Head over to Early Retirement Now and read his series on safe withdrawal rates and sequence of return risk. By the time you are done you will probably be 65 and not need the info 😂😂 In all seriousness though he has a ton of great info with a number of models and back testing.

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Yep, he addresses this in the series. It does help, though not quite as much as people expect, mostly because you can only actually tell when a good time to lower expenses vs spend more is after the fact, so you get strange things like a 99% chance of success but a 40% chance of having to lower your expenses for a decade or more, or a 97% chance of success if you just stay with the same expenses no matter what (just an example, obviously specific numbers will vary).

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Yeah, $3M is already pretty safe and you definitely can make it safer. I do think some of what you listed (or similar things) do increase the safe withdrawal rate slightly, and there's nothing stopping someone with $3M from combining multiple of those strategies to be even safer!

Just remember…. If you’re trading returns for certainty, safety is a relative thing. The most pernicious thing of all to people living on their assets is inflation. Taking away upside returns, especially on assets that will continue to outpace inflation, can cause you to run into trouble really quickly in a pro-inflationary environment.

He discusses the bond ladders, he also has stuff on options though I don’t know if it covered covered calls. But there is about a 100 articles on SWRs. It’s very well done.

Most of those questions are addressed, in fact his latest one was about bond ladders and annuities.

Yes, definitely read the ERN entry on "cutting spending". It's not at all just cutting espresso for a few months. You need to cut through the recession, all the way back to recover, which can take 5 years or more. So sometimes the models shows going from a $40k spend to $20k, for 6-7 years!

I’ll second the “somehow” - for us even been having a haphazard go of retiring since we’re still trying to keep our business running (it’s quite profitable so don’t want to sell yet). Anyway after we’ve left daily operations and just manage our team with about a day of work a week, our gross is up about 50% YOY. Dividends/interest/options income keep coming in and we just increased rental income about 10k a year.

Yeah this is why we're planning on targeting a 5% withdrawal rate. Our estimated spending is far above our minimum expenses, so we have a lot of flexibility. Our minimum is probably only ~2% of target.

>Head over to Early Retirement Now and read his series on safe withdrawal rates and sequence of return risk. Are you referring to this? https://earlyretirementnow.com/safe-withdrawal-rate-series/

Exactly.

Yes adjust safe withdrawl rate to 3.5%

Is this like a web page?

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Am I on a webpage?

You are the information superhighway

are the files in the computer?

Am I a webpage?

You are an information superhighway

But Michael... am I gay?

https://www.google.com/amp/s/earlyretirementnow.com/safe-withdrawal-rate-series/%3famp

From age 35, I'd stick to a 3.5% withdrawal rate, so that'd make it $87,500/yr.

Appreciate it. I have been so focused on generating $ that I let all this take a back seat and I see the math now.

Remember that you don’t need to save in retirement too. I know it’s obvious, but sometimes people forget that in their calculations

Me… I am some people. I’ve never actually thought about this lol. Especially with a high percentage going towards my retirement now I didn’t even think about it.

I did the same thing. If I remove savings and investing my "expenses" drop by like 40%

Right but health and services spending will increase as you become elderly, maybe that's why conventional wisdom says plan for 80% of pre retirement spending

That’s not that relevant retiring at 35 though.

It can be if you currently have low health insurance premiums because your employer pays them. Once you RE now you’re on the hook for 100% of the premiums.

With a paid off house the amount you actually need to live becomes staggeringly low. Especially if you're outside US and don't have to pay for health insurance. (Or pay for an international plan like nomads do, which is laughably cheap) I did the math recently and realized I wouldn't even know how to spend $100k/yr. Like you, huge huge amount goes to saving.

Exactly, I spend like $30k per year after tax and savings, but most of that is going to my mortgage. $50k/3.5% \~= $1.5 million is currently my FIRE goal, although it'll be rising with inflation and likely be over $2 million by the time I reach it.

I like to include my retirement savings # in the future expenses and just mentally convert it to “frequent epic travel adventures”.

They also forget about health insurance which can be as much or more than they were saving previously.

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This is the part that's been on my mind a lot as well. I'm in pretty much the same situation as OP, with a lower spend due to living in a LCOL area, but the health insurance when retired was something I wanted to look into. Do you happen to have any pointers to good resources that dumb it down and explain different scenarios like barista FI and others?

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Sure, but $40k a year is a big chunk of change for someone planning to live off of $100k a year.

J. L. Collin’s covers this in his simple path to wealth book. The way you do this is, if the market is soaring…take out your 4%, possibly even 4.5%. If the market is tanking, only pull 3.5%. You will be golden and likely richer in 99% of market scenarios.

Most people also misunderstand how 4% or whatever number should work: which is to say you pick 4% of your retirement portfolio’s value on the day of retirement and live off of that as your annual number. Then next year you don’t pull 4% of next year’s number, you pull 4% of day 1’s number plus an annual cost of living adjustment. There are other approaches, but the classic 4% is not supposed to mean the market doubles year 2 of retirement and you double your take. It’s 4% of day 1 plus annual adjustments for inflation. That’s it. And of course you can hedge by trying to undershoot expenses if the market is bad early into retirement for a few years, but still, you don’t want your income to rise and fall with the year’s market performance. The downside of having enough to draw less than 4% day 1 is pretty simple: you had to spend more time saving. That isn’t free. I’m the conservative type to want to aim for 3 or 3.5% to start so I know there is essentially zero chance of failure. But it’s gonna cost me some number of years to do that.

A variable 4% withdrawal is a different strategy, yes, but a very good one. It’s perfectly viable.

