mar 29, 2023 7:38 pm
EnjoyIt wrote: Wed Mar 29, 2023 6:11 pm

Although I am a huge proponent of early financial independence and work being optional, in this particular case working just a little bit longer goes a very long way in mitigating some risks. 1-2 more years can easily turn 23x into 25x or more depending on savings rate and market returns. It can be the difference of being concerned about being forced to delay SS an extra 2 years or it being taxed more. It can be the difference of needing to do a reverse mortgage or not. In one's 40s I personally believe that 1-2 more years is a good tradeoff for minimizing those risks. But I am not OP and that is for them to decide.

We-semi retired with less than 25x. If I remember correctly we were around 22-23x, but we continued to work some allowing us to surpass 25x in the years to follow. Our experience is why I think part time (if possible in one's career) is a decent compromise for someone who is interested in buying more time for themselves.
Personally, my current plan now is to maximize my PIA for the second bend and then evaluate where I stand. I won't gain much trying to maximize the third, so it will come down to incremental savings. I never calculated my PIA using my actual earnings from the social security website before reading this thread. Took me a bit to find the proper calculation website, but it was good info. I wonder if it's linked to in the wiki.

Are there any resources for how best to bridge healthcare and dental up until Medicare? This would be super useful.

I'm not planning to move out of the country. That's way too much work.
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?

i can only speak for myself.

There are two issues if the ACA goes away, access and affordability.

We solve the first one by living in a state that has its own protections very similar to ACA to provide access to health insurance, with some cost protections.

We solve the affordability issues by including it in our budget.
While we have been getting a hefty tax credit, when we retired 5 years ago, we budgeted to pay full freight because the ACA was arguably on much shakier ground back then compared to today.
Once in a while you get shown the light, in the strangest of places if you look at it right.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by marcopolo »

wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
Once in a while you get shown the light, in the strangest of places if you look at it right.
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by wolf359 »

marcopolo wrote: Thu Mar 30, 2023 2:22 am
wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
I didn't say it was a good solution or even an acceptable one. It doesn't matter. In a hypothetical world where ACA is repealed and isn't replaced by anything nationally, it's the last man standing. I can't think of anything else that's currently out there.

Several states had provided protections similar to ACA prior to ACA. As far as I'm aware, those states modified their laws to conform with ACA. Presumably they would change their laws to stand alone again if ACA disappeared. I don't recall which states those were -- only Hawaii (HMSA) and Massachusetts (RomneyCare) come to mind. HMSA is now ACA compliant. Massachusetts ditched their health care exchanges in favor of ACA exchanges.

That lack of a replacement is why the probability of outright repeal is low. But remember, this was a response to a hypothetical situation.
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by smitcat »

Patzer wrote: Wed Mar 29, 2023 10:32 pm
EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
I will Roth convert up to the max for a 6% rate of my pay as the insurance cost the first handful of years, then depending on market returns either stay that or eventually drop down to 4%. So, definitely not free healthcare, but not crazy expensive either. That makes health insurance $1,400-2,600 a year until 65, when I would take Medicare.

Not sure where people get 20K-30K for health insurance that must be a couple.
My current employer provided health insurance is super good and is about 9.5K.
"That makes health insurance $1,400-2,600 a year until 65, when I would take Medicare."
What would the budget then be at 65?
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

Patzer wrote: Wed Mar 29, 2023 10:32 pm
EnjoyIt wrote: Wed Mar 29, 2023 8:04 pm
The bridge is the open market and keeping cost low is getting Affordable Care Act (ACA) subsidies. To maximize subsidies one wants to have their income as low as possible but not so low they qualify for Medicaid. Although I don’t frequent that forum, Mr. Money Mustache forum had some great discussions for that calculation with people willing to help with the math and offer advice.

The downside to that above may mean no Roth conversions because that will affect how much ACA subsidy one gets.

Depending on one’s math, an option could be to do Roth conversions to the top of the 24% tax bracket one year and then get maximum subsidies for a few years. A decrease in ACA subsidies more or less comes out to being equivalent to a 10% income tax. Income goes up by $100, you will pay $10 more for health insurance.

I see boglehead spying anywhere in the range of $20k-$30k for health care without subsidies.
I will Roth convert up to the max for a 6% rate of my pay as the insurance cost the first handful of years, then depending on market returns either stay that or eventually drop down to 4%. So, definitely not free healthcare, but not crazy expensive either. That makes health insurance $1,400-2,600 a year until 65, when I would take Medicare.

Not sure where people get 20K-30K for health insurance that must be a couple.
My current employer provided health insurance is super good and is about 9.5K.
$20-$30k comes from family plans with no subsidies plus deductible.

For example we pay $1600/month and have a $8500 out of pocket max. That’s $19200 just for premiums and then we pay out of pocket till we hit the max. Luckily most years we are less than $1k out of pocket but I’m sure that will change as we age.

It’s about half for a single person plan with no ACA subsidies. Prices vary based on location.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by wolf359 »

Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am 2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
Now that I think of it, it isn't really pessimism. It's whether or not you're being suitably conservative when making future projections. You believe that your house is a reliable store of value, and that it is most likely to continue appreciating in the future (perhaps 3X). You also stress tested this and determined your plan survives if your house only appreciates at the rate of inflation.

