How much cash to retire?

[Dockhead]

Originally Posted by Joli

. . . I enjoyed my work so much that I started my own company but still left it to go sailing. Am I wrong?

No one but you, can tell you whether it was wrong.


But you did not consider the years you spent doing that, "lost", did you? Sounds like not.



That would be a tragedy. Because you can't count on even making it to retirement. Every year is precious. The idea of suffering through a career you basically hate just you can quit after you are already way past your prime, and only THEN start to live -- is deeply forked up, in my opinion.

[sailorboy1]

The majority of working people who do their job because of the money hate you "we love our job people".

[valhalla360]

Originally Posted by Dockhead

I would suggest that that is a crude way of looking at it, which obscures what is really going on. Much better divide your capital into two or three funds:


1. Income fund. Invest this into running-yield oriented assets. Set a maximum expense budget and put enough money into this fund so that it is very unlikely to run out -- including spending the capital -- before you are as old as you could possibly live. Then spend less than the maximum budget.

2. Reserve fund. This can be invested into non-yielding capital appreciation assets. Should be big enough to cover whatever unexpected things might come up. How much do you need? I keep a million set aside just for this, myself, even after I lost 90% of my net worth in 2009.

3. Capex/growth fund. In case you expect to make any kind of capital expenses (house renovation, boat refit, or moving house, whatever), invest this separately in assets appropriate to the time horizons. Maybe take more risk with this fund, invest in growth stocks, real estate projects, etc.

And then DO NOT FORGET ABOUT INSURANCE. It is foolish to block a bunch of capital to cover expenses which can be insured against.

As to the risk of ending up in a nursing home -- I believe I will shoot myself if that ever happens to me, but normally you will want a fully paid off house which you can trade for nursing home care if you need it. OR add an adequate amount of money to the Reserve Fund.

I guess anyone going through this analysis is ipso facto a member of that notorious 1%, or to be precise, 3% ($5 million net worth is 97th percentile in 2020). But I guess many, if not most CFers are in this category at least.


I realize this was the premise of the OP, but "30 or 40 years of retirement"? Why in God's name would someone want to be retired for 30 or 40 years? Is it really so hard to find work that you really love?


For me, life without work would be like life without sex -- not worth living.

My example was a bit crude but it points out the issue with eating into the principal when you have a long retirement ahead of you...basically, using the principal doesn't add much to how much you can pull out per year. Dividing it up into different categories doesn't negate the issue.

Yes, you need to factor in insurance and end of life costs but that is only worse, if you are eating away at the principal.

As far as retirement being too long...never heard a person complain about that (at least when they don't run out of money) but so what if you find a new career that you love, nothing stopping you from pursuing it while having a healthy retirement plan if the career flops. But if you've been eating away at the principal and you are worried about running out, starting a new career, particularly if it takes some seed money, takes on a whole different feel and success tends to be worse because you become focused on cash flow

[wingssail]

Originally Posted by Dockhead

I guess anyone going through this analysis is ipso facto a member of that notorious 1%, or to be precise, 3% ($5 million net worth is 97th percentile in 2020). But I guess many, if not most CFers are in this category at least.

Perhaps that is true; I see a lot of mentions of "millions" and "new catamarans" on these threads, but in a real sense that is sad.

It is sad because it implies that few people who are not millionaires are members of CF, or put differently, cannot be cruisers without being millionaires.

Frankly I don't believe that is true, nor should it be. There is little reason why a person who retires, (finishes a working life) can't live on and cruise on a boat; it isn't that much more than a house. In my case I'm doing fine with far less than even one million dollars. I think I have my contingencies covered too. I know many cruisers who are doing well with less wealth than even I have.

I'd not like to take the view that these people of more meager means should just get out of cruising or boating and settle for living in a box somewhere ashore.

Let's don't take the stand that this life is only for millionaires.


I realize this was the premise of the OP, but "30 or 40 years of retirement"? Why in God's name would someone want to be retired for 30 or 40 years? Is it really so hard to find work that you really love?

