What's your retirement number?

[SimpleLife]

Welcome to the fourth page....

Living in a paid off home is hands down one of the best things you could ever do for financial security. I paid cash for my first house at 28 with money I had saved for the preceding 2.5 years and it was an awesome feeling. With a paid off house, you could work at any job and still live well since you have the single biggest expense taken care of. Your savings stretch further, and there is a general peace of mind knowing that you always have a roof over your head. It's guaranteed investment. You can always rent the spare rooms a well, so as to produce extra income. With many, this is a common back up plan in case they burn through savings and need income. You can garden, raise rabbits, chickens, etc. for food. You can drastically reduce your living expenses living in a paid off house.

true, but I can't save enough money to buy a decent house i don't think(in an area where I enjoy living).....That basically takes away all my capital I could use in the stock market, bonds, etc.

In addition, now I'm not as mobile. If I want to move, I have to worry about renting it, managing it, etc. If I want to sell it, I may not get what I paid for it(this happened to me with a condo).

In addition, owning a home takes a nearly constant flow of cash for repairs, insurance, taxes, etc. that most people don't mention.

As a renter, I don't have to worry about taxes, repairs, insurance, etc. and I'm not tied down. This is especially true if I'm living towards ERE, which means I don't have a lot of stuff to store...I don't need a lot of space.

I know there are arguments both ways, but I just prefer the flexibility and freedom of renting at this point. I have enough FI to meet a rent and my monthly expenses.

While you are more tied down, that's the only real downside. When I rented, after each major repair or remodel (new roof, new pavement, new kitchen) my rent went way up. My rent actually doubled in 10 years. The owner wasn't giving me a higher QOL at their own expense just to "pass the wealth around". My rent covered taxes, insurance AND repairs.

I have two rentals and I'm sure my tenants might snub their nose at paying property taxes and insurance and think they are on the better path because "they are not paying taxes or repairs" (even though they struggled just getting 3K together to move in, so it's not like they could afford to buy if they wanted to), but at the end of the day, they still are; the difference is they are paying them for me, while their rent keeps going up and my mortgage (the one that has one) is fixed.

Part of my mortgage for my primary residence is tax deductible too, an additional benefit to owning IF you stay put or don't mind renting it out. My mortgage is fixed, and I build equity.

[SimpleLife]

Looks like 300K is the rough average for most people.

[slsdly]

I suppose if I was working with 4% at present expenses rounded up to the nearest 10k, 500kCAD. That puts me as one of the bigger spenders here although I blame part of that on present geography. I have little faith the markets will actually deliver me 4% + inflation into the future as I am a bit of a doomer, so I expect I will want a lower SWR.

That said, there are many variables for me; I actually love my present day job as it aligns with me philosophically speaking but if it ended I may be more keen to end wage slavery, I don't know what my housing situation will be nor where exactly I will live (a very large part of my current living expenses), I hope to avoid tapping my RRSP if possible, will my nascent hustling income blossom one day, etc.

Suffice to say, I squirrel away and invest, but I try not to obsess over when that magical moment will happen. I figure I will know better 4-5 years from now, and the most important part is to prepare for that day. I have youth on my side as I am still a few years shy of 30!

[SimpleLife]

The older I get, the more I realize life/success is a journey, not a destination. Enjoy the job you like and the friends you make there in the moment. I think once you are financially ready to retire and you pull the trigger, by choice or for mental health reasons, you will look back at these years fondly.

One thing I've always considered is relocating to a lower cost of living state. WA is expensive, and I don't care for the increasingly liberal politics. I can buy a move in ready house on acreage in some states for 50K, compared to the 300+K house I live in now. That frees up a lot of cash. Alas, I own three houses here that I got good deals on, and am in the process of buying more, so I'd either have to hire a PM or sell and start over somewhere else.

[EdithKeeler]

I am new to the ERE blog but have been greatly inspired. Calculating how much you will need in retirement a few questions arose. How do you factor in you 401K/403 contributions since these are penalized if you withdraw early?

Based on the 4% withdrawal rule, I estimated we will need 750,000. But do I include the 401k/403b making up part of this number? I also calculated 30,000 x 21 yrs which is how many yrs away from when I "retire", age 38, to when I am allowed to start withdrawing from 401k/403b contributions, age 59 1/2, which would be 630,000. Should I go with this latter number or am I totally off with my calculations? Also, are we contributing too much to our 401K/403b, but I also realize once we retire we will no longer be contributing, do I need to factor this into my equation?

Please enlighten me fellow ERE members, as I feel figuring out how much money you will need to "retire" is the first step to financial independence and is the most crucial math equation I will ever calculate.

