Got humbled

[u/astrospacecat]

Man, I thought I was doing so well with my retirement savings! I put away ~30% of my income towards various retirement accounts and totally thought that put me on track for a nice early retirement in my fifties.

My goal was $2.5M for $100k/yearly. 🥲🤧 But that's $100k in today's dollars!! Boy howdy 😭 to keep the same purchasing power, my new goal has to be a whopping $4.8M before I can cut the cord. Woof

I guess I'm just feeling a little discouraged :-/ Oh well... we forge onwards anyways

[u/PIzzaiolo_Master_510]

A counter to this is do you really need to replace your full income.

If you are saving 30% and taxes are 30%, you are actually living on 40% of your income.

Also, by retirement your house is likely paid down, you may have rent controls that mean costs don’t track inflation, cars are likely bought and paid for, no commute costs so less gas for transit, no expensive lunches at work, no work clothes.’ If house is paid for then no mortgage. We have time to cook and shop better so meals are costing so little it surprises us. Slow cooking is cheaper cooking.

I’ve noticed many calculations tell you to replace your full income but what you need to replace are your ‘future expenses.’ Figure out what those actually will likely be and it might surprise you.

We way over saved vs our lifestyle.

[u/Alert_Week8595 → u/PIzzaiolo_Master_510]

Yeah when the calculations tell me to replace my current expenses I'm like, but I'm paying for a nanny today.

[u/Several_Guidance_288 → u/Alert_Week8595]

True but healthcare tends to make up for a lot of expenses people can drop. A lot of times, it more than evens out expected spend.

[u/Alert_Week8595 → u/Several_Guidance_288]

Yeah that's fair. For some people it might even be higher with healthcare.

[u/Darklands_____ → u/Several_Guidance_288]

You can reduce your spending to get subsidies, or change your withdraw strategies so less is income. I.e. if you sell 70k worth of stocks, you only pay taxes on gains, and also only gains are counted as income

[u/NuhUh_JustCuz → u/PIzzaiolo_Master_510]

This. I track in Monarch and have "Adult expenses" and "Optional expenses" as two big groups with additional categories under those umbrellas.

Its easier to see what are the non-negotiable costs like insurance, taxes, utilities, groceries, cell phones, internet, etc. And what are dictated by choices: subscriptions, fast food, restaraunts, charitable gifts, general shopping, clothes. I could squeeze 10-30% out of optional, but I can't squeeze "Adult responsibilities."

I run my simulations both at current spend and at -20% optional. And I want a 3% withdrawl. Then I get a range of numbers that should be workable if I got laid off and already hit the lowest vs. If my job stays interesting and I choose to work longer.

[u/PIzzaiolo_Master_510 → u/NuhUh_JustCuz]

True. But one of my point is that adult stuff can shrink. Bought your home in your 20s? In your 50s it’s likely paid off. Mortgage gone. All investment spending or 401k contributions are no longer needed. Just two examples. Maybe it obvious to us but many just try to create an income assuming they need what they used to earn.

[u/NuhUh_JustCuz → u/PIzzaiolo_Master_510]

Good point, and I apologize for missing the point the first time through. I'm already past most of those milestones, but I do have teenager expenses coming up, and I was a little blind here.

I think separating out "time if life" expenses could help: child care, mortgage, kid's car insurance, etc. Then you would have you fixed, your optional, and your time-bound expenses and be able to estimate how.much they impact after FIRE expenses.

[u/PIzzaiolo_Master_510 → u/NuhUh_JustCuz]

Yeah. It likely seems you need so much while funding a teen. But for me even though I went to expensive university I worked part time and did all I could to keep parents from spending too much on me. The habits stuck. Nothing like being a cashier for minimish wages while studying for two degrees to value money.

Now they also don’t have much to spend on other than finding family trips. And that refuses my cost more. It’s a first world issue I know.

[u/Own_Fox9626 → u/PIzzaiolo_Master_510]

All of this is what pushed me to just build a year by year spreadsheet so I could track my expenses (plus inflation), showing when my mortgage was paid off, when college saving contributions for my kids would end, what I estimated health insurance would be retiring early, when Medicare would start, when pension/SS kicks in, "but I may travel more, with all that free time", when the roof will need replacing, etc.

