Money needed to retire - poll

[zippy1]

They also understand my current job is 'managing our investments' which has lead to a number of questions and discussions. My wife and I are both very involved in many not for profit organizations (sport/school) coaching, organizing etc so we are quite busy with the kids.

......

Would like to thank many board memebers to share on this topic.  I have a question that I would like to ask:

At what point, should one quit the "corporate" job and just "manage one's (one's family's) investment?"

 

What criterion should we use to decide on this?

 

I have been wondering about this question and would appreciate any insight on this question.

[onyx1]

They also understand my current job is 'managing our investments' which has lead to a number of questions and discussions. My wife and I are both very involved in many not for profit organizations (sport/school) coaching, organizing etc so we are quite busy with the kids.

......

Would like to thank many board memebers to share on this topic.  I have a question that I would like to ask:

At what point, should one quit the "corporate" job and just "manage one's (one's family's) investment?"

 

What criterion should we use to decide on this?

 

I have been wondering about this question and would appreciate any insight on this question.

I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.  The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

[zippy1]

All of you guys that are retired and have both parents at home, can you and your spouse/kids stand each other 24x7 a day? I suspect you can but many can't. Recently, we had Lou Simpson starting his own fund so he doesnt drive his wife crazy. Just some thoughts and ideas would be helpful on this topic.

 

Thanks for bringing up this excellent point.  Actually, a friend of mine used to work for the CPU company on the west coast.  That company had (may still has?) this policy of giving a person 2 months sabbatical after working there 6 years.  Anyway, the first one was ok.  But the seond one drove his wife nuts.  His wife asked him to "stop following me around...."  :)

[Viking]

shalab, this is actually the only issue I have encountered. The key is what both spouses do with their time. If you are both in the house all day long, yes, friction easily develops. It is also hard to keep a relationship 'fresh' when you are with each other too much of the time. The key is to have enough outside/different interests that each of you get out of the house each day. One thing I do is print much of my reading (i.e. companies I am invested in) and head to any number of local Starbucks to relax and read (I like to print most reports as I highlight stuff and write comments in margins etc). I much better appreciate what retired couples go through...

[benhacker]

Zippy,

 

Actually, a friend of mine used to work for the CPU company on the west coast.  That company had (may still has?) this policy of giving a person 2 months sabbatical after working there 6 years.

 

Still has... it's every 7 years though.

 

Just got done with mine in December... phenomenal opportunity.

 

Ben

[zippy1]

I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.   The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

  Thanks for giving me this very nice piece of advice.  My wife and I actually have been thinking about this for sometime and there are several aspects of it make me undecided. 

 

  One aspect is, of course, will we have enough assets?  We live in Taiwan, where the living cost is somewhat lower than the States, so this part is much easier.

 

  However, what makes her uneasy is to have me being a fulltime "home maker."  Here the society values "corporate titles" very much.  When I told my wife I think I should eventually quit my job and manage our investment full time, my wife actually wanted me to form a small company, a small investment partnership, so that I can: 1) keep the "going-to-work everyday" routine and have a job title and 2) keep relatives from thinking I am lazy to retire when I am 45.

 

    I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do? 

[valuecfa]

I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.   The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

  Thanks for giving me this very nice piece of advice.  My wife and I actually have been thinking about this for sometime and there are several aspects of it make me undecided. 

 

  One aspect is, of course, will we have enough assets?  We live in Taiwan, where the living cost is somewhat lower than the States, so this part is much easier.

 

   However, what makes her uneasy is to have me being a fulltime "home maker."  Here the society values "corporate titles" very much.  When I told my wife I think I should eventually quit my job and manage our investment full time, my wife actually wanted me to form a small company, a small investment partnership, so that I can: 1) keep the "going-to-work everyday" routine and have a job title and 2) keep relatives from thinking I am lazy to retire when I am 45.

 

    I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do? 

 

Quit worrying what everyone else thinks and do what makes you happy. I was laid off at the end of last year from a good job and used my extra free time to travel all of SE Asia, Japan, HK, and Bali for several months. Friends thought i was nuts. "Who does that?"But it was probably the best time i have ever had and I made great lifelong friends! Glad i didn't listen to them or worry about what they thought.