For conservative projections, I agree it is likely to store the value, but I assume that real estate only appreciates at the rate of inflation. My stress test is a 20% decline in value. Real estate CAN drop in value (See 2008). Your worst case is my base case.

Real estate is very local. You're talking about projecting the value of the property from age 46 to 80, or about 34 years. All I'm suggesting is that since you get to pick when you're ready for retirement, that you simply bump up your target IRA balance a little in case that house appreciation doesn't occur as expected. Then your SPIA is more likely to be funded, from either real estate appreciation, equity appreciation, or both.

I brought up the example of Love Canal, but you might not be familiar with it. It was an up-and-coming residential area in Niagara Falls, NY that had been appreciating for 20 years, and by the 1970's was considered one of the top 4 most desirable neighborhoods in the region. What none of the residents knew was that the neighborhood was built on or near a chemical dump. (I was anticipating your statement of "house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating." So was Love Canal at the time.)

I'm not saying that your home is built on a chemical dump. I'm saying that sometimes unexpected things can happen to an individual property that aren't reflected in the averages. 34 years is a long time to rely on the outcome of a single property.

I don't think it's a bad plan. My own plan is similar, if somewhat more conservative. I am relying on segregated IRA funds to fund the SPIA. My home equity is available to replenish investments or fund a SPIA, but only as a reserve if my financial plan fails.

Does your plan work if your home is actually lower in price than it is currently?
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

wolf359 wrote: Thu Mar 30, 2023 8:04 am
marcopolo wrote: Thu Mar 30, 2023 2:22 am
wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
I didn't say it was a good solution or even an acceptable one. It doesn't matter. In a hypothetical world where ACA is repealed and isn't replaced by anything nationally, it's the last man standing. I can't think of anything else that's currently out there.

Several states had provided protections similar to ACA prior to ACA. As far as I'm aware, those states modified their laws to conform with ACA. Presumably they would change their laws to stand alone again if ACA disappeared. I don't recall which states those were -- only Hawaii (HMSA) and Massachusetts (RomneyCare) come to mind. HMSA is now ACA compliant. Massachusetts ditched their health care exchanges in favor of ACA exchanges.

That lack of a replacement is why the probability of outright repeal is low. But remember, this was a response to a hypothetical situation.
As of today, it’s already having trouble in TX. ACA is at risk more than Social Security right now. I’d build conservative plans around a neutered ACA for early retirement.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

rockstar wrote: Thu Mar 30, 2023 11:40 am
wolf359 wrote: Thu Mar 30, 2023 8:04 am
marcopolo wrote: Thu Mar 30, 2023 2:22 am
wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm

Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
I didn't say it was a good solution or even an acceptable one. It doesn't matter. In a hypothetical world where ACA is repealed and isn't replaced by anything nationally, it's the last man standing. I can't think of anything else that's currently out there.

Several states had provided protections similar to ACA prior to ACA. As far as I'm aware, those states modified their laws to conform with ACA. Presumably they would change their laws to stand alone again if ACA disappeared. I don't recall which states those were -- only Hawaii (HMSA) and Massachusetts (RomneyCare) come to mind. HMSA is now ACA compliant. Massachusetts ditched their health care exchanges in favor of ACA exchanges.

That lack of a replacement is why the probability of outright repeal is low. But remember, this was a response to a hypothetical situation.
As of today, it’s already having trouble in TX. ACA is at risk more than Social Security right now. I’d build conservative plans around a neutered ACA for early retirement.
What's going in Texas today.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by rockstar »

EnjoyIt wrote: Thu Mar 30, 2023 11:52 am
rockstar wrote: Thu Mar 30, 2023 11:40 am
wolf359 wrote: Thu Mar 30, 2023 8:04 am
marcopolo wrote: Thu Mar 30, 2023 2:22 am
wolf359 wrote: Wed Mar 29, 2023 10:27 pm

The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
I didn't say it was a good solution or even an acceptable one. It doesn't matter. In a hypothetical world where ACA is repealed and isn't replaced by anything nationally, it's the last man standing. I can't think of anything else that's currently out there.

Several states had provided protections similar to ACA prior to ACA. As far as I'm aware, those states modified their laws to conform with ACA. Presumably they would change their laws to stand alone again if ACA disappeared. I don't recall which states those were -- only Hawaii (HMSA) and Massachusetts (RomneyCare) come to mind. HMSA is now ACA compliant. Massachusetts ditched their health care exchanges in favor of ACA exchanges.

