What's your retirement number?

[Matty]

@JamesR

I’m from the semi-ERE camp as well.

I’m currently 24 with AU$85k. Ultimately I’m probably looking at $500k for a 3%WR of $12k a year. That gives me $280 a week which would just cover a room in a sharehouse, food and utilities. To spend the rest of my 20s and some of my 30s (7-10 years) in my well-paying but shit current job seems crazy and depressing.

With Semi-ERE I can leave whenever I like but I’m aiming for a minimum of $100k before leaving. From there I can be creative in living as cheaply as possible while making the most of my time. Seasonal work, full-time contracts, part-time jobs, self-employment or extremely low expenses are all options for me while I slowly add to my net worth. I just can’t bear to consider the alternative of working 7-10 years, I’d rather take the risk of the unknown. Full-ERE has its own set of risks, namely: significant capital susceptible to theft, taxation, inflation or economic crisis, dying before reaching FI and becoming institutionalised/depressed along the journey.

So my answer is somewhere between AU$100-150k for semi-ERE depending on how long I can hold out!

[workathome]

Wow, 85k at 24 is awesome. I think I was like negative 30k or so, lol.

[susswein]

I've been fully ER'ed now for 10 years (no income other than investments), living VERY comfortably on $18K/year (no housing expenses). By very comfortably I mean that that number supports owning a newish car, a 4wd camper van, a sailboat on the mexican riviera, and regular international travel. In fact, I had lobster for dinner tonight, so I'm definitely not hurting

Depending on what you believe a safe SWR is that translates to around $500K in investments plus either a fully paid off house or a downpayment on a 4-plex or the like.

[almostthere]

I am 42 and in the +1mn category. It's been a year with no work, but it's too early to tell for me if that is 'enough' because I have two small children who will need education etc. I would like to add that having more than needed allows unspent cash from investments to build up in a very comforting way. I have way more cash one year after no work, and it gives me quite a pleasant feeling. I am actually much less stressed about spending now than when I was working.

@Susswein, I like your style. I am going to go back and read more of your posts.

[Spartan_Warrior]

Also see this thread: viewtopic.php?f=3&t=5061

I enjoy getting these perspectives, but IMO the number is only half the picture. I also like hearing about the details of what kind of lifestyle each number affords. It helps me put my own plans into perspective. For instance, it's eye opening to see that many others here plan to retire on amounts substantially lower than what I already have, and how they manage to arrange their lifestyle to achieve that.

My own ideal* number is about $700k total, with $450k in investments and my SFH in Maryland paid off with an estimated value of $250k. This would afford me $18k/yr at a withdrawal rate of 4%. My current expenses have been about $18k-20k/yr for the past couple years, and that includes about $6k/yr in mortgage interest that wouldn't exist in this ideal circumstance.

*I say ideal because I strongly doubt I will make it the 7 more years that this plan would require. Rather, I see myself either quitting or being fired from my current job within the next year or two at the latest, at which point I'll probably work odd jobs for minimum wage until such time as another obvious, blood-in-the-streets market crash offers me a fortuitous time to move my nest-egg to predominantly stocks, which I hope will make me truly independent from investment income. If that doesn't happen, it will be permanent semi-ERE or extreme frugal living unless I find and subject myself to another high-paying corporate gig, which may be beyond my ability to do.

It's also worth noting that my primary hobby is writing and self-publishing fiction, which, again, in an ideal world, will eventually yield yet another safety net of small monthly income. Even a few hundred a month would make an incredible difference in my security.

[jacob]

@SW - I find it hard to compare "lifestyles" because I find it hard to define "lifestyle". Consider the following:

Landscaping/lawn service: $50/week
Motorized lawn mower that breaks every two years and gets replaced with a new one + rake from building center: $100/year + time to mow
Pushmower + rake from building center: $150
Used motorized and rake: $50/year
Motorized + some mechanical skill to extend lifetime by 3x: $30/year
Used pushmower + mech skill + used rake: $100/lifetime

All of these result in the same lawn. Now is the nice lawn the "lifestyle", that is, "the nice lawn lifestyle". Or is the lifestyle the different ways of achieving the same outcome?