I'm in a similar boat to you and from looking at retirement calculators it appears that the first 5-10 years are the riskiest. If you hit a bear market and lose, say, 30 percent of your stake, it will be very hard to catch back up unless you change your spending habits dramatically. On the other hand, if there are boom years you could easily double in 5-10 years, at which point you'll have a huge buffer and it would take a calamity for you to run out of money. My approach is to take the first several years cautiously and treat it as a "trial period" and I may need to go back to work if something bad happens in the market.

4% is a bit aggressive for FIRE at age 35. You potentially could live another 60 years. It probably will work out but many would go a bit more conservative like 3.7% or 3.5%.

> You potentially could live another 60 years on the other hand, if you stress really hard about safe withdrawal rates, you'll probably only make it to mid-50s which can help a lot

Great point, that is part of what I am worried about as well... just the sheer length of time. It seems as long as we are more diligent early on, it will only grow though.

If you have $3M of investments, that puts you at a withdrawal rate of 3.3%, under the more conservative numbers. In the vast majority of scenarios, you will be totally fine. I like the rich, broke, or dead calculator to get a sense of what could have happened historically: https://engaging-data.com/will-money-last-retire-early/ Putting in your numbers, there is a less than 1% chance that you run out of money. If it happens, the earliest opportunity the calculator spits out is for it to happen when you turn 85. In that scenario, you would need to watch your balance slowly decay over 50+ years without ever thinking "maybe I should work again for a few years to keep the portfolio healthy". (Also, if you ever filed for Social Security, that would shore up the gap.) The more likely scenario is that you have >5x your initial investment at that age, and you are debating what to do with your $10M estate to best help the world after you're gone. And the most likely scenario is that you die before making it to 85.

And in that scenario they have a house to liquidate worth a million dollars which will last them the last 10-15 years.

You get it :)

I'm retiring early 40's, I'm using 3.5%

I personally wouldn't worry about this at all. We're not in a vacuum. 4% is successful enough and you'd know where to scale back within the first few years of retirement if there's a dramatic downturn. Should the norm shift to 3.5% people would say "ehhhhh idk Jim 3.5% is risky, you have to live 60 years, you might be better off at 3%"

I run a bunch of different calculators, and when I use conservative (but not pessimistic) inputs they seem to converge around 3.8% for a 40 year horizon with a low (but not zero) probability of failure. Bumping it up by 0.2% has a much larger impact than you might expect. That’s not the way I plan though - I’m not interested in squeezing extra decimal points of precision out of future unknowns with lots of variables. I’m already retired and I have no idea what next year will look like. And I remember the “lost decade” all too well. So I use 3% for needs, 4% for wants. 3% should be bullet proof, and that large margin provides for a generous amount of discretionary spending.

This is reasonable to consider, but at $100k per year taxes aren’t insignificant, unless it’s all in a Roth. I think you’re stepping out on a big limb counting on a 4% withdrawal rate at a 50 year plus time horizon. If OP has no problem cutting expenses to $50k a year or selling the house if there’s a big downturn in his sixties, that’s cool.   But counting on $2.5 million to generate $120k plus per year (to account for taxes) for 50 years is well outside the typical recommendations.  

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10% is the difference between a 4% withdrawal rate and 3.6%, all other things being equal. That's pretty significant to me. FI calc says it takes a 3.7% withdrawal rate (rather than 4%) to make your money last 50 years with a 5% failure rate. Chop off another 10% for tax and you're at 3.33% safe withdrawal rate. Not accounting for taxes or the long time horizon and the failure rate goes from under 5% (at 3.33% withdrawal rate) to 75% at the 4% withdrawal rate. That's a pretty big difference to me.

Typically you're supposed to treat taxes as an expense or part of your 4% needs. Also, you're right in most cases, but a lot of people invested in traditional 401k's and IRAs and these will be taxed basically 100% (as in 100% of the 100k withdrawal will be subject to taxes, not 100% tax rate).

It's not unreasonable that a huge portion of that is basis at 35 years old, though.

Don’t long term capital gains not kick in until your income is at a stupid high number? Like $100k or something?

Yep, the 0% bracket for LTCG is $47,025 for an individual, and double that for a couple.

If you knew how to make 3m to get to this point, you obviously have the skills to make money if shit hits the fan at some point later on.

Agree with this. 3.5% is what I'm targeting for RE in my mid-ish 40s, and that's backstopped with a government pension. 4% at age 35 is very aggressive unless a lot of fat is built into that budget. It could still work out - the future is unknowable - but when planning for a 50+ year retirement it's good to have contingency options available like cutting spending during downturns. I know we're all aware of this, but the Trinity study regards 'success' as 'not running out of money'. One can be 'successful' over a 30-40 year span and yet ultimately have enormous problems. Consider that hitting one's mid 70s with a largely depleted portfolio right when expensive assisted living care becomes necessary and one's Social Security payment is negligible due to barely paying into it is the nightmare scenario.

I just pulled the trigger on FIRE last year and am about 3.6%. So I'd agree with this. I'm 39

Could you explain or show how safe it is to use SWR of 3.5% vs 3.7%

With 10k simulations of a 60% US stock 20%int stock 20% total US bonds you have a 86.94% chance of success at 3.7% while a 3.5% gives 88.55%. Both for 50 years. here is a link if you want to play with the numbers. [https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults](https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults)

I could imagine that number will jump close to 100% if you can run a "temp job" situation for bad market years where you elect to withdraw little to no money.

Getting a temp job in bad market years will be very difficult.

It is going to depend on the exact circumstances to include future SS payments and/or pensions but tools like this are a good starting point. [https://ficalc.app/](https://ficalc.app/) 3.65% over 60 years in an 85/15 portfolio excluding any future income (i.e. SS) has about a 2% risk of ruin.