 

I think the biggest thing people overlook when retiring especially early, like in their late 30s early 40s is maintaining purchasing power for all those years and assuming conservative investment returns. My "magic number" after great thought is about $2.1 million at my current age assuming a conservative 5.5% rate of return and 3.5% average annual inflation for 50 years. At only 5.5% i would have enough left over each year to add to principal to reduce inflationary effects over the long term and easily maintain purchasing power. If some external shock were to happen to cut my wealth in half during retirement, i could easily pack up and move to a much cheaper location I enjoy like Belize, southern Spain/Portugal, or Argentina.

[onyx1]

I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.   The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

 

   I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do?  

 

For me, a healthy byproduct of not working for anyone else is that I no longer care much about how others view me.  Aside from free time, this ranks as one of the best parts of attaining the retirement goal.  When you reach true independence, you will probably feel much of the same.  Hope you get to you goal soon.

[SharperDingaan]

Couple of things to keep in mind:

 

- Your nest-egg just gives you choices. You still have to decide what you want to do, & your choice today will be very different from your choice 10 yrs from now.

- You don’t choose in a vacuum. It’s you & your spouse/significant others, & both sets of parents, & they all have to be comfortable with your choice. They have to live with you, & your consequences.

- You retired, not your spouse/significant other. You do the long vacations on your own, because your spouse/significant other cannot, & it may well not be what they signed up for.

- For most couples, the expectation is that they will retire within a few years of each other, and generally sometime after the kids have left home. No kids/teens underfoot, menopause & the mid-life crises are done, etc.  Materially change this, & you may well be getting old by yourself.

- Like it or not you will be judged. You retired early because you could, but most societies will just see someone who pissed away their opportunities when they were at the top of their game. You can change your game (do something you’re passionate about), but you can’t leave the court.

- Work is not just the money, it’s the people you work with, the mental stimulation that goes with it, & the routine of 9-5. Independent wealth just lets you work for only part of the year, & bluntly tell off the occasional a**hole, but work is still a desirable thing. 

- Just as money is the servant, so is the job. Bhutan’s (Himalayan Alps) ‘Gross National Happiness’ measure is not as dumb as it sounds!

 

SD

 

 

[zippy1]

Couple of things to keep in mind:

 

- Your nest-egg just gives you choices. You still have to decide what you want to do, & your choice today will be very different from your choice 10 yrs from now.

- You don’t choose in a vacuum. It’s you & your spouse/significant others, & both sets of parents, & they all have to be comfortable with your choice. They have to live with you, & your consequences.

- You retired, not your spouse/significant other. You do the long vacations on your own, because your spouse/significant other cannot, & it may well not be what they signed up for.

- For most couples, the expectation is that they will retire within a few years of each other, and generally sometime after the kids have left home. No kids/teens underfoot, menopause & the mid-life crises are done, etc.  Materially change this, & you may well be getting old by yourself.

- Like it or not you will be judged. You retired early because you could, but most societies will just see someone who pissed away their opportunities when they were at the top of their game. You can change your game (do something you’re passionate about), but you can’t leave the court.

- Work is not just the money, it’s the people you work with, the mental stimulation that goes with it, & the routine of 9-5. Independent wealth just lets you work for only part of the year, & bluntly tell off the occasional a**hole, but work is still a desirable thing.   

- Just as money is the servant, so is the job. Bhutan’s (Himalayan Alps) ‘Gross National Happiness’ measure is not as dumb as it sounds!

 

SD

 

Sharper, thanks for a very well thought out input, as you always do.

 

Indeed, as I became more financially secured, I have become more willing to express my view at work. Knowing that I have a second set of skills do help.

 

I am lucky in that when I came back to Taiwan, I was asked to set up an engineering department in a major company.  Over the past years, I essentially staffed it with the top ranked students from the best local graduate schools and have coached them more or less the way I want.  If I quit, I know that I will not have the opportunities to work with as talented a group of people.

 

As you said that I can change the game but can't leave the court. That is really an excellent piece of advice.

 

I think what I should do is to figure out what game I want to play if I quit my current job. Beyond investing in my spare time,

 

do I try managing money for people? (Munger did not  like it, though?)

do I register in a seminary to study theology and become a missionary worker?

do I join a non-profit organization to work on a cause that I am passionate about?

 

Again, thank you for your excellent piece of advice.

[oec2000]

Erciopoly, interesting question; a topic I have also thought about. My kids are 10, 8 & 7 and I have not 'worked' for the past 5 years (my wife since our first was born). Fortunately, I was in sales/management for two large multinational companies and my kids know what my last job was and the products I sold (we eat them every day). They also understand my current job is 'managing our investments' which has lead to a number of questions and discussions. My wife and I are both very involved in many not for profit organizations (sport/school) coaching, organizing etc so we are quite busy with the kids.

