What's your ERE goal amount?

celliott · Post by **celliott** » Sun Jun 19, 2011 5:39 pm

Maybe this has been posted before, but I'm very curious...
How much money do you expect to have before transitioning to ERE?
100k? 250k? 500k? more-K?
Also, how do you expect the aforementioned amount to support you? In other words, how much monthly will you expect it to produce each month to support ERE?
x% from Dividend paying stocks? y% from Rental Income? z% from Internet-based income? Or are you just planning to live off saving & interest? Combination of the above, etc?
Or, if your planning on semi-retirement and supplementing your income, what amounts/percentages are you looking at?
Personally, I expect my rental income to produce the majority of what I'll need. I will probably be invested in some dividend paying stocks and will also have distributions from my janitorial business for some years to come.
The assets currently total about 550k, but the income being produced will continue to grow those base assets, thus increasing the monthly income available. I hope those income streams will throw off about 3k to 4k (or potentially more) per month.
Very curious as to the ranges out there among all of you. I know these numbers have been touched on sporadically in journals and other posts, but I thought it would be fun to consolidate them here.

MichaelAndrewLo · Post by **MichaelAndrewLo** » Sun Jun 19, 2011 5:56 pm

My goal amount is $250,000 by age 28-30. I am currently 23 and have a in demand specialty as a registered nurse. I am just became completely DEBT FREE! That feels amazing but I know it is just the beginning. I will work as a travel nurse for 4-5 years and will not have to pay housing expenses and can live off a couple hundred dollars a month. I will be able to earn 50-80k per year so I hope to have my goal amount ASAP. I plan on investing in dividend paying stocks but for probably 10-15 years after ERE I will not live off those dividends. Since I am a musician and my girlfriend is as well (she is in on the plan to, though from her rich parents she already brings 100,000 euros to the table for herself. We are keeping each ERE seperate) we plan on simply making money through music. Busking, playing shows, selling CD's. Essentially living the free artistic lifestyle with none of the worry that accompanies it. This will allow us to tour SLOWLY instead of cramming in 30 shows in 30 days and having to drive 12 hours a day. It will be a basic subsistence but essentially a stress free and happy one. Then when/if we get tired of being on the road and wandering we will simply go live in the south of france or buy a cheap beach house in mexico and take a couple years off. We do not plan on having kids ever. I am currently living on $750 a month with a car. I expect that once I am ERE I will be able to live on $600 a month. $250,000 should be more than sufficient especially if given 10-15 years of growth. The only other investments I will make besides the capital investments are recording equipment for music, which I already have (mics, interfaces, computer, etc.). That's the plan in a nutshell post.

dragoncar · Post by **dragoncar** » Sun Jun 19, 2011 8:28 pm

I've met my preliminary goal of around $250k, which would be enough for a truly extreme retirement, or a moderate semi-retirement. My intermediate goal is around $500k, which would allow me to continue spending at my current rate and provide a larger safety margin. My reach goal is $750k, depending on how long I can hold out. This is achievable in under 5 years if I can stick with a high-paying, high-stress job for that long. But it's pretty hard to stay fully committed to the job when I daydream of ERE.

InterfaceLeader · Post by **InterfaceLeader** » Sun Jun 19, 2011 9:19 pm

£250,000 but I haven't given a thought to how that would generate income since it's quite a way off at the moment and I need to educate myself first.
Also: rental income (we have a house that needs to be fixed up) and passive income from selling fiction books on kindle etc. (working on this)

Post by **jacob** » Sun Jun 19, 2011 10:35 pm

My ultimate goal is to need as little as $50,000 for an annual expense of $1500. This would essentially cover only health insurance and real estate taxes. The default would be to have these monies in stock for a 3%SWR, but maybe I'll ultimately aim for a 0%SWR.
Right now I'm working on being able to grow most food from the garden and making things myself to avoid having to buy manufactured goods and also to add a bit of ego/personal touch to it. It might be fair to add the price of the house + workshop (which is not inexpensive given those goals). Hence, $100,000: half in financial investments, half in capital goods (home+garden+workshop). This also makes for a very good alpha strategy (ultimately inflation protection) in my opinion.
For those who have read the book, I used to concentrate a lot on the financial, economical, intellectual, and social side of ERE. These days I'm more interested in the technical side (as defined in chapter 4).