If you have lawn service, you're not getting free exercise, so you'd probably have to pay for that as well. If you don't have mech skills, you'll be paying for repairs a lot or spending time organizing other people to do those repairs. If you don't have building skills, you won't be able to repurpose things when you're no longer using them (e.g. turning the rake into a flag pole) and would thus have to rely on your ability to buy and sell on the secondary market.

My point with all this is that my $$ amount allows for a renaissance approach with results that LOOK like a middle class lifestyle costing 4x as much in that the lawn looks the same, the home looks the same, the activities look the same, the experiences look the same, ... however these end goals are all achieved in a very different way. My $$ with a consumer approach would look like poverty.

The difference is that for a consumer outsource a lot more to the economy where it gets registered as dollars which is then seen as a "higher standard of living", whereas I see this outsourcing as a kind of broken window fallacy. Just because some people are less efficient with their dollars doesn't mean that their standard of living is higher. It just means they waste more money.

[Spartan_Warrior]

@Jacob, right, I get that (and I knew as I typed it that "the type of lifestyle each number affords" might meet pushback ), but I think "the different ways of achieving the same outcome" is actually more or less what I meant. In particular, what would be most interesting/useful to me would be geographic location, housing type, other (non-investment) income, skills, hobbies, etc. Sort of like what I outlined above for myself. Not so much to compare lifestyles as to correlate "ways of achieving the same outcome" to different levels of assets. Like I said, it mainly interests me to know what all those other strategies are (e.g. off-grid housing, world travel, etc) so I can visualize how my asset requirements would change if I implemented such strategies myself. The most eye-opening for me so far is the folks who intend to live off-grid in the west on $1XX,XXX total assets.

[jacob]

@SW - My point was that this correlation between "outcome" and "assets" doesn't exist. It's an artifact of consumerism.

We have [in new math]

money + skills = outcome

Now, if skills = 0, then money = outcome, so with the assumption of zero skills, we can talk about standard of living as a pure function of income. This holds for most specialists.

For my outcomes, it's 25% money and 75% skills. For the outcomes of most people it's 95% money and 5% skills.

More importantly, once the skill component becomes substantially larger than the money component the limiting factor is not the money. It's the skills. All the money in the world can't buy me connections, ability, invitations, ... the things I can't do aren't for the lack of money.

Basically, you only need money for things like RE taxes, insurance, ... things that you can't fix no matter how skillful. The rest is just a question of which balance you want in the money + skill ... and what kind of outcome you're seeking. Personally, I'm happy with middle class outcomes (house, vehicle, boat,..). I don't desire a castle, private air planes, rented suites at the stadium, ... but I figure I could accomplish some/most of that for $20k/year (~3-4x what I spend) if I wanted to.

PS: If you go west, you're getting out of the insane RE taxes we pay in the east/midwest (almost half my budget goes to that). They pay almost nothing. Off-grid then gets rid of the connection fees and various rent-seeking taxes that make up most of my utility bills, unlike, say, actual usage. Off-grid implies maybe a small home that doesn't cost many assets, unlike e.g. The Rocky Mountain Institute. So now you have about $100k left which throws off $3k/year in perpetuity. That's enough to cover health insurance for one person plus parts and supplies given that you have made your activities at least money-neutral (buy and sell tools for net-zero).

[IlliniDave]

Also see this thread: viewtopic.php?f=3&t=5061

I enjoy getting these perspectives, but IMO the number is only half the picture. I also like hearing about the details of what kind of lifestyle each number affords. It helps me put my own plans into perspective. For instance, it's eye opening to see that many others here plan to retire on amounts substantially lower than what I already have, and how they manage to arrange their lifestyle to achieve that.