 

Bottom line, the kids can see our work ethic; we just don't hop in the car each morning. We also likely have more time to talk about 'work stuff' with them than most parents (too busy'stressed out with other things). I guess the key is how much time you are able to spend with your kids and what you are doing with them. I definitely wouldn't change anything about the past 5 years. Let's hope the next 5 are as good! :-) 

 

I retired when my kids were just under 10 (late teens now). No doubt the opportunity to spend more time with them is priceless. However, there has been a negative impact on their drive imo. This did not not become apparent until they became much older so I would caution you from forming a conclusion at this point.

 

It's tough to know for sure whether this is a result of having non-working parents, poor parenting skills or some other factor but it was definitely not due to the lack of discussion of the importance of hard work and responsibility. My best guess is that as they get older they realise that the family is "privileged" and they conclude that you can get there without having to work really hard.

 

They are not "bums" by any means and they have a sense of responsibility but it's hard to get them to "walk the extra mile" when necessary.

 

This is a just a sample size of one, though!

 

 

Would like to thank many board memebers to share on this topic.  I have a question that I would like to ask:

At what point, should one quit the "corporate" job and just "manage one's (one's family's) investment?"

 

What criterion should we use to decide on this?

 

I have been wondering about this question and would appreciate any insight on this question.

 

These are questions you should ask:

 

1) How much do your enjoy your day job? Would you continue to do it for no pay?

2) How confident are you in your investing skills to provide a sustainable income through good and bad cycles?

3) Is the opportunity cost of not managing your investments full time more than the income you earn from your fulltime job?

4) Do you have enough interests/hobbies to keep you occupied and sustain your social needs?

5) Is your ego tied to the status you enjoy in your job? I've seen people who were financially comfortable in retirement but were unhappy because of their loss of status/power they used to enjoy at work.

 

The question you should not ask:

 

1) What others will think of your decision?

 

 

[Guest misterstockwell]

They also understand my current job is 'managing our investments' which has lead to a number of questions and discussions. My wife and I are both very involved in many not for profit organizations (sport/school) coaching, organizing etc so we are quite busy with the kids.

......

Would like to thank many board memebers to share on this topic.  I have a question that I would like to ask:

At what point, should one quit the "corporate" job and just "manage one's (one's family's) investment?"

 

What criterion should we use to decide on this?

 

I have been wondering about this question and would appreciate any insight on this question.

 

I occasionally check in on this guy's blog--he retired early and moved to Taiwan. http://hualien-jc.blogspot.com/  Why don't you contact him and talk with someone local?

[twacowfca]

Couple of things to keep in mind:

 

- Your nest-egg just gives you choices. You still have to decide what you want to do, & your choice today will be very different from your choice 10 yrs from now.

- You don’t choose in a vacuum. It’s you & your spouse/significant others, & both sets of parents, & they all have to be comfortable with your choice. They have to live with you, & your consequences.

- You retired, not your spouse/significant other. You do the long vacations on your own, because your spouse/significant other cannot, & it may well not be what they signed up for.

- For most couples, the expectation is that they will retire within a few years of each other, and generally sometime after the kids have left home. No kids/teens underfoot, menopause & the mid-life crises are done, etc.  Materially change this, & you may well be getting old by yourself.

- Like it or not you will be judged. You retired early because you could, but most societies will just see someone who pissed away their opportunities when they were at the top of their game. You can change your game (do something you’re passionate about), but you can’t leave the court.

- Work is not just the money, it’s the people you work with, the mental stimulation that goes with it, & the routine of 9-5. Independent wealth just lets you work for only part of the year, & bluntly tell off the occasional a**hole, but work is still a desirable thing.  

- Just as money is the servant, so is the job. Bhutan’s (Himalayan Alps) ‘Gross National Happiness’ measure is not as dumb as it sounds!

 

SD

 

Sharper, thanks for a very well thought out input, as you always do.

 

Indeed, as I became more financially secured, I have become more willing to express my view at work. Knowing that I have a second set of skills do help.

 

I am lucky in that when I came back to Taiwan, I was asked to set up an engineering department in a major company.  Over the past years, I essentially staffed it with the top ranked students from the best local graduate schools and have coached them more or less the way I want.  If I quit, I know that I will not have the opportunities to work with as talented a group of people.

