Ask HN: Who Has Retired Early?
* “Young” - mid 40s
* Significant assets but non “fuck you” levels. I consider FU >$10M, so likely looking at people in the $5-9M range.
* Not doing some hyper austere FIRE lifestyle (burn rate of $125k-$150k annually - about $40k of this is mortgage that will end in ~20 years)
* No plans or need to make some “fun money” by consulting or what have you
All retirement calculators I use and fiends/family I consult seem to agree I should be able to retire. Firecalc’s Monte Carlo gives me zero failure cycles. Vanguard puts me at 98% success. Every light is green except my own financial advisors, who put us at ~80% success. I trust them, but also, I don’t feel like a financial planner ever got fired for saying “you should work more before you retire”
Has anyone been in the same situation and pulled the trigger? How’s it going if so?
28 comments
[ 3.4 ms ] story [ 61.7 ms ] threadI see it as something around $4M, possibly lower. If you conservatively estimate 5% earnings per year on average, that will get you gross $200k/year just on earnings without dipping into the $4M. After taxes/penalties that is $100k/year, depending locale, until 59.5 here in US where you don't have a 10% early withdrawal penalty.
If you are mid-40's and estimate having to live for another 40 years then you will have some years that dip in to the nest egg and other years where you get 5% more in interest. Inflation will eat into it some I suppose.
If your goal is to have used all of it before expiring then $4M sounds like more than enough. If you intend on leaving some for descendants then I suppose you could hold off.
I'm mid-forties and often have thoughts about when retirement is possible. So one idea is to work contract work part time (like 6 months/year) for a few years to "stay in the game" so to speak and experience mini-retirement periods of time if you are hesitant.
Average returns over 10 years for something like VTSAX (total stock market index) is 13%, granted the last 10 years has been a bull market. 13% of $4M is $520k even half that is $260k before taxes which I think is comfortable to live on, exception of HCOL areas.
A Monte Carlo simulation is the best practical estimation for looking at that. I believe that historically a ~3% withdrawal rate was the highest you could go, for retirement periods of 50 years or longer with substantial equity investments.
The long-term capital gains tax is 0 - 20%. For a couple, the first 78k can be withdrawn tax-free. The rest can be withdrawn at 15% tax rate.
In the unlucky case all 4M is in an IRA, you take a 72t election to avoid the early withdrawal penalty. Then, the rest can be withdrawn (if needed) with the 10% penalty + 15% tax rate (above 78k). Not sure how you're getting anywhere close to 50%.
Also if it is in a tax-protected 401k/IRA then capital gains is irrelevant since it is income tax for distributions as I understand it.
This 72T election is an interesting concept for an early retirement scenario, thanks for sharing that, I never heard about it.
Originally I was going to work super hard to try to save up so much money by 40, but this sounds much more fun. Because 40 might slip to 45, 45 might slip to 50 and then I waste it what's left of my youth chasing money instead of seeing the world.
In much of the world you can live very well off of $1,500 a month, if you have a job which lets you save $30,000 a year, you can afford to only work every other year.
Cost cutting with cars should be straightforward - downsize/eliminate or just pay them off and maintain them and use them for a decade.
The only cost cutting with a house is moving to a lower cost of living area or smaller/less costly house. If you have that kind of money saved now, pay off the mortgage, you'll likely save thousands of dollars in interest.
My biggest fear is running out of funds, so I will maintain an irrationally low withdrawal rate of 1-1.5% during the first ~5 years of retirement, and up my spending after that, in the statistically likely event of those 5 years of frugality eliminating the sequence of return risk. I am 34.
- Very aggressive frugality: living in Silicon Valley on $30-40k a year and saving about $1M over a decade of work, with an average salary of $250k
- Some stock options I had from a previous employer went liquid and netted me about $1M
- Index funds investing did the rest. Never sold any position
The bigger question is whether you'll be happy with a life of leisure. I say count your blessings and try it out and see if you're happy without work! If so, then you can surely tweak your spending rate to match your quite significant savings.
It is worth keeping in mind how "failure" and "success" are defined in the context of these models. Deferring retirement while continuing to work, but then dying suddenly, would be regarded as a "success" - since you died before running out of money. With a broader perspective of what we're trying to achieve (perhaps something like: "make the best use out of our life", but this can be highly personal), that kind of scenario sounds like a failure to me.
Similarly, the estimates of those retirement models assume that the past is roughly a representative sample from some distribution that the future will also be sampled from. But there's no guarantee that will be the case.
There's a nonzero chance that some largely or completely uninsurable major disruptive event will wipe out some or all of your retirement capital. Looking back over the last hundred or so years: https://voxeu.org/article/inequality-total-war-great-levelle...
What am I trying to argue? There are many more failure modes other than running out of money before you run out of life. Focusing on reducing risk of one failure mode while not thinking about other failure modes leads to sub optimal decisions.
maybe the latter could better be summarised as "put yourself in a position where you have a better chance of being able to adapt to the unknown or unexpected"
In 2008 I dealt with a guy that had to come out of retirement because he would have run out of money if he continued to draw from his savings. Lucky for him he was relatively young and was able to find a job. What would have happened if he was in his 80's?
I'd work maybe 3 months on a contract, save as much as possible, then head off traveling until funds ran low or I felt like working again (which was usually the deciding factor). I had a stint in my early 40s where I took a long term consulting gig and went heads down and did 4 day weeks for 4 years, so I guess if we're being pedantic we can say that moved the "retirement" age back to 45 before I downed tools completely.
In the meantime, I built a couple Software as a Service products that do their thing in the background and require pretty close to zero maintenance or customer support. That's the main income stream, though I still pick up consulting gigs on fun tech with fun teams as a sort of a hobby. Never more than a couple days a week though.
From this viewpoint, the bullet points up top don't make a lot of sense. I don't have $5M in the bank. I certainly couldn't imagine spending $150k in a single year, though I wouldn't consider anything about my lifestyle to be "austere". And of course I plan on making more "fun money" consulting. It's a fun job, and the people you do it with are fun to be around. It's just the part where they want you to do it 5 days a week every week that gets old. Never quit doing anything completely if you like doing it.
The two keys for me were consulting rather than W2 work, since that easily doubles your income while letting you jump in and out of work whenever you want, and the SaaS products, which keep a background income coming in when I don't feel like working.
Here's the long version of how I got into this position: https://www.expatsoftware.com/articles/guy-on-the-beach-with...
I’ll soon be driving across the country to spend some time with family. I plan to live a quiet life, gardening and volunteering and exploring my interests. Like you I don’t have an interest in being super frugal. But I also am single and don’t have kids.
I had similar conversations with my financial advisor. Her Monte Carlo runs were coming out at about 80%. There are several factors IMO that lead to that, which all point in my favor. For example, the model had me owning a pretty expensive home outright and still spending many thousands a month — on what, if my residence is paid for? Things like that. They have to be extremely vigilant against the prospect of you ending up old and penniless. That certainly would be terrible, but you’d imagine you’d see it coming with some time to course-correct. So after those conversations and reflecting a bit, I decided I’m happy with my financial situation and I have reasons to think the future is brighter than my advisor says.
The next couple years will decide for sure (in particular the former employer’s stock growth), but right now the plan is never work again. Kiss my butt world.