First, I accept that there is no security and that although money is nice it’s a mistake to trust money. For a safety margin, I like about $25000 in cash money market over investment capital at 4%. Other safety margins include:
Amortization: For a financial safety margin, it depends on age at retirement and life expectancy, the latter of which is unknowable, i.e., if I die next week I saved way, way too much. Although I start with the 4% SWR, I like to take savings/investments and treat them as a mortgage amortized over life expectancy at a very low interest rate. If life expectancy is 30 more years, 500,000 at 1% over 30 years is $1608.20 per month, or $19, 298.40 per year even leaving it in the bank. This approach is mostly psychological but still helpful. Inflation can kill the value of the payments, but I am assuming that interest rates would rise as well.
Social Security: I think it will be there in some form, and even if the benefit is reduced in real terms to 25% of what’s currently promised, it can make up for a substantial amount of savings. If the current promise is $2000 per month, and you end up getting $500 per month in today’s dollars, that still makes up for $150,000 in savings at 4% withdrawal.
Insurance: The big things that can drain savings such as liability, medical bills, long term care, are insurable. Including premiums within the retirement budget is as good as increased savings to pay for them.
Family and community: This is a two way street, and provides another measure of safety. I’ve made substantial gifts to family over the years, and although most have since died, those remaining are doing well and we can help one another in an emergency.
Flexibility: The ability to reduce money expenses is better than just more savings IMO. Preparing a crash budget and a plan provides some added level of safety.
Ability to Earn Money: This is also a safety margin. As Jacob points out, a minimum wage job could support his life. Much better IMO to be able to freelance to get money if the need arises; retirement doesn’t mean being helpless.