That lack of a replacement is why the probability of outright repeal is low. But remember, this was a response to a hypothetical situation.
As of today, it’s already having trouble in TX. ACA is at risk more than Social Security right now. I’d build conservative plans around a neutered ACA for early retirement.
What's going in Texas today.
Here’s a good middle of the road source:

https://www.reuters.com/business/health ... 023-03-30/

From a planning perspective, this would increase out of pocket costs for preventive care.
Last edited by rockstar on Thu Mar 30, 2023 12:06 pm, edited 1 time in total.
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by JackoC »

rockstar wrote: Wed Mar 29, 2023 5:00 pm
JackoC wrote: Wed Mar 29, 2023 3:56 pm
rockstar wrote: Wed Mar 29, 2023 10:53 am
JackoC wrote: Wed Mar 29, 2023 10:03 am
rockstar wrote: Tue Mar 28, 2023 9:48 pm

So all the old folk move into Hooverville?

https://depts.washington.edu/depress/hooverville.shtml

Consider how much social security contributes to GDP every year. We'll be back in a recession or depression. It's one of those things that's too big to fail. The consequences of letting it fail would be devasting.
Not disagreeing with your general theme but just for completeness, government transfer payments like SS are not included in GDP*. Also in general you have to separate cyclical from secular effects. *If* a country's overall debt is headed toward being unsustainable, an eventual crisis could be far more costly than a recession. Even if the debt is just suboptimally high, growth could be higher in the long run by reducing debt even if that has a negative short term cyclical effect. Again not arguing against your general idea which is obvious. Public pension reform (adapting to the changing shape of the population age 'pyramid' because of lower birth rates and longer lives) is very difficult, see France. Yet it will have to happen eventually in most rich and middle income countries. Ending those programs is farfetched though I agree.

I'd say as a practical matter though there's less reason to ignore program risk to SS if you're 46 than if already in your 60's. OP said was willing to include some discount.

*in the expenditure calculation GDP=C+I+G+net exports, G is government purchases of goods/services not including transfer payments. And we know the income calculation of GDP gets the same theoretical answer. If the xfer payments didn't happen they'd end up as one of the other three, Consumption or Investment by the people from whom the payments wouldn't be taken in taxes, or govt still collects those taxes but spends more on goods/services (bridges, F-35's, govt services, etc.). A big change in transfer payments would obviously have secondary economic effects (this sector vs. that, short/long run effects if it changed C v I, etc) that likely would come around to affecting GDP but we couldn't say for sure plus or minus. GDP is indifferent to who gets what. Taxes to make transfer payments are 100% about who gets what. Apples and oranges.
I don’t think anyone knows what is too much debt. But it does make headlines. However, we know from history that we need economic interventions to keep things going. The New Deal comes to mind. People need money to spend it.

You also have the impact of Medicare. There is a cost for supplemental plans. Our medical system really depends on Medicare and Medicaid. If they went away, that would be a serious problem.

What I’m saying is letting social security fail would be worse than the cost to keep it going. I don’t think it’s a real risk to plan for. It’s like planning for the banking system failing. If it did, the consequences are far worse than the cost to keep it going. So we should expect for bailouts.

The risk that I’m planning for is higher medical costs in the future. I can’t predict my future health. There is only so much I can do.

But this is stuff that keeps people fearful. And that keeps them in the work force longer. And that pushes down wages, which is good for businesses.
If 'fail' means abolition of the programs, I agree that's extremely unlikely. OTOH if the idea is that anything done to change old age transfer payment programs, including what some would claim are 'cuts' is an overall economic (and 100% on topic here, stock market) negative: I don't agree. And the practical upshot IMO is younger people (40's might count) particularly should not entirely rely on no changes that might be characterized as 'cuts'. But everyone can take whatever risk they like in such things, obviously.

People being in the work force longer, *that* actually increases GDP. In the income version (which has to equal the expenditure version), one component is wages: people don't make them if not working. There's an unfortunate tendency in our public debate to make out self interest as common interest, when there's actually nothing wrong with pursuing self interest. People working longer does not push down wages by any theory or evidence, it pushes up the productive capacity of the economy: more labor input, more savings of wages to increase the capital input, probably no less productivity (older workers may slow down but are more knowledgeable as a rule). So that means everyone individually should want to work longer? No. It's the same apples and oranges issue of trying to say transfer payments can't ever be reduced (or rate of increase reduced, etc.) because it would cut GDP. That's false, but it's entirely legitimate to want a higher than lower old age transfer payment oneself. :happy
1. Help me understand. If I receive a social security check and spend it on groceries, how doesn’t my spending on groceries count toward GDP? How is it backed out? Isn’t that consumer spending? You can DM me the answer.

2. We’re also definitely seeing upward pressure on wages due to lower labor participation by the 55+ cohort. You’re also not considered unemployed if you’re not seeking out work. I’ll see if I can find a paper to DM you.

3. I’m trying to avoid going down this economic rabbit hole.
1. The SS check came from somebody else's tax payments*. If they didn't pay those taxes, they'd have more of their wages, labor *production* to spend at the grocery store. GDP counts up 'product' as the acronym implies, production. Transfer payments aren't production. There are two ways to calculate GDP which come out the same if all the data are neat. The income method counts (pre tax) wages, money gotten for production of goods and services. The more common expenditure method counts all Consumption spending in GDP=C+I(nvestment)+G(ovt spending)+Net Exports. It doesn't matter where it came from. Again if the FICA tax hadn't been collected, the people earning the wages would had the same money to spend on C (or I), or the govt could have still collected the same taxes (from labor production) but spend more on public goods and services (only public goods/services count in 'Govt Spending' for GDP purposes, again not transfer payments). Zero moral implication here about producing and not producing, this is just basic economics. Nobody can have a transfer payment unless somebody produced it and GDP just measures production. even though the expenditure method does that in a somewhat roundabout way.