Counting everything I'm planning for the income available to me to average about $50K pre-tax, maybe in the ballpark of 42-43 post-tax. I'll be debt-free. Most likely I'll be living alone (in property I own). I'm going to split my time between two locations (hometown in winter, edge of the BWCA in summer). So I'll have costs associated with two residences (a proper house and a cabin). I don't plan to travel a whole lot, I prefer regional exploring to worldwide touring. Early on I intend to try out some hands-on projects--repair, remodeling, woodworking, landscaping, etc., for some of my leisure time. Also will be taking forays into the "wilderness" (which starts a few hundred yards outside my new door). TV? Probably not. Internet? Probably. Vehicles? Simple, utilitarian, and used. I will have some lawn care expense for my winter home while I'm away for the warm seasons, but I can do my own snow removal in the winter. I'll eat out occasionally, same as now.

Overall, plain and simple. Probably not exciting from the outside looking in, but from the inside looking out I think it will be pretty cool.

[JamesR]

What's with the paid off house fetish among retirees? Forget about that, and don't include it in your retirement number. Instead, just include the monthly cost of shelter in your living expenses and use that to derive your retirement number.

[theanimal]

PS: If you go west, you're getting out of the insane RE taxes we pay in the east/midwest (almost half my budget goes to that). They pay almost nothing. Off-grid then gets rid of the connection fees and various rent-seeking taxes that make up most of my utility builds, unlike, say, actual usage. Off-grid implies maybe a small home that doesn't cost many assets, unlike e.g. The Rocky Mountain Institute. So now you have about $100k left which throws off $3k/year in perpetuity. That's enough to cover health insurance for one person plus parts and supplies given that you have made your activities at least money-neutral (buy and sell tools for net-zero).

Yep, this explains my number range.

SW- Go west!!!

[JohnnyH]

Property taxes out west aren't that low, and areas that have seen growth have created governments that expect aggressive tax increases... That said, after calling their BS, I got mine down from almost $1000 to ~$450 annually. Some property owners kept up on ridiculous "market value" appraisals and disputed with each new valuation. These properties have reasonable taxes. Most property owners never took the time and after 4-8 uncontested appraisals the "market value" imposed for taxes is 2-4x the actual market value. Worse you have to really fight to get these down into reality and these uncontested houses see their resale value depressed because of looming tax liability.

Median property tax map:
http://interactive.taxfoundation.org/pr ... 59prop.png

I think the cheapest living in the county is to be found in places like OK and AR. But they have been experiences ridiculous growth recently (secret is out) and this may no longer be the case.

[Spartan_Warrior]

@Jacob, again, I think I understand your point, but I also think in this case we're debating semantics. For instance, you estimate your lifestyle outcomes as comprising 25% money and 75% skills. Would you be more comfortable if I had used the phrase, "what percentage of skills vs. money are you relying on to achieve your particular lifestyle outcome?" Or perhaps, "what skills/strategies* make up the 'skill' component of your lifestyle equation?" That's the general idea of what I meant. Simply put, different people are able to make the same amount of money stretch further than others, and I'm curious about the specific underlying factors that make that possible. FTR, how one approaches lawn care is definitely an example of what I meant.

*I say "strategies" in order to encompass activities like achieving low household costs, etc., which might not necessarily constitute "skill" so much as making efficient choices.

Basically, I think we agree (but if not, I won't belabor the point); in terms of your new math equation, I'm just curious about the "skills" and "outcome" variables, because the "money" part alone doesn't give a full picture to me. That's all.

[Tyler9000]

What's with the paid off house fetish among retirees? Forget about that, and don't include it in your retirement number. Instead, just include the monthly cost of shelter in your living expenses and use that to derive your retirement number.