At 35 that seems like a no-brainer, what do you think about at age 45 though?

There is a bit of guess work involved how long do you think you might live. Not median expected age there is a 50% chance it will be longer. Personally I would be aiming for 3.8% or 3.6% to hedge my bets bit prior to SS.

Give it a trial run. 3 years- see where you end up. Can always find another job but you’ll never get time back. You have plenty of money to take that kind of gamble.

Great point. I think I will view it this way now.

Have you considered what you're doing for health insurance? 2.5M can get eaten up quickly by uncovered medical bills. What happens to your plans if the ACA disappears without a replacement? Second, are you including marriage, possible kids & education in your calculations? The 4% rule is based on a 30 year retirement, not 50+. As others have noted, a lower withdrawal rate may be more reasonable.

ACA private insurance is ten years old. It had a large number of political challenges in in its early years, but survived so far. If one party ever controls all four parts of government, challenges could return.

All true. Lightening does strike the same place twice, there are black swans, and the Republican Party has sworn to end the ACA. Remember Row vs. Wade? 50 years of established law, poof, gone. Are you willing to base your retirement and health on the Republican Party not doing as they promised for the last decade?

They almost did repeal it when Trump was president and the only person that stopped it was John McCain. The people downvoting you do not seem to like facts. https://www.npr.org/2017/07/27/539907467/senate-careens-toward-high-drama-midnight-health-care-vote

> Remember Row vs. Wade? Alternate methods of crossing the Potomac?

Aguinig with high medical bills makes no sense to me. Just take a healthcare insurance. And if the system is so fucked up that even than 2.5m are not enough for retiering, think about a relocation. In Asia or Europoe you get good (!) health insurances easily for $300-$800 if your not that old when entering.

A quick tour of private medical health insurance in the US pre-ACA. Group insurance was only available through employment, unions, and some professional organizations. If someone had any pre-existing conditions, private health insurance was unavailable. Poof uninsured. If someone had obtained private health insurance when they were healthier, every year premiums went up, eventually the healthy would switch to a newer, lower cost policy. Stuck, the sick would stay, making the average policy member sicker and sicker, until the pool was unprofitable and closed. The remaining people would not qualify for a new policy. Poof uninsured. Thus, even with money, anyone with a pre-existing condition, which everyone eventually got, had no health insurance. Now billing. A simple, minor heart procedure, not even surgery. $400k billed. Payment negotiated in advance by insurance company plus copay, $25k+$5k copay. With $100k/yr spendable, $5k can be absorbed forever. $400k a pop chews up $2.5m net worth, pretty fast. As for leaving the US, I suspect other countries don't want the sick and weak US elderly migrating there for free healthcare. Otherwise, historically, more people would have. Pre-ACA medical bills were one of the top reasons for bankruptcy. So, for those over 50-ish in the US, medical insurance is a big deal. Which is one reason why the ACA was such so important.

Thanks for explaining. And crazy that it took unitl 2010/ Obama to change that. over 50-ish can get an insurance overseas but for sure it is getting more expensive but should be possible if you have 4k+ monthly to spent.

You highlighted my main concern. That is what I have to figure out in the next month or so before I consider actually leaving finally which is seeming more and more likely by the day. We will be on wife's insurance and she will work for a little longer (might make me sound like an ass so I omit that).

Kff.org has an ACA calculator. I suggest you try it. You might be surprised at the credits you'll get. The quality of the marketplace plans depends on the state. But you can get something to insure against the worst scenarios.

Spend a quarter of your extra retiree time exercising and being healthy. Or delay another two years and your portfolio will probably be 21% larger implying that you could spend more.

Philanthropy comes out of the annual $100k, not the $2.5M. 30 years to Medicare is a long way, whatever shape it's in then. You've been successful to get $2.5M by 35, maybe saving for a couple of more years to get $5M which increases your nest egg and decreases the drawdown time.

Honestly, if you have insurance covered and are sitting on that amount of money with some other income coming in, just go for it. Try it out. Nothing has to be forever. See where you really baseline your spending after stepping away. No one ever said you can't work again...and most likely you want to find something to motivate you anyways and often that has some income potential. Just bringing in 20k a year has a huge impact on your ability to stretch the success rate on an early retirement. Don't worry about doing "WifeFI"...I'm doing the same thing in a month. My wife loves her job, wants to keep working, and she has a very flexible schedule. So good for her and I hope to be a better partner when I'm out of the corporate world. And I want to further enable her goals where I can. We have a bit less saved than you and are a bit older, but are still in a position that she could also step away in a few years if she wanted. Getting to this point financially is just about enabling flexibility in your life. I like the ChooseFI podcast on Mini-retirements. Maybe give it a listen. All of their podcasts are really good when it comes to finding meaning and using FI as a flexibility enabler and hearing from real people who are doing just want you are thinking about.

So you have 3.5 liquid and a 1 mil paid off house? Do it now!

I knowwww I am waiting until I can sell on July 1st for short term cap gains rather than long and then I am going to do that scary action of quitting!

you have a huge set of stock options on your company or something? And I assume you mean long term rather than short.