2. It would be an off topic tangent to debate why *nominal* wages have increased significantly since Covid. But since real wages haven't increased much (or even decreased depending on the specific data and period), it's largely moot. The point is again the basic economics that there has to be production for anyone to consume anything. People working longer means more GDP under almost any scenario. Some people labor under the misconception of a 'pie' that just gets cut into smaller pieces the more people work. The earlier people retire, the more difficult it will be to support everyone, with only exceptional scenario's. It's Macro Econ 101. Again though the decision for an individual to retire is theirs.

3. But basic misunderstanding of economics obviously influences 'on topic' arguments. If your previously stated economic misconceptions had zero influence on your 'on topic' thinking, why would you have made those arguments?

*you can think of it politically as your own past tax payments coming back to you if you'd like, however dubious that might be, but economically it doesn't really matter whose taxes.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by marcopolo »

wolf359 wrote: Thu Mar 30, 2023 8:04 am
marcopolo wrote: Thu Mar 30, 2023 2:22 am
wolf359 wrote: Wed Mar 29, 2023 10:27 pm
rockstar wrote: Wed Mar 29, 2023 10:13 pm
marcopolo wrote: Wed Mar 29, 2023 9:56 pm While this is generally good advice, as often, the devil is in the details. There are common scenarios ( e.g., one selects a plan that is cheaper than the benchmark second lowest cost silver plan) where the cost of the plan can be $0 even with income significantly higher than the Medicaid threshold. Lower income even more does theoretically result in a larger tax credit, but since the credit can not be more than the cost of the plan, the additional credits are lost. So, one is better off having a higher income to do things like Roth conversions, at least to the point where the tax credit becomes less than the cost of the plan.
Playing devil's advocate, what if ACA goes away? What's the fallback plan?
The most likely backup plan is a health care sharing ministry (HCSM). They're a faith-based alternative to insurance. They are organizations in the United States in which health care costs are shared among members with common ethical or religious beliefs in a risk-pooling framework in some ways analogous to, but distinct from, health insurance. (Given that solution, it's funny you both used the word "devil" in your responses.)

HCSMs are currently used by people who don't want to participate in the ACA. Should the ACA go away, they're probably the only affordable alternative standing until one qualifies for Medicare at age 65.
That may be an acceptable alternative to some. I would never rely on "faith" to provide health care for my family. I want a contractual obligation in return for the premiums I pay.

Several states provide protections similar to ACA regarding access to health insurance.
I didn't say it was a good solution or even an acceptable one. It doesn't matter. In a hypothetical world where ACA is repealed and isn't replaced by anything nationally, it's the last man standing. I can't think of anything else that's currently out there.

Several states had provided protections similar to ACA prior to ACA. As far as I'm aware, those states modified their laws to conform with ACA. Presumably they would change their laws to stand alone again if ACA disappeared. I don't recall which states those were -- only Hawaii (HMSA) and Massachusetts (RomneyCare) come to mind. HMSA is now ACA compliant. Massachusetts ditched their health care exchanges in favor of ACA exchanges.

That lack of a replacement is why the probability of outright repeal is low. But remember, this was a response to a hypothetical situation.
Here is a somewhat dated spreadsheet showing which states have enacted ACA-like protections for access and cost containment. The first 3 columns for each state indicate the critical components. Looks like 11 states have implemented all 3.

https://docs.google.com/spreadsheets/d ... =drivesdk
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

wolf359 wrote: Thu Mar 30, 2023 9:24 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am 2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
Now that I think of it, it isn't really pessimism. It's whether or not you're being suitably conservative when making future projections. You believe that your house is a reliable store of value, and that it is most likely to continue appreciating in the future (perhaps 3X). You also stress tested this and determined your plan survives if your house only appreciates at the rate of inflation.

For conservative projections, I agree it is likely to store the value, but I assume that real estate only appreciates at the rate of inflation. My stress test is a 20% decline in value. Real estate CAN drop in value (See 2008). Your worst case is my base case.

Real estate is very local. You're talking about projecting the value of the property from age 46 to 80, or about 34 years. All I'm suggesting is that since you get to pick when you're ready for retirement, that you simply bump up your target IRA balance a little in case that house appreciation doesn't occur as expected. Then your SPIA is more likely to be funded, from either real estate appreciation, equity appreciation, or both.

I brought up the example of Love Canal, but you might not be familiar with it. It was an up-and-coming residential area in Niagara Falls, NY that had been appreciating for 20 years, and by the 1970's was considered one of the top 4 most desirable neighborhoods in the region. What none of the residents knew was that the neighborhood was built on or near a chemical dump. (I was anticipating your statement of "house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating." So was Love Canal at the time.)

I'm not saying that your home is built on a chemical dump. I'm saying that sometimes unexpected things can happen to an individual property that aren't reflected in the averages. 34 years is a long time to rely on the outcome of a single property.

