What's your retirement number?

[JL13]

Good question, despite being into this for a few years now, I never did figure it out exactly. I guess it's been roughly whatever 25x whatever my current expenses were, so in that case:

2011: $500,000
2012: $375,000
2013:$300,000
2014: $250,000
2015: $200,000?

My lack of patience with office work is pushing me to open up to concepts that would make $175k work, let's hope I can last that long. Hell, maybe I'll get smart and figure out how to do $125,000 and jump ship in a few months!

[JamesR]

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.

I can see there is some increased "risk" but this is part of what ERE is about. In ERE, the risk is controlled through other dimensions rather than over-compensating on the money dimension. In the long run, the nest egg catches up and it becomes a non-issue.

If people wait to cover the house before retiring, then perhaps it's merely RE (or plain R) and not ERE.

Perhaps this is rude to point out or quibble over. I just find it someone ironic that many people hang out on these wonderful forums but rationalize various reasons to aim for the old school version of retirement (paid off house, never working, super nice cushy lifestyle, the american dream).

--
As Tyler9000 pointed out, "Different life stages may call for different strategies."

I agree.

Perhaps true "ERE" style retirement requires a rather specific life stage such as not having kids and being younger than 35. Kids and age definitely change things.

--
@J_L13

I'm sure people would love to help you figure that out, as would I. Sounds like an interesting challenge!

Depending on your age & capabilities to generate some income streams or do the occasional contract job online, you might consider a withdrawal rate of 5%, that would give you $520/mo which is doable depending on how & where you live.

[IlliniDave]

Perhaps this is rude to point out or quibble over. I just find it someone ironic that many people hang out on these wonderful forums but rationalize various reasons to aim for the old school version of retirement (paid off house, never working, super nice cushy lifestyle, the american dream).

--
As Tyler9000 pointed out, "Different life stages may call for different strategies."

I agree.

Perhaps true "ERE" style retirement requires a rather specific life stage such as not having kids and being younger than 35. Kids and age definitely change things.

--

Yep, aside from different life stages, where exactly you start is a driver too. When you're already a 50 year old debt-free homeowner with a decent nest egg a handful of years shy of traditional retirement benefits and the like before you ever even hear of Jacob or ERE, it's kind of hard to go back and be 25 again and re-institute one's college lifestyle, and largely pointless (unless that happens to be where one's happy point lies). It's ER rather than ERE--just plain early retirement. Although it's different, many of the ERE "principles" are valid and useful. There's an online investing community where I participate, and one of the prominent personalities there likes to say, "There are many roads to Dublin." Similarly there are many ways to early financial independence towards the frugal end of the continuum.

I have great admiration for those who make a go of it with much slimmer finances and more reliance on their own skills and wit, the true ERE-ers.

[jacob]

In my case 100% homeownership (no mortgage) is also part of "this complete investment portfolio". I never had it as a goal per se but given the current market environment and my/our personal circumstances I thought it prudent to convert paper assets to bricks.

There's not really any simply number-answer that makes it easy to compare numbers for everyone. It all comes down to personal circumstance. The most important thing I realized is that whatever model I use, it tends to change with assets as well as age ... well, in general, just personal circumstances.

A number is just a first order approximation. But that is fine.

[chicago81]

With very few exceptions, most people will need to do one of the following:
1. Live in a paid off home
2. Live in a mortgaged home
3. Pay rent to live in an apartment or rent someone's spare room
4. Live in their car/van, live on the streets, or be a beach bum (e.g. not living in 'structure')

I would suspect, even among the ERE crowd, that options 1, 2, and 3 are the overwhelmingly most common choices.
Given that, most people either have to have a paid off home, or pay rent/mortgage. I think it would be naive to consider a "retirement number" without regard for figuring out whether or not it included the place where you live!

[JL13]

@JamesR

I'm interested in talking more about this (are we at risk of hijacking this thread?). Rent and utilities are covered where I am for $500/mo, groceries for me have averaged $125/mo so that puts us at $7,500/year @5% WR = $150,000. This is a bit risky as this is 100/0 needs/wants breakdown. I would need the ability to get income from another source, and let it be something I could crank up/down as needed.

I need to get some side income going somewhere, but not sure how to go about this. I don't want to be stuck geographically?

[plantingourpennies]

Perhaps this is rude to point out or quibble over. I just find it someone ironic that many people hang out on these wonderful forums but rationalize various reasons to aim for the old school version of retirement (paid off house, never working, super nice cushy lifestyle, the american dream).