You can take SEPP (substantially equal periodic payments) withdrawals from an IRA or 401(k) without penalty before 59 1/2 as long as you take them for at least 5 years or reach 59 1/2, whichever is longer.

And actually, you can access your 401(k) without penalty at 55 if you leave your company during the year you turn 55.

[IlliniDave]

Kudos to EdithK. I forgot all about SEPPs, although I spent a lot of time investigating them a while back. I'd dismissed them for myself because they required me to withdraw more money each year than I want. IIRC, you basically put yourself on a schedule with the same general rules as the RMD schedule (with appropriate adjustments for age) and go. The penalty for early termination is severe, though: 50% of whatever the schedule dictates you withdraw that year. So it's something you have to be committed to.

[bad_LNIP]

Please enlighten me fellow ERE members, as I feel figuring out how much money you will need to "retire" is the first step to financial independence and is the most crucial math equation I will ever calculate.


I would roll it to a self-directed IRA and use the proceeds in income producing investments. Just make sure you stay away from self-dealing (ie. buy a house that you live in) and you should be fine. This way, you can "Access" the investment money, but prudence would suggest you avoid just spending it on living costs, but rather invest in something that will increase in value or help with that 30k in income.

live in one unit of a multi-unit mortgaged property, such as a 4-plex. The down payment on a 3-4 unit building isn't much more than the downpayment on a house, and rental income from the other units will typically cover the entire mortgage, meaning you're living rent-free.

Solid idea. I know one Harvard MBA type who was VERY successful in real estate and finance that suggested similar.

[jacob]

My number is 3. As in

- have three independent ways to source income
- ensure that any action has three positive outcomes
- master at least three fields of expertise
- know how to live in three different kinds of homes
- be familiar with three different ways of transportion
- three kind of income (salary, freelance, entrepreneur)

And so on ...

[JohnnyH]

@Jacob: That is excellent... Early on my ERE path I decided once I had three independent, non-related income sources that paid my expenses I could retire. I think it is safer, more reliable, more valuable and leads to a more interesting life than just SWR.

[Dragline]

Yeah, I'll go with that. I learned as a child that three was a magic number: https://www.youtube.com/watch?v=aU4pyiB-kq0 I guess it turned out to be true.

[jennypenny]

Is the magic number still three if you're partnered up? That would make ERE even easier to achieve, assuming each person brought separate skills to the table.

It would also make ménages à trois the ideal ERE arrangement.

[jacob]

I find that the number of problems and unacceptable solutions tend to increase much faster than the benefits from adding skills [from other people], especially since you have to work that much extra for each person.

The more you partner up, the more problems you get and the harder they are to solve due to petty politics/diverging values. Therefore the greater the number the people the smaller the magic number gets. For society as a whole, it's somewhere near 0 just like the average competence level of the average human ;-P

No seriously. Assembling a group of people and getting anything better than what you could have gotten from the best in that group is really really hard.

[SimpleLife]

Looks like Tylerr is warming up to the idea of home ownership after a series of emails back and forth. Congrats! One of the best decisions you will ever make.

[liberty]

If CAPE was 25 (as it is now) and I expected never to do anything productive whatsoever ever again, my "need" would have been higher... probably closer to 33x expenses. I would also consider how much of my budget was wants/needs.

Or invest in Russia, with a current CAPE of 5. Then you need only 8x expenses

http://www.starcapital.de/research/stockmarketvaluation

[SustainableHappiness]

I was wondering if there was a classic FI thread on "the number" here. Dw and i's number is 400k and 5-10 hours of paid work a week on average (meaning not retirement??). I will work full time flexible for longer if I can find a company I really like or easily pad the resume with leveragable experience for future high pay, low hours contracts.

[wood]

Bare bones 200k w/high probability of wanting to supplement with part time work at some point.
Current lifestyle 400k, maybe part time work if kids or lifestyle inflation.

Likely to retire somewhere in between those two.

Current NW around 230k.

Increasing 25k annually.

[frugal]

Hi,

I need 20.000 EUR per year to live.

This means 25 x 20.000 = 500.000 EUR

Applied in a LAZY portfolio ?

Or as cash in bank?

Regards to all you!

[liberty]

Cash in the bank will give you negative return currently. You need to set the money in production: Stocks, bonds, real estate etc. I prefer to have as much as possible in stocks, as long as there are cheap and up-trending markets (which is the case currently).

[frugal]

Cash in the bank will give you negative return currently. You need to set the money in production: Stocks, bonds, real estate etc. I prefer to have as much as possible in stocks, as long as there are cheap and up-trending markets (which is the case currently).

not sure they are cheap... you never know.

I think it must be passive investing.

regards

[liberty]

There are many cheap markets currently: http://www.starcapital.de/research/stockmarketvaluation