I don't think it's a bad plan. My own plan is similar, if somewhat more conservative. I am relying on segregated IRA funds to fund the SPIA. My home equity is available to replenish investments or fund a SPIA, but only as a reserve if my financial plan fails.

Does your plan work if your home is actually lower in price than it is currently?
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 1.5% real (the current 30 year TIPS return), it would require an additional .27X
If I assumed investments saved to match that decline would return 3% real (a balanced portfolio), it would require an additional .16X
Last edited by Patzer on Thu Mar 30, 2023 2:14 pm, edited 2 times in total.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

Patzer wrote: Thu Mar 30, 2023 2:08 pm
wolf359 wrote: Thu Mar 30, 2023 9:24 am
Patzer wrote: Mon Mar 27, 2023 5:28 pm
wolf359 wrote: Mon Mar 27, 2023 11:07 am 2) Funding your SPIA is dependent on a single asset - your house. Although real estate in general will increase at the rate of inflation, your house is a specific property that is subject to individual risks. Those who had homes in the Detroit suburbs when the car industry crashed did not have their homes appreciate. Nor did the people who suddenly discovered that they were living on a future Superfund site (like Love Canal.) I suggest considering two sources of funding for that SPIA - Open up an IRA to keep the funds segregated, up to the amount allowed for a QLAC annuity. Then don't count those funds for the first phase of your retirement. You then have the option of funding the SPIA with funds that had been invested in the stock market, and/or funds that raised with a reverse mortgage.
2) I hear you, but my house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating.
Houses in this area from 1990-2010 increase 4X and 2010-Present increased 3X.
I am already being very pessimistic by assuming the house will only match inflation.
Now that I think of it, it isn't really pessimism. It's whether or not you're being suitably conservative when making future projections. You believe that your house is a reliable store of value, and that it is most likely to continue appreciating in the future (perhaps 3X). You also stress tested this and determined your plan survives if your house only appreciates at the rate of inflation.

For conservative projections, I agree it is likely to store the value, but I assume that real estate only appreciates at the rate of inflation. My stress test is a 20% decline in value. Real estate CAN drop in value (See 2008). Your worst case is my base case.

Real estate is very local. You're talking about projecting the value of the property from age 46 to 80, or about 34 years. All I'm suggesting is that since you get to pick when you're ready for retirement, that you simply bump up your target IRA balance a little in case that house appreciation doesn't occur as expected. Then your SPIA is more likely to be funded, from either real estate appreciation, equity appreciation, or both.

I brought up the example of Love Canal, but you might not be familiar with it. It was an up-and-coming residential area in Niagara Falls, NY that had been appreciating for 20 years, and by the 1970's was considered one of the top 4 most desirable neighborhoods in the region. What none of the residents knew was that the neighborhood was built on or near a chemical dump. (I was anticipating your statement of "house is in a very desirable area that only keeps getting more desirable and there is no data to suggest a change in the winds. If anything, it's accelerating." So was Love Canal at the time.)

I'm not saying that your home is built on a chemical dump. I'm saying that sometimes unexpected things can happen to an individual property that aren't reflected in the averages. 34 years is a long time to rely on the outcome of a single property.

I don't think it's a bad plan. My own plan is similar, if somewhat more conservative. I am relying on segregated IRA funds to fund the SPIA. My home equity is available to replenish investments or fund a SPIA, but only as a reserve if my financial plan fails.

Does your plan work if your home is actually lower in price than it is currently?
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 3% real, it would require an additional .16X
Just curious, how much extra work would it cost you to get an additional .44x? How many months will it take?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

EnjoyIt wrote: Thu Mar 30, 2023 2:10 pm
Patzer wrote: Thu Mar 30, 2023 2:08 pm
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 1.5% real (the current 30 year TIPS return), it would require an additional .27X
If I assumed investments saved to match that decline would return 3% real, it would require an additional .16X
Just curious, how much extra work would it cost you to get an additional .44x? How many months will it take?
My savings rate is .19X/month
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

Patzer wrote: Thu Mar 30, 2023 2:17 pm
EnjoyIt wrote: Thu Mar 30, 2023 2:10 pm
Patzer wrote: Thu Mar 30, 2023 2:08 pm
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 1.5% real (the current 30 year TIPS return), it would require an additional .27X
If I assumed investments saved to match that decline would return 3% real, it would require an additional .16X
Just curious, how much extra work would it cost you to get an additional .44x? How many months will it take?
My savings rate is .19X/month
Can I assume that is today? Does it include asset growth?

What do you think your asset savings plus growth rate will be when you are at 23x but need another .44x? I'm sure it will be less than 2 months additional work needed. Probably worth the effort...no?