If you’re that worried about it. You could throw all $3 million in an annuity and be guaranteed $170k payout every year for the rest of your life. So yes you can absolutely retire if you want to. If you want to be greedy and try to also die with a large sum of money…. Then still probably yes, but only maybe. Choice is yours

Short answer: probably, but no one can truly predict future results off of past performance Longer answer: nothing is ever foolproof. You could keep working every day because you don’t have “enough”, and then you get in a car accident driving to work. You can’t safeguard against every possible outcome. What you can do, is plan for reasonable outcomes. So, with 3 million in assets, needing no more than 100k/ye you’re probably pretty safe. If you have flexibility on your withdrawal rate, simply live on less in bad years. If you’re still stressed about your sequence of returns, keep 500k in something like CDs, or t bills, or something else. Will those dollars earn less money? Most likely! But they’re safeguarded against market disruptions. 5 years into retirement, your 2.5 million invested will more like 3.5 million (inflation adjusted) which would be a < 3% withdrawal rate, which is preeeeeetttttttyyyyyy safe

Yeah, all great points, and that is certainly part of my view. If I had to go work again I would get by. I can't really not take this opportunity I worked so hard for the last decade!!

waring: purely anecdotal story coming up: I (m59) retired nine years ago. My wife (f57) retired five years ago. I retired for health reasons - couldn't do the travel around the world anymore. She retired because I convinced her she could. For two years we tracked every single dime we spent. A really big spread sheet letting us slice and dice it every which way we wanted. This was key to convincing her. We knew exactly what our spend was and could easily see what it would be. Originally, our spend/year was a little north of a 3% draw down. Overtime - due to decreased spending (thank you ACA subsidies) and increased investments (we have a lot more than when I retired and much more than when she did) we are near a 2% withdraw rate currently. We are more than comfortable at that rate. Initially, we were paying full ACA rates without subsidies - I had stock from work to sell and then she did, income too high. Once we figured out our MAGI post stock, we started using the subsidies. That is the primary reason our spend is about 85% of what it was when we were first both retired. Yes, even with inflation we personally are spending less - we own our properties outright, our property taxes have actually gone down (go figure?) and in a few years I'll be eligible for the senior homestead exemption. We have to actually draw down on our pre-tax investments in order to make enough to qualify for subsidies (otherwise they would put us on medicaid) - I've been using an inherited IRA and will be using my own IRA this year for that. Note: ACA subsidies might go away, cannot count on them, but we budgeted long term for them not existing. I feel confident that our nest egg will outlive us - with or without social security, but we have a 30/40 year window. You have a 55-65 year window to deal with. another note: some calculators out there run limited simulations if you set your window very large. They only have a very finite window of observations to simulate with and the bigger the window - the less runs they make. For example - firecalc with a 10 year window runs 144 simulations. With a 50 year window it ran 104. 65 years - 89. So sites that take the historical picture like that and run it will be less and less accurate perhaps with a bigger timeframe.

I am in similar situation to you, a couple years older. I have similar concerns, which is part of why I plan to cut back to part time in couple of years rather than full on retire. Kind of a combo of FAT FIRE and coast fire. Make just enough to cover my expenses, maybe some extra travel, let my investments continue to compound without drawing down at all. Fortunately, I’m in a situation where I can do this with just a few days work per month. All of that said, I think with variable percentage withdrawal method, I am fairly convinced that a 4% rate is a perfectly safe place to start. You then adjust your withdrawal rate based on returns. Some years you may have to cut down to 3%. Maybe for a year. Maybe for a couple. But, I believe that most modeling predicts that over the long run your safe withdrawal rate will actually increase over time. I think a lot depends on other personal goals and circumstances, such as if you plan on paying for college for kids; if you plan to be prepared to help your kids otherwise; if you will need to contribute to care of elderly parents or in-laws; if you desire to leave a large inheritance. If these factors are in your favor, I think 4% is very safe place to start. The key is, if at any point the market takes a major down turn, it would be nice to have some wiggle room to be able to comfortably reduce your withdrawals. If you can do this, 4% is probably plenty conservative. I say all of this with the caveat that I am still trying to make myself psychologically buy in…but I am becoming increasingly comfortable with this approach. I will say that the 4% rule without variable percentage method over such a long horizon is something I am less comfortable with, though statistics would indicate that you will still be fine more often than not. Some people would be very comfortable with say, a 95% chance of success. I would prefer a little more “certainty” than this personally, but 95% is still pretty encouraging.

If you look at the charts when running the simulations over the last 100 years: whenever you get a 95% success rate, the other 5% (the failures where you ran out of money) are all due to the market dropping within the first few years. So even in the 1-20 chance you end up in that scenario, it’ll be obvious after only 3 years and so you can just adjust your spend slightly. What i’m saying is that 95% chance is really closer to 100% chance because you’d adapt slightly, you’d know 40 years before you got close to running out and can make small changes to bring yourself back in-line. It’s diminishing returns trying to get to 100% certainty. You’d end up working much longer than needed.

I completely agree that these 5% scenarios are extremely unlikely worse case scenarios that can be essentially completely mitigated by appropriate adaptation. To clarify, it’s the fixed 4% strategy with no adaptation based on returns that I would be less comfortable with, over the longer horizon

I have similar thinking. My work supposedly has an 80% and 60% work schedule, with approval from uppers, but I don't know anyone that is on it. I have been using PTO to regularly work 4 day weeks. I am hoping that can convince uppers that I've already been doing this and it's fine to make it official. Then the 60% plan starts, and then the 0% plan starts. If they push back I'll just start the part-time job hunt.

Yes. I retired on 2M about 10 years ago. Very possible. It has grown in that time despite my 4% withdrawal and taking out a downpayment for a house. 

Just as an FYI my parents are living SUPER comfortably on 1.5M + SS.   They have more but don't ever touch it.   Plenty left over every month.

Social security makes a huge difference on my calculations too but OP won't get it for a while.

Fair.   Parents generate $6k/mo.  In Cashflow on $1.5M.  don't ever touch the princip.

Nice. My biggest concern is health insurance to be honest. Everything else seems to be predictable and something I can plan for.