 

As you said that I can change the game but can't leave the court. That is really an excellent piece of advice.

 

I think what I should do is to figure out what game I want to play if I quit my current job. Beyond investing in my spare time,

 

do I try managing money for people? (Munger did not  like it, though?)

do I register in a seminary to study theology and become a missionary worker?

do I join a non-profit organization to work on a cause that I am passionate about?

 

Again, thank you for your excellent piece of advice.

 

Zippy1

 

Suggest you get a copy of an out-of-print, skinny, paperback book, The Truth About You, by Arthur F. Miller.  It tells how we were all born for a purpose.  That vocational and avocational purpose is quite specific and often unique for each person.  

 

The late Dr. Miller became a well known, high level personnel consultant to corporations.  After many interviews, he came to understand that each person has a specific set of motivated abilities, sweet spots so to speak, things he likes to do and does very well.  Efforts to work outside of these sweet spots generally fail or are unsatisfactory.  

 

However, these "tropisms", the work and activities we enjoy doing, are where we are most productive and where we contribute the most to society.  His book shows how to tease out our tropisms and understand clearly our giftedness.

 

 

 

[bargainman]

I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.   The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

  Thanks for giving me this very nice piece of advice.  My wife and I actually have been thinking about this for sometime and there are several aspects of it make me undecided. 

 

  One aspect is, of course, will we have enough assets?  We live in Taiwan, where the living cost is somewhat lower than the States, so this part is much easier.

 

   However, what makes her uneasy is to have me being a fulltime "home maker."  Here the society values "corporate titles" very much.  When I told my wife I think I should eventually quit my job and manage our investment full time, my wife actually wanted me to form a small company, a small investment partnership, so that I can: 1) keep the "going-to-work everyday" routine and have a job title and 2) keep relatives from thinking I am lazy to retire when I am 45.

 

    I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do? 

 

Quit worrying what everyone else thinks and do what makes you happy. I was laid off at the end of last year from a good job and used my extra free time to travel all of SE Asia, Japan, HK, and Bali for several months. Friends thought i was nuts. "Who does that?"But it was probably the best time i have ever had and I made great lifelong friends! Glad i didn't listen to them or worry about what they thought.

 

Zippy  It's clear that you care about what your wife thinks, and thank goodness for that!  So i don't really subscribe to the comment about "quit worrying what everyone else thinks" since clearly her opinion is important to you.  The idea of doing what makes *you* happy is a good one, but also seems to me to be more of a north american western individualistic concept that doesn't pervade all societies, and certainly not a lot of Asian societies.  So ultimately there are actions and consequences and the most important thing is for you to be happy with the consequences ( and perceived ones, since maybe they wouldn't be what you think they would be. Often times we fear doing something, then after we do it we realize our fear was just in our heads, or our spouse's heads).  You already have spelled out what you think the consequences will be, the question is whether you can live with them?  that's only a decision you can make.  In other words if you take advice from a board member that says "do what makes you happy", and the thought of other people close to you thinking bad of you doesn't make you happy, well then you should ignore the part about "quit worrying what others think" :-) 

[treasurehunt]

Thanks to everyone for this fascinating discussion.

 

I am forty four and I am quitting my current job to take a break for a couple of years. I am not retiring as such, but the new occupation I have in mind for later -- teaching -- will pay much less. The points brought up in the posts on this thread have given me a lot to think about (but I am still not changing my mind about quitting :-)). Thanks especially to twacowcfa for the Arthur Miller book recommendation; I'll check this out.

 

My net worth is about 30 times my annual expenses. I don't think this is quite enough for retirement, but it should provide a good enough cushion for lower income in the future. I think.

[bargainman]

Thanks to everyone for this fascinating discussion.

 

I am forty four and I am quitting my current job to take a break for a couple of years. I am not retiring as such, but the new occupation I have in mind for later -- teaching -- will pay much less. The points brought up in the posts on this thread have given me a lot to think about (but I am still not changing my mind about quitting :-)). Thanks especially to twacowcfa for the Arthur Miller book recommendation; I'll check this out.

 

My net worth is about 30 times my annual expenses. I don't think this is quite enough for retirement, but it should provide a good enough cushion for lower income in the future. I think.

 

You'll want to pick up Tim Ferris's book "4 hour work week" or check out his website.  He's a piece of work in some ways, but leads a very interesting life and advocates for mini retirements, which is what it sounds like you're doing.