This is how one more year happens BTW. You look at your portfolio and savings rate and realize putting in 1 extra year will get you 3-4x in yearly spending. That is the difference between possibly needing to reverse mortgage your house vs not. I wonder if that extra year is worth it to you?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

EnjoyIt wrote: Thu Mar 30, 2023 2:39 pm
Patzer wrote: Thu Mar 30, 2023 2:17 pm
EnjoyIt wrote: Thu Mar 30, 2023 2:10 pm
Patzer wrote: Thu Mar 30, 2023 2:08 pm
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 1.5% real (the current 30 year TIPS return), it would require an additional .27X
If I assumed investments saved to match that decline would return 3% real, it would require an additional .16X
Just curious, how much extra work would it cost you to get an additional .44x? How many months will it take?
My savings rate is .19X/month
Can I assume that is today? Does it include asset growth?

What do you think your asset savings plus growth rate will be when you are at 23x but need another .44x? I'm sure it will be less than 2 months additional work needed. Probably worth the effort...no?

This is how one more year happens BTW. You look at your portfolio and savings rate and realize putting in 1 extra year will get you 3-4x in yearly spending. That is the difference between possibly needing to reverse mortgage your house vs not. I wonder if that extra year is worth it to you?
That is today, and doesn't include growth. So, yes, .44X is probably 2 months and .27X (The TIPS yield) would be less than 1.5 months.
I agree working extra to cover that is a reasonable proposition.

That said, I don't have any concerns with taking a reverse mortgage, so no reason to avoid it completely as a possibility. It's only a small possibility anyways. Most likely my portfolio outperforms the worst few percent of historical scenarios and my assets are larger, so I don't need it, or I die and I don't need it. So, not worth working extra to completely avoid it.

The rabbit hole of one more year, is why 100% of people I know that actually are retired have told me they wish they did it, 1-5 years earlier.
I want to get to a defensible position based on reasonable math, and go with it.
EnjoyIt
Posts: 8272
Joined: Sun Dec 29, 2013 7:06 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by EnjoyIt »

Patzer wrote: Thu Mar 30, 2023 3:01 pm
EnjoyIt wrote: Thu Mar 30, 2023 2:39 pm
Patzer wrote: Thu Mar 30, 2023 2:17 pm
EnjoyIt wrote: Thu Mar 30, 2023 2:10 pm
Patzer wrote: Thu Mar 30, 2023 2:08 pm
I have solid reasons to think my home location is not a Love Canal or Detroit, BUT I also think you made a good enough argument to justify hedging for a 20% decline in real estate value as a reasonable stress test, and I will build it into my model.

If I assumed investments saved to match that decline would not appreciate above inflation, it would require an extra .44X.
If I assumed investments saved to match that decline would return 1.5% real (the current 30 year TIPS return), it would require an additional .27X
If I assumed investments saved to match that decline would return 3% real, it would require an additional .16X
Just curious, how much extra work would it cost you to get an additional .44x? How many months will it take?
My savings rate is .19X/month
Can I assume that is today? Does it include asset growth?

What do you think your asset savings plus growth rate will be when you are at 23x but need another .44x? I'm sure it will be less than 2 months additional work needed. Probably worth the effort...no?

This is how one more year happens BTW. You look at your portfolio and savings rate and realize putting in 1 extra year will get you 3-4x in yearly spending. That is the difference between possibly needing to reverse mortgage your house vs not. I wonder if that extra year is worth it to you?
That is today, and doesn't include growth. So, yes, .44X is probably 2 months and .27X (The TIPS yield) would be less than 1.5 months.
I agree working extra to cover that is a reasonable proposition.

That said, I don't have any concerns with taking a reverse mortgage, so no reason to avoid it completely as a possibility. It's only a small possibility anyways. Most likely my portfolio outperforms the worst few percent of historical scenarios and my assets are larger, so I don't need it, or I die and I don't need it. So, not worth working extra to completely avoid it.

The rabbit hole of one more year, is why 100% of people I know that actually are retired have told me they wish they did it, 1-5 years earlier.
I want to get to a defensible position based on reasonable math, and go with it.
I know you realize that 100% success means that you have >$1 when you die.

But let us think about the psychology of success. How do you think you would react if you are retired, the market is down and your portfolio is dwindling. After a few years as it starts to recover another blow comes where equities drop by 50%. You look at your portfolio and you realize that without growth you wont get to SS at current spending levels. That is what happened to the year 2000 retiree who chose to spend at 4%. Turns out after the crash in 2009, equities grew pretty well and the portfolio will likely survive all 30 years. But at that moment in 2012 or 2014 the retiree I think would be scared they may run out of money. I would suspect any rational person may very well start spending significantly less during those times to help preserve their portfolio. I suspect sleepless nights worrying how to survive. To me that is kind of like a portfolio failure.

How do you feel you would react to this type of scenario?

Just to refresh your memory, I am all for early financial independence and buying one's freedom. So I'm not trying to convince you not to retire early. Just looking to see what you consider success and is cutting it so close worth it?
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
Leesbro63
Posts: 10638
Joined: Mon Nov 08, 2010 3:36 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Leesbro63 »

EnjoyIt wrote: Thu Mar 30, 2023 3:25 pm
I know you realize that 100% success means that you have >$1 when you die.