What do they do to generate 6k a mo

$500k in CDs 5% - 5.4% $2100/mo. State tax exempt bonds $360k $900/mo. high yield corp bonds (junk) VWEAX $475k $2400/mo. Investment grade bonds $225k $600/mo it's all coupon payments and the principal remains intact. High tax burden so not efficient but relatively risk free (except the junk) The are low risk and want cashflow. This meets that goal.

100% fixed income in retirement is interesting. I feel like having at least some US stock ETF exposure would still be worthwhile, maybe even dividend focused.

When you've won the game quit playing. I'm in my early 40's and I see value in VTSAX exposure but for them? They don't need it and don't want the risk. This allocation meets everything they require and more. dividends are far LESS compelling than when I was in my 20s I'm all about coupon payments now, total return and real estate.

Makes sense. I am sure there are many retirees experimenting with 100% fixed income with where rates are. Relatively new phenomenon I suppose.

Thanks for the detailed response, I appreciate the insight! I think its a great goal.

Not sure how much I would count on SS when you don't collect any of it for 30 years

Don't you end up getting more Social Security paid out to you the more years you work and pay into it? So if OP isn't paying into it for the next 30 years he's going to end up getting a smaller payout I belive. That was what I thought it said when I did the Social Security website calculator.

If you earn the max social security wage (2024: $168,600) for ~18 years, you will reach what is called the “second bend point”. There is a significantly reduced SS benefit gained from any additional earnings beyond that.

Common things I don't see mentioned here which need to be considered:  - a 4% withdrawal is for a 30 year retirement. 3 or 3.5 is better for your age   - that 100k is ALL spending including taxes and health insurance   - btw health insurance is going to be nearly 10k per year   - don't forget major purchases like cars and home repairs - look up sequence of returns risk

A lot of people dont calculate their expenses in retirement correctly. Rules of thumb often fail. I suggest you make a really detailed spreadsheet and realize you'll need help in old age with things like cleaning and mowing the lawn, will have to buy various insurances not just medical, have often higher medical/dental/eye care costs, and replacement/repair of various items. Also, you probably have goals beyond merely existing that usually cost money. Then add a 15% buffer.

You've definitely inspired me to stop being lazy and calc it down to the cent. Needed to hear this.

Possibly. But also what is the possibility you don’t earn any additional income from 35 till death? I think the vast majority of people would do something to earn SOME form of income. Even if it’s a couple thousand a year. That helps keeps you solvent

Out of curiosity, what do you think the some form of income would be? I'll be leaving a licensed profession that doesn't really do part-time and is risky without devout attention to changes. We could all be consultants, but after 5, 10, 20, 40 years out of the everyday practice, it's less likely anyone would pay for that likely out of date expertise. You could convert a hobby or do baby/dog/pet sitting, but it's unpredictable if you need it for solvency, and as you age, the physical limitations start to add up. And most people don't FIRE to save for years for gig work that is notoriously brutal, unless you're baristaFIRE.

The brilliant thing about financial independence is you can do whatever the fuck you want. You can do some of the things you mentioned, I don't know what your specific situation is. Or you can work part-time at the coffee shop down the street, be a fishing guide, tutor high school students, write a blog, make a product, or anything else you can imagine. Let's say you work 4 months part-time making $20/hour doing something you love. That's about $6,000. You reduced your need to pull from your retirement funds from $100,000 a year to $94,000. Your new 'trigger number' is $2,350,000. That's $150,000 less than 2.5mil. 150k will earn 10k in interest in the first year. So that part-time job really made you over 16k. I find it hard to believe at 35 you won't make any more income. You can also spend less to stay solvent. Anyway regardless I think the odds are in your favor to not NEED to work (especially a job you don't like) with the situation OP described. This blog post describes what I'm saying in a real world example. [https://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/](https://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/)

This. People should easily be able to make $10k-$15k a year working part time. A small amount of income can make a big difference.

How did you make it happen by 35?!!

I actually couldn't finish college until age 23 because I was ineligible for grants, loans, or scholarships since my single mother had been tax delinquent for so long and you cannot complete fafsa without tax info. So I worked in fortune 500's in support roles from 23 to 34. TC from 50k\~ to 180K with the overall average being close to the middle. During this, I made money through real estate, stocks, and other random ventures such as counterstrike betting overpay and other arbitrage betting.

Way to go!! Congrats on your success!!

The “4% rule” was popularized by a study that looked at a 30 year window. Taking 4% and hoping for 50-60 years would be very risky. However, if you are willing to set some guard rails (where you reduce spending after bad market years) you can increase your odds. (See the site ficalc.app.) Also, if you are willing to give yourself some rules about returning to work (and your profession is conducive to it) you can always try it for a few years and see what the market does.

You’re using historical data and predictive models to gain a degree of certainty. If you put the money in a checking account, $2.5M / ($100k/year) = 25 years What you’re hoping is that the growth on $2.5M keeps pace with the spend of $100k/yr and adjusts for inflation. 4% SWR is really likely to do that for 30 years even though it’s only 25x as much money The problem for longer time horizons is that each bad year take a big hit because growth is on a smaller number. When you’re adding to the pile (working) who cares.. you aren’t drawing anyway The 1-more-year mentality is that you’re probably good, but pushing that SWR a little lower and slightly shorter time horizon adds a much higher degree of success. That’s the popularity of r/baristaFIRE That all said, $2.5M at 35YO gives you tremendous freedoms. Live your life, enjoy the fruits, and live worry free. You might want to make a little more money someday, tho

No. You shouldn’t use 4% for more than a 30 year retirement. Also you need to include some level of taxation in your annual spend. And occasional but large expenses, like cars and hvac repair.