chilly · Post by **chilly** » Mon Jun 20, 2011 12:01 am

My target is $700k based on 3% SWR. Intend to buy a homestead for <$100k as soon as I'm confident on where I want to be. That's 1 year hopefully, 2 years hopefully not... like if the market implodes. Even then, I'm very conservatively positioned after doing a profit taking shift a few months back after the big run up... so I can's see losing more than an extra year recovering.
That number would be lower if not for my desire to live near family in one of the more ERE inhospitable locations you could find - very expensive and with real estate that didn't drop much and doesn't present a very good investment opportunity. I also feel that the only marketable skill I have for significant part-time work is something I no longer really want to do - so I'll suck it up as long as I feel I need to and save while I'm making many times what I'll be able to in the future.

sky · Post by **sky** » Mon Jun 20, 2011 12:42 am

I am figuring on the equivalent of $400,000 per person (x2 for a couple). At 3% rate of return, that is $12,000 annual per person, or $1,000 per month per person.
This assumes a paid off mortgage and house owned free and clear. No car payments.
Not including mortgage, car payments or health insurance, we currently spend $1850 per month for two people, so the goal is a little higher than current spending. This is to cover health insurance, which I have no idea how much it will cost.
My retirement amount calculation is complicated because in 10 years I will be eligible for a retirement pension with a current value of about 22k per year, and in 12 years I can collect socialist security, whatever that will be. Should I assume these as a given? I'm not sure. Also, the retirement is not adjusted to inflation. My DW also has a retirement pension coming up soon, I'm not sure of the amount and its in euros, not dollars, to make things even more complicated.
So I don't really need 400k per person, I just need to pay off the mortgage, car loans and cover 10 years (or less) at about $24,000 per year. Plus cover any pension losses due to inflation and any increases in the cost of health insurance. I expect to be at that point in about 3 years, barring any setbacks.
I am clearly ER, not ERE, but I think the group here is quite diverse in its goals and expense levels, so I will chime in along with the others.

George the original one · Mon Jun 20, 2011 12:43 am

Being too old for ERE (48) and supporting a spouse, my real numbers are going to be different than the young adults here.
I can draw a retirement pension starting at age 58 that is adequate to pay for our current lifestyle of about $28k/yr (not including current mortgage payment), but can't leave the work force until at least age 53 to avoid screwing up the pension.
So the need is to pay off the mortgage and have enough assets to cover the intervening years. At age 53, that would be about $180k for the mortgage and another $150k for the living expenses, so my target range is $330k-$400k depending on inflation, politics, healthcare costs, and realized returns.
For every year after age 53 that I don't exit the work force, I can subtract about $30k from the target range.
Alternate plans would be put in motion as needed. Moving to a cheaper home is one option on the table and renting out my workshop is another.
***
It is interesting to note that while I have a specific goal of paying off the mortgage when transitioning to retirement (and thus an emphasis on the minimum dollar amount), I'm also highly interested in maximizing reliable investment income, thus the upper bound is flexible.
My reliable instement income will be coming from dividends and bonds. I expect to yield 6.5% minimum (not counting capital gains) and the portfolio is yielding over 7% today, so a 4% SWR is, in my mind, an easy target. The importance of preserving capital for the short term while maintaining a good yield is the investing skill I'm honing right now.
Dividend growth is my anti-inflation piece. I want stocks that can grow their dividends substantially above inflation rates. These stocks should comprise at least 70% of the non-cash portfolio.

BennKar · Post by **BennKar** » Mon Jun 20, 2011 1:38 am

I'm pretty much in the same situation as George, I'm 48 y.o., I can get full pension at 58 but financially should be able to leave earlier if I want to sacrifice the early pension (I'm already vested for a pension at 65). I paid off my mortgage this month, so the extra funds will now be going to bulk up my dividend paying portfolio. (BTW, for me I want ~$2,000/mo. to retire comfortably, but I could live on less than half if needed - mostly for taxes and insurance).
My retirement accounts combined are hovering around $210k, and my taxable portfolio is around $25k. I want to get the taxable dividends to reach $10,000/yr. in another 6 years (currently its under $1,000). Also by then the local military base that is doubling in size now (BRAC) will be fully packed, so my house (1 mi. off base) should be worth much more, and I might sell it to fund an early(-er) retirement.
Anyway, the goal amount shouldn't be how much you have, but how much you have earns for you versus how much you need. Once you hit the point where it earns more than you need, everything else is academic.