But let us think about the psychology of success. How do you think you would react if you are retired, the market is down and your portfolio is dwindling. After a few years as it starts to recover another blow comes where equities drop by 50%. You look at your portfolio and you realize that without growth you wont get to SS at current spending levels. That is what happened to the year 2000 retiree who chose to spend at 4%. Turns out after the crash in 2009, equities grew pretty well and the portfolio will likely survive all 30 years. But at that moment in 2012 or 2014 the retiree I think would be scared they may run out of money. I would suspect any rational person may very well start spending significantly less during those times to help preserve their portfolio. I suspect sleepless nights worrying how to survive. To me that is kind of like a portfolio failure.

How do you feel you would react to this type of scenario?

Just to refresh your memory, I am all for early financial independence and buying one's freedom. So I'm not trying to convince you not to retire early. Just looking to see what you consider success and is cutting it so close worth it?
This is such a great point. The 1966-1996 retire survived at just below a 4% SWR, but at age 81ish, in 1981, that retiree would probably have been in some serious dispair.
chassis
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Joined: Tue Mar 24, 2020 4:28 pm

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by chassis »

Patzer wrote: Fri Mar 24, 2023 1:04 pm I may retire as early as 46.
Many would say I have to worry about living 50-60 years, but I don't really need to worry past 80, because at 70 I can take social security and at 80 I can take a reverse mortgage and buy a SPIA with it, which sets me up with income for life as shown below.

My Income needs from age 46 to 100:
Image

From 2014-2021, I spent an average of 22,726 per year.
From 2022 until I retire I gave myself a raise and plan to spend an average of 37K/yr.
In retirement, I plan to spend 48.6K/yr with a surplus of 5.4K/yr (to cover unexpected expenses) for a total of 54K/yr.

Retiring at 46, my social security benefit at 70 will be 35K, which covers 65% of my spending.

At 80, I could get a reverse mortgage, buy a SPIA (Single Premium Immediate Annuity) with the proceeds. That SPIA would pay 14.7K/yr, for a total of 49.7K/yr with Social Security. Most likely, I will still have investments to cover the remaining 4.3K, but even if I don't that won't matter, because I will easily be able to live on 49.7K/yr (Inflation Adjusted).

This is for a modest 234K house. For someone with a more expensive house this would be an even bigger supplemental income.

Below is the combined proceeds from Social Security and a SPIA for me, and 80 is about the point where it starts to make sense, but if my investments are doing well, I could/would delay it further.
Reverse Mortgage/SPIA + Soc Sec at different ages:
70: 43.8K/yr (Too early)
80: 49.7K/yr (About right)
81: 51K/yr
82: 52.3K/yr
83: 53.6K/yr
84: 55K/yr (More than I can spend)

For those of us with moderate spending, who had short careers with strong earnings, which would be the case for many early retirees, it can be quite easy to hedge against longevity with social security and a SPIA derived from earnings a reverse mortgage on our homes in old age.

Even with a simple Asset Allocation of 70% Stocks / 30% 10 year Treasuries, 24.5X worked all the way to age 100 even if you were unlucky enough to retire in Sept 1929, if you had the Social Security and Reverse Mortgage/SPIA amounts that I am referencing.
If your luck was just a bit better and you retired just 3 months earlier or later then 21.5X and 19.4X would have worked.

I will use a more diversified asset allocation that would have survived with 22.4X in Sept 1929 and 19.8X and 17.7X if I retired 3 months earlier or later.
So, even retiring with just 23X at 46, I don't have to worry about how long I live.

----------
About me:
No heirs, no plans to have heirs. Not married, won't get married.
I do have a long-term romantic partner, but her financials are completely separate from mine and she is materially older than me, so no inheritance worries past me being 80.
The post above is a declarative statement, correct? Are you asking for endorsement or approval from the community, regarding your plan?

There are no question marks or statements written to suggest a question.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

EnjoyIt wrote: Thu Mar 30, 2023 3:25 pm I know you realize that 100% success means that you have >$1 when you die.

But let us think about the psychology of success. How do you think you would react if you are retired, the market is down and your portfolio is dwindling. After a few years as it starts to recover another blow comes where equities drop by 50%. You look at your portfolio and you realize that without growth you wont get to SS at current spending levels. That is what happened to the year 2000 retiree who chose to spend at 4%. Turns out after the crash in 2009, equities grew pretty well and the portfolio will likely survive all 30 years. But at that moment in 2012 or 2014 the retiree I think would be scared they may run out of money. I would suspect any rational person may very well start spending significantly less during those times to help preserve their portfolio. I suspect sleepless nights worrying how to survive. To me that is kind of like a portfolio failure.

How do you feel you would react to this type of scenario?

Just to refresh your memory, I am all for early financial independence and buying one's freedom. So I'm not trying to convince you not to retire early. Just looking to see what you consider success and is cutting it so close worth it?
It's a reasonable point.
If you remember, the really scary year was 2011 from a purely psychological standpoint, lots of news sources were saying there was going to be another recession and another leg down.

I think my emotional response would be very different by age.

46-50 Won't be scary no matter what happens. My math survives the great depression and I do think I could shrug my shoulders at it, or easily get another job paying near my peak salary if I couldn't.