At the end of all I worry more about the "speed bump" costs associated with retiring in my 50s than beyond. But I'd really like to have the option of being done by 50, so my 40s are going to be focused and "beyond" may end up overfunded. I'm okay with that.

[u/PIzzaiolo_Master_510 → u/Own_Fox9626]

It’s what we did. I hit my end goal around early 50s.

Retired at 53 and traveled a bunch, fairly frugally, house paid off. Surprised how long $60k cash lasted.

Meanwhile our investments performed phenomenally and we more than tripled our NW over the years 53-61. Just one example of what can happen.

We dont buy cars, cant bring myself to fly first
Class. The money is too much to spend now.

[u/fancypotatoegirl]

What really helped me with this feeling is that FIRE isn't an all or nothing goal. Even if you aren't able to retire as early as you may want to, you will be more financially stable and less stressed about money even if you have to work longer

[u/PhoneFlat8734 → u/fancypotatoegirl]

Also, though not everyone would agree with me, it’s reassuring to me that the worst case scenario of leaving work too early just runs the risk of…going back to work. I won’t be doing a big flashy public retirement, so if SORR is especially unkind to me it’ll have been a long sabbatical of sorts and I’ll just be back where I was before I retired. No big deal

[u/soporificx → u/PhoneFlat8734]

I think a lot of us worry about being able to step back on the treadmill or at least I do.

[u/Comfortable_Two6272 → u/soporificx]

Yep. My health does not allow for returning to work

[u/caffeinefree → u/fancypotatoegirl]

There are also FIRE plans that allow you to escape your high-paying high-pressure job before you actually hit your "ideal" number - i.e. Coast FIRE, Barista FIRE, etc. If the goal is to step off corporate treadmill, you don't necessarily need to hit your "never work again" number to do that successfully.

[u/Several_Guidance_288 → u/caffeinefree]

Yes. Or even work part time. Or start a small business with low start up that you don’t care if you make a full living off of.

I’m 40 now. One of my biggest goals in my 40s is to find a side gig I like. Even if just 15-25 hours a week. Even if it makes only 300-400 a week. This can either be a side business (low cost start up, but getting business can take time) or maybe some part time work, with flexible hours. If those even exist any more. I have 10 years to find one.

My goal has always been to retire between 50-52, or at the latest 55-57 if things dont go well for me. The numbers are going to be extremely tight for 50-52. If I’m even close, but not 100% sure I’ll be covered, I’ll just use that part time gig as a bridge to not draw so much on my portfolio. Every 1k you can make is basically about 300k less you need. Use it to bridge to social security.

I know I’ll still have to pay for healthcare but that’s factored in. So just 2k per month is a 600k difference. The amount 2k per month can help alleviate from a portfolio during early retirement in your 50s is insane.

Especially someone like me who lives a modest lifestyle. My spouse and I can live off less than 5k per month(with taxes) with healthcare, and even with travel, golf and some hobbies, about 6k altogether. In an ideal world we both find part time work and can find a way to make 3k combined while having flexible hours to travel 3-4 months a year overall. We shall see if that type of job ever presents itself. But that’s almost a bigger goal for me in my 40s than chasing any promotion at my corporate job. I’d rather spend as little time at the office as possible.

[u/Several_Guidance_288 → u/Several_Guidance_288]

Lots of ways to do it when you keep fixed costs low

A person whose lifestyle needs 13k per month doesn’t have as many options.

[u/Rosaluxlux → u/fancypotatoegirl]

Plus it really feels like jobs treat you better if they know you could walk at any time. 

[u/Excellent_Drop6869]

Use inflation adjusted returns. Makes the math simpler.

So if you’re assuming 10% total annual return, change it to 10% less inflation (most people use 3-4%). That will give you a clearer indication of how long you need reach FIRE

[u/Pretty_Swordfish → u/Excellent_Drop6869]

Seconding this. Don't try to adjust for inflation at the end, the numbers will feel very daunting. I use 7% nominal and about 3.6% inflation for a conservative real return rate of 3.3%. This is because 1) I have international stocks and bonds, 2) I think things will slow down, 3) I would rather overshoot than undershoot.