It depends on what you call "retirement'. I did love my career, but I wanted to go sailing full time. We all have our preferences, and some of us are lucky enough to be able to do what we really want to do. I wanted to sail. In fact my focus on sailing handicapped my career even during my working years, and I still wanted more of it. I wanted to live on a boat and not have a house somewhere, I wanted to spend the rest of my life sailing and visiting and living in foreign lands. All of this was incompatible with "working" in the job I loved, and besides I found that I don't have time for a full time job.

So I quit and went sailing. I've never regretted it, not for a minute, even though I suffered financially by my choice.

I found as we went along that I needed to recalculate our financial plan and I needed a bigger fund to continue cruising, so I returned to work a few times (in foreign lands). But it was a means to an end, not the objective itself.


For me, life without work would be like life without sex -- not worth living.

Well, in that case I happy for you that you are working, not sailing full time.

I think it takes a few million dollars to have a reasonable middle class life for a few decades of not working. I'm not interested in "not working" myself.

As to the risk of ending up in a nursing home -- I believe I will shoot myself if that ever happens to me, but normally you will want a fully paid off house which you can trade for nursing home care if you need it. OR add an adequate amount of money to the Reserve Fund.

"Normally" I want a new Mercedes too. Oh heck, I'll just the the money in a reserve fund instead. It is really a privilege to have those choices. Not all of us are that privileged.

[ol1970]

Totally agree, hell the entire phenomenon of retirement is a very recent development in human history. Anybody who is fortunate enough to have the opportunity to retire in any capacity is very lucky.

[tradrockrat]

This is such an impossible question. I have enjoyed finding out about the other website and the programs used to find solid numbers for people, but man - we're all so different it's just impossible. I'll give you my numbers, but applying my numbers to you is...pointless??? I guess??? Anyway, here ya go:

I'm NOT retiring - I'm one of those people Sailorboy hates I love my job, made a concrete plan to start a business that would pay me to sail around the world doing what I love, and enacted the plan in 2012.

I LOVE my work. I have no intention of ever stopping. But starting next year, I get to do it only when I want to - and more importantly - WHEREVER I want to (local laws permitting).

Here's some numbers for the numbers crowd -

I'll be making a guaranteed 3K US a month when I step back fully to cruise (timing depends on COVID), then on top of that, I will be profit sharing - as the founder of the company and builder of the programs, I get 50%. That isn't a lot actually (we're a boutique style service provider), but even in Covid times, it has the potential to return another 3K a month. What about inflation? Well, I'm glad you asked! The business is scalable on both sides of it - I can franchise the schools (each one worth a set monthly fee added to my income) and I can grow the online training programs along with inflation thus increasing my profit share.

We own the boat outright

We will have 100K in the boat kitty when we sell our house.

And for those asking about working for free - I fully intend to share and teach for free everywhere I go while cruising (and I also intend on charging in places that can afford / allow it).

Yes - I am at risk of a major health issue - but seriously folks - I live in America and even with our health insurance a major health issue would destroy us anyway. I'd rather be sailing when (if) it happens.

There's just no one answer that fits everyone. My answer scares the bejeebus out of some people, others call me crazy, and still others have a little envy, but it's the plan that works for me and my wife.

[kenbo]

Here's an interesting website for calculating what you need until presumed death. It's a Monte Carlo analysis that is based on assumptions that YOU need to make. It's far from infallible but the more you work with it and make conservative assumptions it can offer some valuable insights.

Enjoy! https://firecalc.com/index.php

I recommend using the long form version which is accessed by the tabs at the top of the page.

[barnakiel]

I retired at 35, with less money in my pocket than I have today, 18 years down the road. Traveled, lived, loved. Ready to die now (although very unwillingly so!)



Why do you always link retiring with money? Make up your mind if you want to retire OR if you want to have money.


If you want to have money, do NOT retire. Keep on grinding. Till you drop on your face.


barnakiel

[valhalla360]

Originally Posted by sailorboy1

The majority of working people who do their job because of the money hate you "we love our job people".

Reality fall somewhere in the middle.
- Thinking tomorrow you will change careers and it will be all rainbows and unicorns while making big bucks is foolish. All jobs have hassles and frustrations.
- Thinking you are trapped in a horrible job and can't make a plan and move towards a career that you find more enjoyable and satisfying is equally foolish.