shanermack · Post by **shanermack** » Mon Jun 20, 2011 1:51 am

I am shooting for 75K and getting off the grid. Living outside the U.S. and never looking back. I will have no trouble making a few dollars here and there to supplement.

mikeBOS · Post by **mikeBOS** » Mon Jun 20, 2011 4:16 am

I'm spending just under $100k acquiring and rehabbing 3 rental properties that ought to net me well over $2k/month. With my personal expenses somewhere around $1k/month. I'm hoping to save the profits and sell the properties before I'm 40 and just live on dividends past that point. Hopefully getting to $400k-$500k invested after the sale of the properties, with a WR of 2-3%.
Similar to Jacob, I'm interested in getting my expenses as close to $0 as I can in the coming decade by providing for my own fuel, food and handy-man skills.
I don't think I'd really want to get it to below lower than around $300/month though. I'll still be importing some media, occasional video card upgrades for my gaming rig, chocolate, some dairy, coffee beans and tropical fruit most likely, unless I build myself a complicated heated greenhouse in New England.
With a WR that low, at that young an age though, I'm sure to be a millionaire once or twice over sometime in my 50's.

S · Post by S » Mon Jun 20, 2011 4:17 pm

DH and I are looking at ERE as a combined goal, so we're aiming for around $2000 a month for the two of us. $800 of that will be rental income after taxes/insurance if we don't sell or buy other property (house worth ~$180,000 if paid off). We're both comfortable with the idea of occasional part-time work (in his case seasonal jobs, in my case freelance software development) to supplement as needed. Considering that other income, we'd like to have around $400,000 in stock/bond type investments, though I have to admit this part seems vague to me. For now that money is just piling up in a savings account. I hope these three legs of income will take care of us whatever the larger economy ends up doing other than a full Mad Max crash.
Concerns: We may have one child, so that would change the numbers. Health insurance is also a big question mark, since I've always had that through an employer.

tjt · Post by **tjt** » Mon Jun 20, 2011 7:42 pm

My ERE goal is $3000/month. Assuming 3% actual returns, this requires $1.2M in savings. I have 2 children plus my wife, so this is $750 per person. This also assumes my house is paid for.
To be honest, I think that once I retire we can get below $3000/month by reducing driving, cooking more, and maybe growing our own food. I consider this my safety net, along with the knowledge that I could contract work here in my field of employment.

celliott · Post by **celliott** » Mon Jun 20, 2011 8:28 pm

This talk of 3% or 4% safe withdrawal rate is interesting inasmuch as you need 1.2M saved to draw 3k p/month @ 3%
This illustrates one of the real advantages of rental real estate. With properties totaling 482k and a current 7.5% net profit (or what could be considered a 7.5% safe withdrawal rate) I can get the same 36k (3k p/mo.) annually.
Of course the initial investment is much, much smaller as the tenant is paying the mortgage until the property is paid off, at which time the former mortgage payment (less taxes & insurance) become available for withdrawal.
The power of leverage, when used wisely, is a powerful tool in the retirement arsenal.

George the original one · Mon Jun 20, 2011 9:19 pm

@celliott - There's a lot not to like about the SWR for stocks & bonds, mainly that it is focused on capital gains rather than a dividend income. It is also biased towards US large cap stocks. However, it is the best research on the subject of SWR that we've got.
I don't think anyone has done the research needed to determine a SWR for real estate investments. Or, for that matter, any leveraged investment (and I say that as one who uses leverage in stock investments).

dragoncar · Post by **dragoncar** » Mon Jun 20, 2011 10:14 pm

Of course, the tax treatment is different for capital gains/dividends vs. rental income.
Edit: Random tax question. Normally, with income, tax rates are marginal right? But if all you have is dividend income, you can get bumped up to the next bracket and lose? E.g. single person makes 34,500 in qualified dividends (no other income), they pay no taxes. Single person makes 34,501 in qualified dividends, they pay $5175.15 in taxes. Is this right?