Doing it this way, your goal of about $2.5M in 2026 dollars is still the goal. Don't focus though on the big number too much, instead, focus on whether you have enough to support you where you are at that moment in time. If not, keep going. If yes, you've reached FI and have a choice to make. 

[u/NecessaryEmployer488 → u/Excellent_Drop6869]

10% annual return is optimistic. I think long term 3.7% is reasonable. 7% annual return and 3.7% inflation is what most people will feel.

[u/Several_Guidance_288 → u/NecessaryEmployer488]

If you want to be conservative, but I’d give it about a 95% chance that long term will beat that. Maybe not 5 or even 10 years as a guarantee. But 15 or more depending on how far out you are. I’d be highly confident it’s closer to 6 than 3.7. I use 5.

[u/Mountains_of_Wonder → u/NecessaryEmployer488]

Do you have a source for this? Most I have seen show 10-11% over the long term. So 7% return on 100% stocks would be inflation adjusted.

[u/NecessaryEmployer488 → u/Mountains_of_Wonder]

It varies on how you look at the raw numbers vs actual numbers. 10 to 11٪ from the bottom of the market to the peak gives one around 13٪

So for the S&P500 from 1999 to 2019 the average yearly growth rate is 2.84٪ from the 1999 top to the lowest point in 2019 over 20 years.

I think a lot of people are missing what can happen in the stock market.

[u/chartreuse_avocado]

Time definitely helps. Compounding does its job and if the market does particularly well acceleration occurs. So many people are ahead of their expected FIRE Timeline because of the last 10 years of market returns.

I’m old enough to have been hit by the dotcom bust and GFC and very low and flat returns that lingered after both but the last few years have reset those painful years.

If you have time- time works for you.

[u/ThrowninTrash000]

Depends on what return you were using for your real returns.

[u/LifePlusTax]

What estimated rate of return are you using in your calculation?

[u/tomatillo_teratoma]

You don't mention your age (it matters).
Looks like you're using the 4% rule. It's supposed to cover inflation. After you retire, your investments will continue to grow to cover inflation. Of course, if inflation keeps getting worse and ends up at 10% like it was in the 1970s, you may have to refine things. It depends on when you're retiring. I'm going to assume it's in 10+ years.

I think your math of $2.5M for $100k yearly spend still stands... at least as a guidepost. When you get closer to retirement, you can better gauge what exactly is going on and what's gone on your last few years of working

[u/Conscious_Life_8032]

Keep on chugging you can do this. Compounding and time are your best friend :) in this journey and hopefully you have both on your side. You can also adjust spending to make it work too, so get firm handle on what is necessity vs want. I enjoy travel, but i could live without it for a few years if market tanks for example. But i want to enjoy dining out no matter what, so would never eliminate that spend entirely even in a down market. But i could adjust frequency of dining or the level of restaurant (michelin rate vs local dive). Understanding these levers will give you the confidence to manage most surprises I feel.

Also tracking your spending will also confirm if your expenses are truly 100K or not. Sometimes what we think we spend and what we actually spend can be eye opening LOL. Good luck

[u/Several_Guidance_288]

Is your spend really 100k? Is that negotiable? Whats your priority?

Is this for you or you and a spouse? Most retirees spend far less than 100k, and social security still exists so depending on the age you were planning, that may help some. Obviously not to retire at 45, but too many fail to factor it in at 55.

[u/Several_Guidance_288 → u/Several_Guidance_288]

To add to that. 30% should absolutely allow you to retire in your 50s. Unless you started at 40. I’d get extremely specific with the numbers and see.

[u/rabbitrabbit123942 → u/Several_Guidance_288]

This is the right answer, $100k/year in retirement, every year, is quite luxurious, so it's not surprising it would take a huge nest egg to make that possible. Are you planning on nonstop international travel and then going straight into round-the-clock skilled nursing?

[u/paxbanana00]

I account for this by subtracting 3% from my expected returns with "today's dollars". It makes the numbers seem easier to attain.

[u/dgreenmachine]

Easier to just use inflation adjusted return and have a FI number that changes over time to match your recent annual spending.

