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was reading an article this morn where the owner of a trailer park was increasing the rent substantially on renters. The article focused on how this would affect the residents who are living on a more or less fixed income. The effect is obvious. But what it did was highlight for me the realization that we are probably arguing the wrong aspect of planning for early retirement. There is a lot of discussion taking place on whether or not we should use 4% or 2% SWR. I have stated I am not putting my retirement on the line by following the 4% SWR, but I am doing that because I am focusing on HOW TO CALCULATE MY ANNUAL BUDGETS. Which if I can calculate accurately, tells me how much I need in sum to retire which in effect makes the 4% or 2% or whichever w/d rate I choose to use work (at least for a little while barring a total failure on my budget estimating and degradation in market returns, etc) so wondering, is it more important to focus on HOW TO ACCURATELY ESTIMATE your annual budgetary needs? To wonder how much to pad your annual budget up front in determining if one has enough to retire at the intended w/d rate? because bottom line, if you underestimate your annual needs or they are exceeded because of unanticipated (say it this way because we all expect costs to rise, but don't think too many would plan for 200+% jumps in home insurance rates which as most know would put a heck of a dent in the later years even if they keep rising at a more reasonable rate) jumps in costs, whatever SWR you planned to use won't work because your needs exceed what you can w/d. or maybe better said, if you are able to w/d at your planned SWR, the SWR plan will give you a long and happy retirement. But if you annual needs are underestimated, you don't fail because of the SWR. so in closing, think we are arguing the wrong aspect when we argue which SWR to use, if the SWR plan works at all, etc. Think its more important to discuss how to estimate an annual budget, pad it, for say what your needs will be and how much it will cost say 30 years from now. just look at whats going on today. Gas prices, heating costs, taxes (if some states do what they are saying), medical care costs, insurance costs are all rising at what I would say are "alarming rates". Say alarming because a lot of folks on fixed income/SS are finding it difficult to meet their ends meet. That will be us as soon as we "retire". Now a lot of them don't have any choice in the matter because they didn't plan for their retirements beyond saying the "government will take care of me, I trust them". Some of us are fortunate to be planning much earlier than the norm. Now all we have to do is figure out how to guess what it will cost us to live 30 years from now. Its easy to guess how much we can w/d 30 years from now, but how will we ever know its enough? been saying this all along, just wasn't focused in my prior arguements enough to highlight it this way... THe thought of having to cut my spending year over year to stay within a pre-planned SWR is not my idea of early retirement. Kind of defeats the whole reason to quit working early.
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