Tortoise wrote: ↑Thu Feb 04, 2021 8:42 pm
Bumping this gem of an old thread about reaching various financial milestones to financial freedom.
I was updating my net worth spreadsheet recently and noticed that my net worth (including home equity) is now about 25x my average annual expenses.
I can't retire yet under the 4% rule for various reasons -- my home equity doesn't generate passive income, I can't tap my tax-sheltered retirement accounts yet, etc. -- but it at least feels like an important psychological milestone for net worth to hit 25x annual expenses.
That's a good milestone indeed, Tortoise!
What happens if you calculate your magic number in two parts? One number for age 70, when you're collecting Social Security and on Medicare, and another for "bridge" savings from retirement to age 70. Tyler has a handy chart for determining the safe spend-down rate for the bridge savings. If you're in your 50s or older, that will come out to be a smaller number than using the straight 4% rule.
Medicare would be 65 years old.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Tortoise wrote: ↑Thu Feb 04, 2021 8:42 pm
Bumping this gem of an old thread about reaching various financial milestones to financial freedom.
I was updating my net worth spreadsheet recently and noticed that my net worth (including home equity) is now about 25x my average annual expenses.
I can't retire yet under the 4% rule for various reasons -- my home equity doesn't generate passive income, I can't tap my tax-sheltered retirement accounts yet, etc. -- but it at least feels like an important psychological milestone for net worth to hit 25x annual expenses.
Badass.
BTW, if you're running a PP the equivalent SWR is closer to 5% than the 4% the classic studies found by only looking at stocks and bonds. So you may be even farther along than you realize. Congrats!
WiseOne wrote: ↑Fri Feb 05, 2021 7:00 pm
What happens if you calculate your magic number in two parts? One number for age 70, when you're collecting Social Security and on Medicare, and another for "bridge" savings from retirement to age 70. Tyler has a handy chart for determining the safe spend-down rate for the bridge savings. If you're in your 50s or older, that will come out to be a smaller number than using the straight 4% rule.
I haven't calculated anything to that level of detail. The extent of my "analysis" was simply to divide my yearly expenses by 0.04 to get a super-rough ballpark estimate of how much liquid net worth I'll need to consider myself FI with a 4% withdrawal rate. I ignored Social Security and all tax-related considerations.
But you bring up great points. I'll eventually need to do a much more detailed analysis that accounts for taxable vs. tax-advantaged net worth and age-related things like Medicare. (I'll probably just conservatively assume Social Security has been sucked dry by the time I'm old enough to receive it.)