I come for the inspiration! Our number is embarassingly high-maybe 1.2M in net worth.

[old_fart]

If I had $15000 in expenses and a $10,000 pension would I just need $5000 x 35 ($175,000) to be good for life or will I need to have $15,000 x 35 ($525,000) even with the pension? The $178,000 is sitting in an account getting 1/2 percent interest, I don't want to invest it, I'm paranoid and won't to keep it 100% safe even if it's not growing.

[chicago81]

If I had $15000 in expenses and a $10,000 pension would I just need $5000 x 35 ($175,000) to be good for life or will I need to have $15,000 x 35 ($525,000) even with the pension? The $178,000 is sitting in an account getting 1/2 percent interest, I don't want to invest it, I'm paranoid and won't to keep it 100% safe even if it's not growing.

I'm not a financial advisor, so feel free to take my advice with a grain of salt --

But there is risk in keeping it just in cash. Inflation risk. Inflation is going to erode purchasing power of that over the next 35 years that you're projecting for.

Seeing that you only need to generate $5000 a year (and presumably will want that amount to increase annually to keep up with inflation), and that you have 178K in savings, you only need to have your money earn 2.8%/yr (+inflation). In my opinion, that return on capital is extremely attainable with a portfolio of some stocks of high quality companies and some bonds.

[George the original one]

If I had $15000 in expenses and a $10,000 pension would I just need $5000 x 35 ($175,000) to be good for life or will I need to have $15,000 x 35 ($525,000) even with the pension? The $178,000 is sitting in an account getting 1/2 percent interest, I don't want to invest it, I'm paranoid and won't to keep it 100% safe even if it's not growing.

If the pension gets cost of living increases and is guaranteed not to be legislated away (or go bankrupt), then yes.

However, you need to invest the $175k... even if you put it in CDs or government bonds earning 2.5-3%, you'd be 5x-6x better off than your current 0.5% situation! Inflation is eating that money away as it sits... you've already lost 11% in the last 5 years to CPI inflation during the lowest inflation period we've had!

If you really, really want to play it safe, buy an annuity. They are designed for people who are afraid to invest.

[old_fart]

If I had $15000 in expenses and a $10,000 pension would I just need $5000 x 35 ($175,000) to be good for life or will I need to have $15,000 x 35 ($525,000) even with the pension? The $178,000 is sitting in an account getting 1/2 percent interest, I don't want to invest it, I'm paranoid and won't to keep it 100% safe even if it's not growing.

If the pension gets cost of living increases and is guaranteed not to be legislated away (or go bankrupt), then yes.

It's a state government pension so as long as the state doesn't go bankrupt I think it's safe and in 7 years I'll get social security, another $15,000 a year and ss does get cost of living increases, so with $175,000 in the bank now - $35,000 till SS kicks in, I'll have $140,000 left and should actually be able to save that $35,000 back into savings before inflation eats up the pension and SS yearly. I'm just hoping it'll be enough.

Honesty I don't want to earn any more money if I don't have to, that's why my cash is sitting in a savings account. I don't really want to pay anymore taxes than I'll have to pay on the pension.

[7Wannabe5]

Well, I haven't been full-time employed for 12 years now. At the time, I quit my job to start my own business I had about $8000 in the bank and a starving musician husband who was maybe making $28,000/yr from his day job and two kids who were 11 and 14 and a way-too-big 135 year old money-pit of a house with a mortgage. So, I am the opposite of the forum members who can't even quite pull the trigger at $1,000,000. However, I should note that one of the reasons I joined this forum is because I have suffered too much anxiety over the years because I haven't been conservative enough in my approach (do not recommend to others.) My other reason for joining being social support for my pretty much lifelong practice of living the good life on very little money. As others have noted, your phase-of-life, especially in regard to whether you are currently raising children makes a big difference in solution to this puzzle.

Anyways, I have no intention of ever fully retiring because what I crave is varied self-employment and/or flexible-temporary employment. Of course, it may happen someday that none of the ways in which I wish to be self-employed create any cash flow whatsoever except for my job as a self-employed manager of my passively invested assets in which case it will appear that I am retired. However, as Jacob noted, it almost invariably happens that if you involve other people in the equation of any work you are doing or even just let them see you doing it, it will result in some stream of cash flow in your direction. For instance:

"My what a nice crop of arugula you are growing!"

"Thank you. Would you like some?"

"Thank you. Most generous. Can I please at least give you a couple dollars?"