50-55 Very few scenarios that would make me worry, but if one did, I could still get a job for at least half my current comp in a lower position, and that would still be 6 figures, so that fixes any holes fast. Doubt I would feel much pressure to do anything but ride it out.

55-60 Same as 50-55, but getting a job gets harder; it's a longer search and I might have to spend some time retraining. Starting to feel the pressure, but it's not overwhelming.

60-70 This is the only truly scary phase. I am no longer marketable in my industry. If things were going horribly wrong, I would have to choose between 1) Trusting the math, 2) cutting expenses, and 3) doing some pretty low paying work to make up the difference. I probably cut expenses and have to give up on a few of my dreams. Hopefully, I got most of them done between 46-60, since most of them are very physical and it's just the easy stuff I save for later, like touring the Vatican. It helps a lot that I don't need a lot of money to be happy, so I could probably juice things a little bit with some side gigs if I had to, but it's a pretty low ROI to take on a $15-30/hr job when I could have made $125/hr at my prime and worked a few months longer. I am not blind to this risk, it just doesn't seem extremely high in probability.
Do I take a 100% chance of giving up prime years to work extra, to reduce a 2% chance of feeling fearful later in life? It's a tough question.

70-80 won't be that scary, because I will have social security, a full paid for house, and worst comes to worst, I cut my budget. My mobility is in decline and I am probably okay doing local hikes, playing tennis, and watching Netflix, which can all be done on a budget.

80+ I have will social security and a SPIA, and just not care what the market does as it will be such a small part of the picture.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

chassis wrote: Thu Mar 30, 2023 3:42 pm
The post above is a declarative statement, correct? Are you asking for endorsement or approval from the community, regarding your plan?

There are no question marks or statements written to suggest a question.
It's an investment theory post.
I propose a theory. The forum agrees with the theory in which cases, there wouldn't be 200+ replies or picks mathematically testable holes in the theory.
Then, I update the theory to cover the VALID counter arguments and perhaps put it into action when I turn 46, or whatever age the final version of the theory points to.

The community grows from a deeper discussion into an often under discussed topic on this forum, which is potentially successful strategies for early retirement for lower spenders with lower SWRs, than the oft cited and overly conservative, 30-50X expenses posts that are not actually based in math, but primarily derived from fear.

It's funny, the notion, "this time it's different" is easily mocked when people are touting get rich schemes or concentrated investments like ARKK, but somehow gain traction when people say they need a higher X expenses or lower SWR than what would have been successful in every point in history before now.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by marcopolo »

Patzer wrote: Thu Mar 30, 2023 4:20 pm
chassis wrote: Thu Mar 30, 2023 3:42 pm
The post above is a declarative statement, correct? Are you asking for endorsement or approval from the community, regarding your plan?

There are no question marks or statements written to suggest a question.
It's an investment theory post.
I propose a theory. The forum agrees with the theory in which cases, there wouldn't be 200+ replies or picks mathematically testable holes in the theory.
Then, I update the theory to cover the VALID counter arguments and perhaps put it into action when I turn 46, or whatever age the final version of the theory points to.

The community grows from a deeper discussion into an often under discussed topic on this forum, which is potentially successful strategies for early retirement for lower spenders with lower SWRs, than the oft cited and overly conservative, 30-50X expenses posts that are not actually based in math, but primarily derived from fear.

It's funny, the notion, "this time it's different" is easily mocked when people are touting get rich schemes or concentrated investments like ARKK, but somehow gain traction when people say they need a higher X expenses or lower SWR than what would have been successful in every point in history before now.
I agree this has been, and continues to be, a useful discussion.
It is refreshing to see something other than an ever-spiraling lower SWR being duscussed.

I do have a follow-up question. You mentioned in your OP that you have long-term partner who is materially older. Do you live together and share expenses? The budget you put forth is your share of those expenses? Or, do you have completely independent financial lives? If the former, how would your budget change if your partner were to die long before you? I can envision scenarios where your expenses could rise, or fall.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: I don't have to worry about living past 80, even if I retire at 46 with just 23X

Post by Patzer »

marcopolo wrote: Thu Mar 30, 2023 4:34 pm
I agree this has been, and continues to be, a useful discussion.
It is refreshing to see something other than an ever-spiraling lower SWR being duscussed.

I do have a follow-up question. You mentioned in your OP that you have long-term partner who is materially older. Do you live together and share expenses? The budget you put forth is your share of those expenses? Or, do you have completely independent financial lives? If the former, how would your budget change if your partner were to die long before you? I can envision scenarios where your expenses could rise, or fall.
We live together in my house. I don't rely on her financially.
She does rely on me financially, but only for the house, which she is set to inherit in the unlikely event that I die first.

I actually think the biggest risk to my finances is if she dies well ahead of expectations or we split up and I end up meeting someone who's finances are less aligned.
As I sit now, I would not want to fit the bill for someone else's retirement, but I do wonder if an older and perhaps lonelier me might be more open to spending extra money to support a new partner.

Would I work longer now and give up adventures with my current partner to make sure I have extra money for a future partner with undersized savings? That doesn't seem right.
Last edited by Patzer on Thu Mar 30, 2023 8:45 pm, edited 1 time in total.
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