I personally see my paid off house fetish as an extension of Jacob's money + skills equation. I prefer to improve my house upkeep skills rather than pay a landlord to take care of them. It's not simply a financial decision, though -- I'm a mechanical engineer and enjoy working with my hands. For others, the alternative method of renting and including that in your costs is just fine, too.

[George the original one]

The paid off house is a capital expense that should lower the monthly cost in retirement. However, due to the size of the sum required to pay off a house, it is a hurdle that adds significantly to "the number".

Renters choose to keep that sum in reserve and have it already built into their "number".

[IlliniDave]

What's with the paid off house fetish among retirees? Forget about that, and don't include it in your retirement number. Instead, just include the monthly cost of shelter in your living expenses and use that to derive your retirement number.

I'm not sure what you're saying. My retirement "number" does not include any equity for real estate I intend to live in, just invested assets. My anticipated retirement expenses include the ongoing costs associated with housing. I think it's a bit of a stretch to classify a person's desire to own their home a "fetish".

[Tyler9000]

I prefer to avoid specific numbers, but I do find one phenomenon pretty interesting. When I first calculated my "number" about four years ago, it was 2.5x the ultimate number that I'm very comfortably retiring on today. And counterintuitively, my margin of safety is even higher today than I assumed back then. Once you switch the mindset from traditional consumerism to maximizing happiness on minimum cash flow, things really do change for the better in measurable ways.

[jacob]

@Tyler9000 - Yes, that! That!!

[JamesR]

@Matty

By the way, you seem to be making an assumption that the only way to bring in additional income during your semi-ERE is to trade your time for money in a strictly linear manner. Surely there's other non-linear income streams you can explore during your semi-retirement, within your passions & hobbies.

@Jacob

Just looked at the CAPE chart and it's clearly missing something, whether that's a lack of compensation for interest rates or something else. Are there any good alternatives or fixed versions of CAPE that you can suggest?

@all

I suppose if you're going to have a house, it may make some sense to have it paid off. Should that add to the retirement number though? If you would be paying $600/mo for rent on the equivalent house, that means you'd need about $210k to support that income, and you could buy the house in full for that amount anyways.

However, the disadvantage of having a paid off house means you've got all that capital stuck in the house, and it's not working for you. If you had a mortgage at a low rate and invested that money you would come out ahead. There's also the tax write offs with real estate, and that could reduce taxes on capital gains, etc.

When I hear "paid off house" it just makes me sad because it seems like there's a missing opportunity in investing.

--

Perhaps we should all just automatically retire after hitting a savings of 5 times the last 5 years average on our annual salaries. So if your last 5 years salary was on average 65k then automatically retire when you hit $325k, no ifs, ands, or buts. After all, 5 years is pretty much the ERE rule isn't it?

Retire first then figure out how to survive on 3.5% of that. True "extreme retirement!"

This could even be a tv show. Extreme Retirees. These dauntless souls suddenly find themselves expected to live and thrive on 3.5% of the sum of their last 5 years salary - can they do it?! *spooky theme music*

[chicago81]

When I hear "paid off house" it just makes me sad because it seems like there's a missing opportunity in investing.

It all depends on your level of comfort with leverage and debt. When I hear someone would keep a mortgage so that they have more funds available to invest, I equate it with investing on margin at a broker. (I think Jacob, or perhaps another blogger wrote an article about "You are born 'short' a house.")

I suppose the long term performance of portfolios with a higher risk tolerance have historically outperformed mortgage rates -- but there is more risk involved. For someone who wants to be financially independent and minimize the chance that they would ever feel like they "have" to go back to work, a paid-off-home makes sense.


------

As for my number... I'm currently aiming for a paid off primary residence (have got it already) along with investments that generate a passive income stream in the neighborhood of 2k to 3k dollars per month. Right now my investments generate approximately 1k per month, some of which comes from a rental property that I eventually want to sell so I can invest the proceeds in an even-more-passive investment (dividend growth stocks), albeit at a slightly less yield on capital.