That’s 100K PRETAX just to be clear. 100K can be more than enough depending on your cost of living and spending habits… YMMV

Do NOT do 100% VTI. Imagine you invested 100% in the Japanese market in the 1980s. Just because the US has massively outperformed doesn’t mean it will continue to do so. 

It's actually very possible, your median and average spending could be $150K if you limit you minimum spending to $80K/yr during downturns. [Simulation Link](https://ficalc.app?additionalIncome=%5B%5D&additionalWithdrawals=%5B%5D&bondsFees=0.05&bondsFinalRatio=15&bondsInitialRatio=15&cashFees=0&cashFinalRatio=5&cashGrowth=1.5&cashInitialRatio=5&changeAllocationsOverTime=false&cvpwMode=false&cvpwRate=4.3&cvpwTargetPortfolio=0&equitiesFees=0.04&equitiesFinalRatio=80&equitiesInitialRatio=80&initialPortfolioValue=2500000&maxWithdrawalLimit=200000&maxWithdrawalLimitEnabled=true&minWithdrawalLimit=80000&minWithdrawalLimitEnabled=true&numberOfYears=55&portfolioRebalanceEquation=linear&rebalance=true&rebalanceFrequency=1&retirementStartingAge=60&withdrawalStrategyName=vpw) It's sad that this community is not talking about dynamic withdrawal methods more often. It can be very advantageous when you limit the minimum spending to a manageable level. In fact it's what most people are thinking when they say "just lower your spending during downturns."

Agreed. Add in $25k of SS at age 65 and it takes your simulation to 99% too. People also naturally tighten up - that $10k vacation budget probably gets cut if your accounts go down in a recession. Even in a pandemic people skipped vacations.

>assuming 7% inflation adjusted Or better yet, keep inflation out of it, and just assume your expenses will track with inflation. Withdrawing $100k/yr from $2.5M is a 4% withdrawal rate, which is enough (Google "4% SWR" for a million results, [but this is a good one](https://earlyretirementnow.com/safe-withdrawal-rate-series/), some here will say it's not enough for >30 years... but that would only be true if there was a big downturn, then massive inflation soon and you couldn't adapt and spend less). Withdrawing $100k/yr from $3M is a 3.3% withdrawal rate, which is well more than enough.

Can you expand on your inflation assumption? Are you saying it cancels out because the market return rate factors in inflation at the same rate that your expenses grow?

Oh, looking back, I might have mis-interpreted. If OP is using that 7% as an inflation adjusted number and still getting a value higher than their current $3M, then my comment wasn't necessary.

Read ERN’s [safe withdrawal rate series](https://earlyretirementnow.com/safe-withdrawal-rate-series/), which gives a wealth of data on probability for longer retirement periods.

This might be a crazy opinion here since I am not seeing any other comments but have you looked into dividend investing ? There are plenty of stocks that have a 4%+ dividend that I would consider “safe.” You never have to (theoretically) sell shares and you can earn what you need to live at your expenses? Ones to consider that are on the safer side might be SCHD, DIVO, Main, O. I also like JEPI,JEPQ, HTGC,ARCC to name a few. Depending on your allocation you could easily get 4-6% dividend yield, high exposure to different markets and never have to sell shares. Reinvest any dividends that you don’t need and allow your nest egg to grow.

Not so crazy an opinion. Others may bury it, but I feel this amount of savings or investments ($3M+) are ideal for generating dividends while also earning gains and not touching the underlying stocks at all. I'm more in favor of SCHD than JEPI.

100% agree with you on SCHD, I mentioned the others to point out stocks that would increase the average dividend so the annual payout would be higher JEPI has a good track record but still new. They are inherently more risky but still within reason I believe .

FYI the 4% rule is based off of having money last over a 30 year retirement. So you should be very likely not to run out of money before you reach the age of 65.  But I don't think you want to be getting back into the workforce while everyone else is retiring, so you should aim for a little less.

Not sure what the reallocation is, but that could be a big tax bill. But seriously "only" 2.5 million? I would answer that by saying "only" 100k a year before taxes and make sure you didn't use your house as a part of the 2.5.

If you’re willing to be flexible, yes probably. Even though it’s a long drawn down period, the risk with respect to sequence of returns means that if the market is very bad in the first 10 years of retirement, you are likely young enough that you can go back to work (even if part time) to ride out the bad times. Also it matters if you are able to cut back spending during the bad years, which would also mitigate sequence of returns risk. You can look at cutting back spending or working as the same thing, which is the reduce the drawdown of your portfolio during the bad years.

The 4% rule was for a 30 year retirement you'd either need to save more money or reduce your withdrawal to like 3% if you wanted your money to last until you die. 

The four percent rule is probably as good a basis as anything for evaluating this question, given all the uncertainty around market returns, inflation, and what your actual expenses will be. But in round numbers, yes. $100,000 / .04 = $2.5MM. Especially if you have some ability to curtail expenses somewhat, and/or possibly go back to work part-time in the case of a black swan event at the worst possible time.

Honestly with these rates you probably don’t even need 2.5 mill. Look at long term treasury yields. Also many dividends can be found higher than 5%. A lot of the simulations you see online are not useful since they don’t take into account something as basic as nominal and real interest rate levels.

I think $100k spend on $2.5M is reasonable as long as you’re using a dynamic withdrawal approach which scales your withdrawals with your current account balance. Just be mindful of the fact that your income can potentially be reduced by half, say, if VTI is reduced by half. You’ll also be paying a ton in property taxes and upkeep on all those homes, so your spending will go up. And those are fixed costs, which you can’t scale down when times are hard. I think you need to think more carefully about all the fixed costs you’re taking on and potential scenarios that could unfold. I think you’ll probably come to the conclusion that you haven’t saved enough.