 

http://www.fourhourworkweek.com/

[Vish_ram]

Lots of great posts and an interesting discussion.

 

The wild card really is inflation. What would a retiree in Zimbabwe (who retired 10 years back) be doing now? His 1 million $ portfolio in zim$ may buy him a dozen peanuts now.

 

No one can predict what inflation is going to be in next 30 years. Any one using a benign rate of 3.5% may be in for a nasty surprise. I'm sure everyone in this board would have read Buffett's thoughts on how inflation impacts market values. Even a company like KO can trade at 5 times P/E if inflation runs very high. As Buffett says, risk comes from not knowing what you are doing.

 

How many have stress tested their portfolio with inflation of 10% or more?

 

I think the only thing that handles inflation well is having "employable/employment creating skills". what one needs is plan B in retirement.

 

Inflation can skyrocket due to these

1) failure to contain medicare/medicaid expenses

2) failure of federal govt to reduce expenditures

3) $ losing global currency status

4) failure of US to innovate

 

There are also other risks

 

What if yellow stone erupts, what if an underground quake creates a tsunami that sinks 10% of US.....

Any one depending on equity market as a sure way to get income is dumb.

 

I had an interesting conversation with my dad. I asked him why would anyone buy an apartment for 1 crore (10 million rupees) and get 1.6% yield and with capex of 0.3%, with net yield of 1.3% in India. He said, i can handle inflation better. In 5 years, the same apartment will be selling for way more than 1 crore, and giving same % yield, but if are renting with fixed income, you are hosed.

[Uccmal]

Very interesting discussion.  I may check out the book by Miller as well.  Looked up a couple of related websites.

 

Vishram, I dont disagree with where you are coming from but there is no way to protect against true worst cases:

1) your job skills become absolutely obsolete

2) War takes away your land - Sri Lanka, Europe WW2 - War is perhaps the most signficant negative driver of prosperity

3) Global climate change takes away your real estate.

 

At a certain point you have to live on faith.  It is far better to rent in Liepzig than own or be a landlord.  Population has declined naturally by 20%.  In that case you would want to hold German stocks not Leipzig real estate.

 

A true backwardization of society would wipe out much of the populace so there is not much point in worrying about because you and I will be dead.

[Viking]

zippy1, I still (5 years later) struggle a little with explaining to people what I do in a way they can understand. Most are so financially illiterate that they are not able to understand; I am sure many think I must have some 'under the table' income that I am not telling them about. It is also hard because we are always heavily involved in our kids activities (coaching, managing, sitting on various executives etc) and we see how time starved most people are; I also do not want to come accross as being boastful or Mr Perfect with all sorts of time on my hands. I find talking to people about 'work' to be a fine line to walk.

 

I have also learned over the years that when you make big decisions the 'problems' are relatively easy to pick out. I have also learned over the years that many 'unintended positive outcomes' happen that are not contemplated when the big decision is being contemplated (versus only a  few 'unintended negative outcomes'). This tells me that if you focus on the big decision and think it through well, if the positives outweight the negatives then it likely is a go (and the positive unintended consequences that subsequently happen make the decision a slam dunk a few years later).

 

I am reading Hill's 'Think and Grow Rich' classic and it sounds very much like your thought process creates your reality (not the other way around). I think this is an important factor in the net worth number that people come up with when considering 'retiring'.

[treasurehunt]

How many have stress tested their portfolio with inflation of 10% or more?

 

I think the only thing that handles inflation well is having "employable/employment creating skills". what one needs is plan B in retirement.

 

Inflation can skyrocket due to these

1) failure to contain medicare/medicaid expenses

2) failure of federal govt to reduce expenditures

3) $ losing global currency status

4) failure of US to innovate

 

There are also other risks

 

What if yellow stone erupts, what if an underground quake creates a tsunami that sinks 10% of US.....

Any one depending on equity market as a sure way to get income is dumb.

 

I had an interesting conversation with my dad. I asked him why would anyone buy an apartment for 1 crore (10 million rupees) and get 1.6% yield and with capex of 0.3%, with net yield of 1.3% in India. He said, i can handle inflation better. In 5 years, the same apartment will be selling for way more than 1 crore, and giving same % yield, but if are renting with fixed income, you are hosed.