akratic · Post by **akratic** » Mon Jun 20, 2011 11:16 pm

goal #1: $375k ($1250/mo, 4% SWR)

goal #2: $500k (nice round number)

goal #3: $600k ($1500/mo, 3% SWR)
After goal #1 I'll consider myself financially independent, but barely. Then it's just a question of how long I can hold on for in order to drive the SWR needed from ~4% to 3% or lower and to provide a spending cushion.
I'll probably do a combination of dividend stocks and the permanent portfolio. I would consider pursuing real estate income if I end up settling somewhere conducive to it. I may also do some freelance programming if the project interests me, and if I'm fortunate I'll still have some passive internet income.

crazn · Post by **crazn** » Tue Jun 21, 2011 12:47 am

The numbers I am thinking are much greater than what is being tossed around here, but I am a 51 year old conservative engineer. I plan on retiring after accumulating 2.5M and a 40K/yr pension and a 40K/yr lease income. I am older than most on here so you would probably be at or around the same spot if you worked till you're 56. I wouldn't have accumulated what I have unless I had many of the same values that I've read about on this website.

celliott · Post by **celliott** » Tue Jun 21, 2011 1:00 am

@George
Of course, you're right. I was using the terms "Safe Withdrawal Rate" very, very loosely. It's not an apples-apples comparison. My main point was that you can invest so much less into rental real estate than into dividend paying stocks or stocks (using capital gains) to get the same return as rental real estate.
@dragoncar
Why would they pay no cap gains tax on the first $34,500? Dividends are still taxed no matter the amount.
EDIT: You're correct as to 0 tax IF your in the 10-15% tax bracket. However, that little beauty of a tax benefit ends on 12/31/2012.
The difference is between short-term vs. long-term capital gains tax. The former being capped at 15% (as low as 5% in some cases) and the latter being taxed at your prevailing tax rate be it 15%, 28% or whatever.
In any case, let's assume that you're paying 15% short-term cap gains on the first $34,500 or $5,175.00 (I believe long-term capital gains are capped at 15% regardless of your income) and then the next year you make $34,501. You would be taxed at the increased rate only on the amount exceeding the $3,4500, or in this case $1.00. The next higher tax rate is called your "marginal tax rate." That tax rate only applies to whatever amount of income flows over into the next tier (or tax rate). It doesn't kick all the income into the higher tiered tax bracket. Only the difference gets taxed at the higher rate. In the end, you will have an average tax rate as your increased income is taxed at marginally higher rates.
http://www.econlib.org/library/Enc/Marg ... Rates.html

JohnnyH · Post by **JohnnyH** » Tue Jun 21, 2011 2:13 am

I have had many numbers in mind... I blew right through the first several markers, each time re-evaluating and deciding to continue striving. Some of the early numbers would seem very embarrassing now. But in my defense, ERE was not on my mind as much as being free to experiment, learn and have adventures again. Being able to do that indefinitely became the ultimate goal.
After several years of savings and smarter living, the crash came and the raises stopped. When my portfolio's fluctuations and performance dwarf potential savings I began to question the quest for "the number" -point of diminishing returns.
So I resolved to focus on increasing returns and income streams because the never have to work or worry again 3% drawdown 'number' was approaching far less rapidly than when I was starting.
My goals for early retirement (as in the early time of retirement) are:

*to earn enough through income streams to not drawdown my portfolio at all.

*find and pursue income streams that are less oppressive than FT employment.

*continue to find ways to increase returns (so far focusing on rental properties and options sales [mostly on core holdings])

*emotional reason: recapture all I feel I missed out on, during the period of "sacrifice."
Too tired/busy to run the numbers right now, but it would be nice to add years where you do not withdraw to the drawdown formula... The way I see it, working PT on exciting new jobs for 5 years (not withdrawing), might be a better idea than working that 9/5 for another 2 years and then not working at all.
These will be my fun drifter years, all the experience yet none of the desperation!
I think finding an ERE spouse that I am compatible with is unlikely. Should I decide to have children, something I think I will do eventually, I think I'll be looking for one of those 'love to work/love my job' people! I can provide everything but health insurance.
EDIT: looks like many here, including myself, are currently evaluating where to locate their homestead... We should get an analysis thread going!