Also, the amount of Social Security I am due at age 67 is more than adequate to cover my current living expense so it might appear like I am retired at that point.

Minor quibble with equation of Skills + Money = Lifestyle would be that I think it is more like Skills + Practice + Money + AssetYouWereBlessedWith@Birth = Lifestyle because, for instance, most people possess the skill to floss their teeth but many people who possess the skill do not engage in the practice of it and some people are born more cavity-prone than others.

[IlliniDave]

I was thinking about the Skills + Money = Lifestyle too, and maybe I'm just quibbling about vocabulary, but I tend to see lifestyle as independent of those things.

I'd say "standard of living" is a function of skills + money + 7w5's extensions and probably location.

But you could have 2 people with very much the same material positions and situations, equivalent self reliance, but very different styles to the way they live. In other words, while some lifestyles typically have higher "costs" than others, for a given "cost" it's usually possible to have a variety of lifestyles.

That said, expressing a quantity that is the sum of financial resources and skill/ability resources, while simple, is profound, and there are more than a few people out there who operate as though they're oblivious to it.

[IlliniDave]

Sorry, duplicate.

[7Wannabe5]

IlliniDave said: But you could have 2 people with very much the same material positions and situations, equivalent self reliance, but very different styles to the way they live. In other words, while some lifestyles typically have higher "costs" than others, for a given "cost" it's usually possible to have a variety of lifestyles.

Good point. For instance, Amish vs. Bohemian lifestyle. It seems to me that you could pretty well narrow down any person's ideal lifestyle by giving them their choice of 3 (or maybe 5?) magazines from the inventory of a very well-stocked bookstore and all of the 124,251,000 different combinations could be purchased for less than $20.

[jacob]

Yes, lifestyle is not the same as standard-of-living. What I originally claimed was that nor is standard-of-living the same as cost-of-living because skill and design can substitute for a lot of the normal cost. The last observation is frequently ignored or dismissed.

[susswein]

With very few exceptions, most people will need to do one of the following:
1. Live in a paid off home
2. Live in a mortgaged home
3. Pay rent to live in an apartment or rent someone's spare room
4. Live in their car/van, live on the streets, or be a beach bum (e.g. not living in 'structure')

I'd add one more option to the list (and in my opinion it's the best):

5) 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.

[jacob]

FWIW, we paid 95k for our [fixer foreclosure] house. According to zillow (and the RE listing I've seen locally for houses similar to ours), it would rent for about $1400. A 4-plex would be around 350k cash listing. A 2-plex would be 250k. The current market around here is such that RE seems to sell around listing price.

Basically, if you're willing to leverage and accept a combination of RE risk and management, the current cost is quite low. Leverage, that is, accepting a mortgage, is the key word here.

[FRx]

I spend about 3k/mo right now and I'm 36 years old. I have about 90k in student loans to pay back, I have about 300k saved up and take home about 200k a year. I'm a recent convert and up to now been spending every last dollar plus some on anything that was advertised to me. I firmly believed that my happiness was linked to material possessions. So I decided to just try what jacob and others have done and my happiness actually increased. I'm still going through the motions, so I haven't gotten the big picture yet. Which is why I'm gonna say that right now the number I "need" is 650k and the number I "want" is 850k.
I'm certain that as I continue to grow as a human being and stop drinking the consumer kool aid I'll realize in the near future that [actual need=0.5*current need] and [need=want].

[EdithKeeler]

I think my retirement number is somewhere between $350K and $500K, plus income from my current rental, maybe an additional one. I'm around $300K now, but I still have a mortgage on my rental house. My goal is to pay off the rental. The house I live in is paid for, and I live according to one article in the least expensive city in America. If I can stick it out another 5 years, my pension should pay me about $500/month, not a huge amount, but significant enough. There seems to be little chance of staying beyond that 5 year mark (which would greatly improve my pension payout); most days the big question is if I can last one more day.... But I'll only be 55. I would like to work at SOMETHING after that, just to pay at least a small amount into social security to avoid having those zeros average in. Probably not a huge deal, but I'm leaning more toward "early semi-retirement."

As to lifestyle stuff, I live pretty "small." I spend a pretty small percentage of my current income, compared to most people, anyway, but probably not compared to people on this board!! I see some US travel in my future after retirement, maybe a couple of trips to Europe, but no plans to be a crazy world traveler.

I could probably do it on less, but I also have a brother I need to consider in my planning; he's slightly handicapped and needs some help with certain things related to daily living, etc. So I want to make sure I have some extra padding in the retirement budget.