 

Good point about inflation. I have been looking at my assets lately, trying to see how they will do in an environment with high inflation. The conclusion -- my portfolio does not provide adequate protection against inflation. I have been considering buying real estate using a fixed rate loan as an inflation hedge. Another option is TIPS, but I am not sure if this is a good time to buy any US government bonds (what if yields go up for reasons other than inflation?). Any other suggestions?

 

As for protecting myself against cataclysms like the eruption of Yellowstone, I don't see the point in spending a lot of effort on this. I am probably taking a bigger risk every time I drive my car. I prefer to accept that life is inherently risky and move on.

 

Also, one comment on your dad's view of Indian real estate. His comments reflect a very common attitude in India. This view has been a good idea historically because inflation has generally been high in India. But what if India's inflation rate goes down as the economy modernizes? Then real estate as an inflation hedge looks much less appealing, and prices may come down significantly. Just as many people are ignoring the risk of high inflation in the US, I think folks buying Indian real estate are ignoring the risk of declining inflation in the future.

[zippy1]

I would like to thank board members for sharing with me on this so generously.  The experience and advice sharings are really beneficial to me.

 

I will definitely get Dr. Miller's book.  Interestingly, even though it is out of print in US, it is still available here in Taiwan in a Chinese translated version.

 

One aspect to "retirement" though is that I am not looking forward to sitting in my house doing nothing. The kind of retirement that I look forward to is the kind that I think I can do something positive.  So one task is to find something that I think I can really contribute.

 

In terms of how confident that I can be of my finance, given a few bad years.  Honestly, I don't know. 

 

I started picking stocks in a small scale in 2000.  I was doing it in small scale till 2005.  I started to do it in bigger scale following the move back to Taiwan in 2006. 

 

It turns out that the results are quite "lumpy." 2009 was a good year and I got 50+%.  2008, I lost about 10%.  2007, I only got about 5%.  The geomertical mean is about 16-17% for 2006 to 2010. However, as the result are so diverging, count on the geometrical mean as the performance expectation appears to be quite dangerous.

 

I undersstand that investing full time vs. part time "should" improve performance but I am not sure what assumption should I make on the difference.

 

I can only live life once so I got to make it count.

[jb85]

I found a pretty decent tool that is interesting.  It is an excel file found here

 

http://www.efficientfrontier.com/ef/101/hell101.htm

 

 

(look for sentence "(For those who want to explore the spreadsheet option, I have posted a 100-run by 30-year sample here.) "

 

 

This excel sheet lets you calculate your chances of going broke in retirement based on a few factors (1) how much you have saved at beginning of retirement, 2) how much you will withdraw every year 3) your annual return (expected) and 4) the standard deviation of that return (expected).

 

With these factors it calculates your probability of success.  Kinda cool

 

(for the record, i use magic formula stocks, and the standard deviation for those stocks from 1988 - 2009 was about 27

[valuecfa]

One of my relatives owns this asset mgmt. firm., where i first interned many years ago. His website has really good retirement calculators to play around with.

 

http://www.fimg.net/services/financial-planning/66

 

down at the bottom of the page are the different calculators, that can incorporate annual income, inflation, social security, investment returns, etc.

[Uccmal]

I am not totally convinced of the timing factor in retiring early, for a reasonably good investor.  Here is a situation.  One has 4 years of significant capital gains which are taxed in Canada at 50% of your marginal tax rate.  If one enters retirement and immediately has two or three losing years one gets a couple of things.  First, in Canada there is a slew of tax rebates, deductions etc. for people with no earnings.  This would offset some of the losses.  Some would be offset by dividends.  Some would be offset by pushing the capital losses back into prior years and actually getting a refund on past taxes paid.  This works for individuals in Canada.  I have no idea if its the same in the US. 

 

If you put your investments in a partnership or company then you can write off all kinds of things that previously cost you out-of pocket money.  and you can use tax loss carryforwards. 

 

What I am basically saying is that the rich get richer because they know how to deal with money, and in fact know how to make money.  I expect that applies to most of the people on this board.  These skills are very transferable.  These skills also last deep into old age, well beyond conventional retirement. 

 

 

Basically, what needs to be done is to set up 3 years or so of cash for living expenses.  Firewall the rest of your investment money and run it as you always have.  Re-assess regularly.  Take excess cash out of the investment portfolio when things are going well and top up the three year amount. 

[twacowfca]

Interesting results from the poll.  There is no pattern to the results; no skew or up or down trend; nothing approaching a normal distribution; no kurtosis.

 

This implies that the information content of the board's wisdom on this subject is low, despite the investment acumen.