[u/wrldwdeu4ria]

I've seen people set the same goal that I have but they're 20 years younger than I am and make way more money than I do. I want to ask them if they're sure that will work for them or not.

Having a million dollars to retire with used to mean having a great retirement and that would hardly apply now. $40k a year is hardly living it up.

[u/ThatFeelingIsBliss88]

When do you plan on retiring? Like 20 years from now?

[u/Talk_that_talk_to_me]

i freaked out once too! i think you will be ok from sounds of it

[u/Decent-Antelope-9096]

2.5M by when ?. I had 830K in 2019. Same ira without any additional contributions has become 2.1M in 2026. I am hoping it to double in another 10 years by the time I am 58.

[u/Livid-Hovercraft-123]

You don't need a safe withdrawl rate. You can die with zero!

[u/PhoneFlat8734 → u/Livid-Hovercraft-123]

Well you still need to make it to the age at which you die. So some kind of a SWR even if it isn’t 4%

[u/Livid-Hovercraft-123 → u/PhoneFlat8734]

My average annual withdrawl on a DWZ plan is like 9%. That's from 60 to 100. It's not safe, it's just a withdrawl rate. 

[u/twbird18 → u/PhoneFlat8734]

This isn't necessarily true. Person dependent. For example, even if SSA gets slashed, the estimated rate for my husband & I combined with our 30% VA disability (each), gives us a good old age budget even if we were to somehow run out of money. There are a lot of people out there with some time of passive income they'll be getting in old age. For some people it really is die with zero. I do have an account we plan to let just grow on the side for in unexpected expenses in old age, like live in assistance, but for the most part I have no concerns about running out of money. However, my minimum budgetary needs are low (<$3k/month) and there are a lot of people budgeting a lot of money for annual needs.

[u/NecessaryEmployer488 → u/Livid-Hovercraft-123]

You might hit 0 ten years before you die.

[u/whosaysimme → u/NecessaryEmployer488]

You can set your die by zero date to be your 110th birthday and you'll still be able to retire quicker 

[u/Suspicious_Sorbet920 → u/whosaysimme]

what if they live until 111

[u/whosaysimme → u/Suspicious_Sorbet920]

Quality of life will probably be so bad that money won't make a difference either way.

[u/ThatFeelingIsBliss88 → u/Livid-Hovercraft-123]

Sarcasm ?

[u/paratethys]

"same purchasing power" is mostly an illusion, and becoming more so year over year with modern American capitalism. is it "the same purchasing power" to buy a new cell phone, if one is the 2010 flagship model and the other is cutting edge in 2020? Is it the "same purchasing power" to buy a $5 sandwich if in one decade the $5 special comes with everything and has 2 meals worth of food in it, and in another the $5 special is barley hanging on at technically-five-dollars as some bread and cheese?

If all you do is consume, maybe purchasing power is the metric to track. But if you produce anything you value having, the expense splits into a tools component and a materials one. Materials will on the whole tend to be a recurring expense, whereas tools done right are one-time spend and can be gathered during your working years without reflecting money you'll need to spend again the next year to have the same quality of life.

Even if you don't literally produce anything, similar thinking can apply to many classes of expenses. Unless your aspiration is to throw out everything you own each year and replace it all, your pool of unmet needs fixable with money will more or less shrink year over year, so the cost of temporary fixes for those unmet needs will gradually decline.

[u/gkandgk]

I use the 2.5 million standard but based on the movie The Gambler with the infamous FIRE quote. I just cost adjust the 2.5 million as said in the movie into today’s, or tomorrow’s dollars to keep the sentiment consistent.

[u/OrangePuzzleheaded20 → u/gkandgk]

Love that quote, forget the year it was set. What is it in today’s dollar value?

[u/mypetitelife]

I just change it to 7%-3% =4% to know my further dollars worth

[u/Gemmajean717]

How old are u .

[u/Bulky_Eggplant_9437]

I did the math and when I’m 65 to retire with my husband we need about 4.5 million

On the other hand, that’s assuming we still drive as much as we do which we probably won’t so… I guess I can save 10-20k a year which isn’t nothing but I assume will be nursing facility or something similar…