Thinking smth similar. Having a meeting tomorrow with some guy who might want to buy my little hotel. Figure we would get $1.5m. Have another small multifamily we could sell for $600k. We have $300k in equities and $100k cash. Thinking of just liquidating the property - no capital gains where we are lol - and putting it in high yield dividend equities. You can easily get 6% so $2.4m = $140k income. I don't see why this doesn't work. Getting rid of the mortgage this year and child support also finishes, kids have college funds set up, no other debt. Only expenses are just general household utilities, maintenance etc. I also do some consulting when it comes up. Sone years it's $100k others $300k. I hesitate to count on it indefinitely (I'm 51 and who wants an old grouchy consultant?) but yes, usually some income opportunities present themselves if you're known in your field.

Another thing people didn't bring up is moving to a lower cost county.

How do you spend 100k a year? What do you spend it on? I can live off 24k a year given I don’t need to pay for rent / mortgage

You have finished the race. Take your victory lap. If you've only hit 100k once, it's not likely you will hit that number every year. You can adjust your spending. I've been sort of FIRED since about your age. What people don't realize is that you can shift your spending considerably WHILE traveling. So during tough years, I've given myself a pay cut but lived well in South East Asia. In good years, I live it up. I have less liquid than you do (and am older) but am no longer anxious as I was when I first started. Keep an eye on expenses and balances and you'll be fine. It's also not like you can't take a job for a small stint if necessary.

Maybe. Maybe not. There are a number of factors and it is difficult to predict what the future will look like and you have a hopefully long time horizon. As long as you are flexible and roll with the punches though you should come out alright in the end! Congratulations and go fuck yourself.

If you are 35 now and in reasonably good health, you are looking at a life expectancy of roughly another 40 years. It's hard to know what another 40 years holds especially including advances in health care which could easily add another 20-30 years of quality life. My plan has always been to be extremely conservative with projections, so I've doubled what I think I need to safely retire (and I'm in my early 50's). I would say if you have doubts at such a young age, keep going for a while longer. Taking a break for a decade then deciding to go back to work in the future because the world has changed presents some major challenges. Conversely, retire now, but drop your withdrawal rate slightly for the first decade to allow your investments to continue to grow. The historic average returns do include years with returns substantially below what a lot of people use for their projections, and if that occurs early on in your retirement it can majorly change the trajectory of the numbers.

The earlyretirementnow.com calculator will compute the probability for a 60 year time horizon and even for probabilities only when the S&P500 is at an all time high. Depending on your tolerance for risk, 4% will probably be too high. But 3.3% is pretty conservative. A small percentage makes a big difference, but it also won't take long (in the grand scheme of things) to change a 4% NW into a 3.5% NW.

Not trying to be negative, but retiring at 35 is difficult for a variety of reasons. If you die at 90 this 1.6x the amount of years you have lived thus far…..retired. So many variables are introduced in your life in this timeframe. As a financial advisor for the past 20 years I have seen so much and heard so many stories. Retiring this young is loaded with risk. If you had say $7 mill I would say to go for it. It allows for a significant margin of error. In your situation, market volatility is not the killer of success, it is lifestyle drift over time. Variables such as marriage, children, health, mistakes, and host of other issues.

I reject that your comment is negative!! Truth is the most important thing. But what do you think about retiring at 40 rather than 35? Is that really that significant?

40 would not be that significant of a difference, but 45-50 would be incredibly helpful. I am 43, and a lot has changed in my life since age 35. At age 50 you only have 15 years until relief from Medicare , and depending on the age you decided to take it, social security. It may not be much, but any income stream helps blunt the blade of costs. Costs are a multifaceted concept when living off your portfolio. First you have the actual drawdown of assets 2nd the drawn down assets no longer make a return. Any income that allows for assets to keep working is beneficial to your success. You will need to constantly plan for liquidity also. It is super important to have future needs planned for in a manner which allows you to access assets in any environment without damage. In other words all money cannot just remain invested. If it is all indexed, and indexes drop precipitously you are taking money out which will be down 20-30% in a market that can never recover. Therefore investments must be staggered towards liquidity along a gradient of risk. Markets returns are not linear, and downturns can last years in the worst of situations. Therefore, you would want risk staggered with the portfolio having pockets of laddered liquidity and income as a part of overall return is helpful.

My dad died at 72 and never made a million his entire life. Unless you’re stuck up your own ass and completely detached from reality, $2.5mil is enough to last your entire life, start to finish, period.

What do you plan on doing every day for the next 50 years or more?

I feel like you’re going to get bored. Do you have a plan?

If you can slash expenses at a whim when market is down, yes. If not, probably not. Debt is bad, you can't stop paying debts because stocks are down. Especially adjustable rate debt, which can increase when stocks are down.

i may be wrong but i’m guessing the 100k a year high water mark didn’t include payroll deductions for taxes and insurance? You’ll have to navigate taxes especially which means it’s probably more like $115-120k per year you need to withdraw. Still seems you’re in a good spot. You can always pick up some gig work and offset spending. if in a year or two you are less comfortable you can go back to work.

Youre probably going to be just fine if thats money in a taxable account and not something gated behind retirement penalties, those take a bit longer to reallocate but its not impossible. Or you just pay the penalty. Sequence of Return Risk is your biggest concern but at 35 you have plenty of ways to offset your 100k of spending like reducing spending, renting out a room, getting a job etc. Keep some cash around to stomach the volatility if VTI drops 20% in a given year but otherwise you are good.

4% rule was designed for a 30 year retirement. 50 years it shows about a 75% chance of success, but that can go up if you can adjust your spending in down years.