Of course, if you've worked hard, saved up and want to retire for the next 50yrs traveling the world and doing charity...more power to you whether you liked your job or not.

[smac999]

Money in North America will be worthless in a few years. Due to the covid collapse. So there is currenty no way to save money for retiring. Soon they will be printing billion dollar bills to buy a coffee. Like currently in Venezuela. So your million dollar savings might buy you a glass of water.

So to answer. Maybe 500 trillion? Would get you through a few years.

[daletournier]

I've been lucky, I never had a job I didnt like, or better put once I wasnt enjoying a job I left it, that included my business. I decided that I wanted to go sailing, so I did. I worked out what needed to be done and set out to do it. Retired at 38 (14 years ago) and have no intentions of going back to work.

It's great that some like to work and will work forever but there's always a cost, you cant work and sail around the world for 10 years at the same time. Life minutes are limited.

Different personalities. DH cant understand how someone like me is happy with no employment BUT I dont understand his type of cruising, having a team working well, sailing a boat hard for short periods of time etc...me, I like having my partner onboard or one female crew, enjoying a cup of tea or a wine and dawdling from one Anchorage to the next, it's not the journey it's the destination.

Heres one other thing, it's not the boat, I cruised extensively on a much smaller boat than my current boat , I'm no happier on the bigger boat, sure I'm more comfortable but not happier, sunsets are sunsets, good company is good company, whether your on a big boat or a small boat.

Much better things to do than deal with customers and employees.

[daletournier]

Originally Posted by smac999

Money in North America will be worthless in a few years. Due to the covid collapse. So there is currenty no way to save money for retiring. Soon they will be printing billion dollar bills to buy a coffee. Like currently in Venezuela. So your million dollar savings might buy you a glass of water.

So to answer. Maybe 500 trillion? Would get you through a few years.

I'm not sure the US will follow Venezuela BUT I agree they seem determined to debase the Usd, they arent alone though.

As much as Venezuela is a basket case some there have done well, they understood that their purchasing power was getting destoyed and bought assets that would protect them.

[Mike OReilly]

The thing about work is, no one is talking about not working. There's no end of work to be done, all the time. And a cruising life lends itself to this constant work. Indeed, it demands it.

What some are talking about is moving into a space (retirement) where the choice of work is, to a larger extent, defined by you, and not by some external force like an employer or customers. But just because you're not getting paid, doesn't make the tasks everyone does everyday any less work-like.

What's interesting is that some people seem to fear that if they don't have this external structure, or demand, that they will somehow whither away in retirement. Despite this common fear, I've never actually met this kind of person. Maybe they exist, but that's not the norm for human nature.

BTW, I've been a self-employed writer for almost my entire so-called career. I've always worked as hard as necessary, but usually not more. And that goes for both paying, and unpaid work.

As far as paying work, and making money, I've always tried to limit my need for it by living smaller than most. I guess that's why I've always focused on the expense side of the ledger, as opposed to the revenue side.

[NPCampbell]

Originally Posted by Dockhead

I guess anyone going through this analysis is ipso facto a member of that notorious 1%, or to be precise, 3% ($5 million net worth is 97th percentile in 2020). But I guess many, if not most CFers are in this category at least.

I hope you're not correct but you probably are. It's sad because it's relatively easy to make a sizeable nest egg by retirement age. I have this spreadsheet I use to prove this point.

Assuming:
1) you started flipping burgers at 18 in 1971 making minimum wage ($1.60/hr)
2) you never made more than minimum wage at any point of your career
3) you retired this year at 67
4) you had the wherewithal to invest 15% of your salary in the S&P500 every year

You'd be a millionaire.

Obviously, you would have had to been able to survive on minimum wage your entire life which would be no easy task but the point this example shows is that someone making the absolute minimum possible can save a million+.

[Boatguy30]

And you're a sucker and looser if not! I haven't met anyone that's been making minimum wage and saving 15%!

Most of these folks don't even have bank accounts. Including a tenant of mine that has a "good job at the hospital"

Nice try to uphold the status quo there! Completely detached from reality.
But good effort. Boot straps and all that.

"Ok Boomer" either people should just try a bit harder or people should just die a bit sooner I guess....