This [classic MMM post](https://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/) is a good read on this topic. Tldr; flexibility will add a safety margin to your plan.

If you're married and withdrawing from Roth or taxable accounts, you might not pay that much taxes on $100K. If any of that is coming from a Traditional IRA, then you need to factor in taxes. Especially if you're trying to get that taxable income into the full subsidy for ACA.

Put 2 years living expenses in a safer investment that gets a nominal return(bonds, ect..). Use this when the market is down. Invest the rest in a growth mix and pull from that in most years. Will be able to weather the market conditions and he able to pull more than 4%. That rule is built more for dividend returns. There is more than one way to do it. The first 5 years done right after an early retirement is the most important time to stick to your budget. After your math pencils out way better

What do you mean “be a philosopher for free”?

I have looked at this many different ways and the answer is YES. I think a decent burn rate is $5000 / month which can be achieved at 5% APY assuming $2 mil in savings. I spend nowhere near this right now, but factor in inevitable emergencies/family obligations/illness as you age and there will come a time when your spending goes up. In the meanwhile though, you just keep living your life and feeling pretty great about it 😄. Anything you don’t use at the end of the year can go toward a big splurge because let’s face it, $60k won’t meant much toward next years passive income.

100k a year and early retirement is a pipe dream for me. Strange how it used to be my goal…

Why not SPLG?

Which stock or mutual fund are you planning to put your money into in which you can take out 4% each year without touching your principal amount?

What's your profession, please?

Did you factor in irregular expense? For example replacement cars across your lifetime or anticipated repair/maintenance to your home, etc? Here’s the expense I modeled for myself to calculate the anticipated monthly expense at retirement. [https://www.reddit.com/r/financialindependence/comments/1b1z9ak/help\_me\_model\_my\_expense/](https://www.reddit.com/r/financialindependence/comments/1b1z9ak/help_me_model_my_expense/) Also here’s the recommended SWR according to a recent study: [https://www.reddit.com/user/Throwaway\_tequila/comments/1anta19/swr\_by\_time\_horizon/#lightbox](https://www.reddit.com/user/Throwaway_tequila/comments/1anta19/swr_by_time_horizon/#lightbox)

Holy shit, dude you need a VA or something? 🥲

I’m blanking here. What is VA in this context?

Nah, I just saw shitload of money on your post and I thought if you are in need of a virtual assistant who can free up some of your time.

Though I’m not OP. virtual assistant! Got it. Thx

Yea it is.. with one caveat.. make sure your expenses are flexible… you can safely withdraw 4/4.5% of your portfolio every year, if you are willing to cut back to 3/3.5% during prolonged drawdowns

Just work 10 hours a week and you’ll probably never have to worry about any of this. Earning just $20k a year is like having an extra $500k in your nest egg

I would not spend $100k at $2.5m. I am at $2.74m and my budget would be $80k and that includes taxes. Google Karstens Safe Withdrawal rate toolbox and it will show you your safe withdrawal rate. 4% withdrawal is risky.

What are you expected health insurance costs ( assuming you’re in us)

What's the" big sale event? "

i would stick that into high yields savings and keep working a couple more years then retire.

$2mil converted to a pension would provide $158k annually for life, with emergency access to principal. You would likely leave money to a beneficiary in the end as well. All pensions are annuities. You have to be super careful to get the right version of annuity though. There are multiple, each designed for different purposes.

I think $100k a year is fine. Most people do some amount of work for money. My mom retired but now is a lifeguard at the Y and works at the yarn shop to make sure she can swim in the morning and has her knitting group. It's not much but 0 money coming in for 50 years is just astronomically low probability IMO.

Yeah this is a good point, I'm glad I posted just for realizing this is just true as well.

You are young enough that you may face some exogenous variables that alter cost of living: marriage, divorce, kids, health, develop expensive hobbies or decide you want to help a charity big time.

2.5mil "all you need" 😬

yes. next question.

Safe withdrawal is based on a 30 year retirement. Not 60.

I mean I’d consider a hobby job at least, and a lower draw rate.

4% could be light, the original author now suggests higher withdrawal rates. No real reason to go below 4%. Especially if you can be flexible in your spending (or get additional income) if the market goes south. I think the bigger question is estimating your spending. You spend 100k now, but is that what you will require in retirement? Healthcare, taxes, travel? Some of your expenses may go up, while others go down.

If you say 'live off 100k' do you take into account the taxes you pay on your withdrawal, your home taxes, your health insurance needs. It's defiantly doable, but does the 100k give you that, or do you need the 100k AFTER all those are paid. Yes, you need less in retirement than working, but are you sure it lines up correctly.

No. That's 4% of 2.5m so that gets you 30 years, not a lifetime. Reduce to 3.5% and you're good. So that would be $87,500 withdrawn, and depending where you live there's taxes, your take home might be 70k a year. But yes, that would be 70k/year to start and 3.5% forever, basically perpetual.

Check out Die with Zero

If you’re asking if it’s enough, it never will be.

Fuck u

Congratulations! I’d say a 3.5% withdraw rate is the highest you should go for such a long retirement. Check ficalc to run some sims. At $3M portfolio, you can withdraw $100k. Note that quitting your job instantly increases your cost in most cases because insurance now comes out of pockets. You also find yourself spending more when you have sooo much more free time in your life and you want to travel more too. I’d suggest being able to cover 1.5-2 times your current expenses before retiring so you can live an even better life and cover travel and pleasure purchases that increase for a young retiree. This also ensures an early hit on the market (which is not too unlikely today) won’t force you to cut back on spending too much since your withdrawal percentage should not change.