How much would it take for you to retire now?

[Merch]

I would say $5 million that would need to be liquid. In otherword, not including the house, cars, etc.

Why so much? Well, I see my expenses after retirement going up. I would want a lake or beach house before I retire. I would also like to try things like flying and real estate venture. All pretty expensive.

But then, I don’t plan to sit in the backyard sipping ice tea in the cool breeze of the oak trees.

So $5 million would be enough to for me to stop working for the man, with no worries,

[jIM_Ohio]

Since I am 30 I have to go with the "no idea." I haven't really run the #s.

I think one of the biggest unknown factors for the young folk is longevity. A lot of my family has lived to 100 (like in the 80s) and now you hear life expectancy is going up at a rapid pace.

Then there is inflation and everything.

It would have to be many millions. Mostly I am way to risk adverse to retire so young. If I was on the brink of being able to, financially, I'd wait it out a bit.

I really haven't run the #s though. When I figure retirement #s I usually assume I'd live 40 years after retirement. I am not sure how the numbers change if the years significantly increase.

I wouldn't need much to live on today, but I'd want to make sure I was prepared for inflation for the next 100 years, just in case. I still have kids to put through college and all that too... So all that leads me to the conclusion that I would need many millions.

Yeah, I would have no desire to retire so young anyway.

I would suggest looking up the trinity study. This will educate you on the longevity of portfolio's. That is where the 4% rule generally comes from.

A 60-40 equity/bond mix can last 30-40 years (based on past market performance) if 4% of portfolio is withdrawn per year (increased each year for inflation).

A 100% equity portfolio takes on more principal risk. If that porfolio had a 3% yield, it would be worth more at death than it would during withdraw. Lowest withdraw rate needed is 3%, assuming you could find a 3% yield (S&P 500 yields 2.2%, so slightly more yield is needed than the market itself). Even if the principal dropped 30% in a year, the dividend payout would probably not change (dividend paid per share).

[noppenbd]

I would suggest looking up the trinity study. This will educate you on the longevity of portfolio's. That is where the 4% rule generally comes from.

A 60-40 equity/bond mix can last 30-40 years (based on past market performance) if 4% of portfolio is withdrawn per year (increased each year for inflation).

To follow up on this, the Trinity study assumed you pick an initial withdrawal rate of 4% and adjusted the dollar amount upward each year for inflation (not the 4%). So as an example, say you had a portfolio of $2M at retirement. The first year you could take out $80K (4%). If inflation for that year runs at 3.5%, then the 2nd year you could take out $82.8K ($80K * 1.035), regardless of your portfolio value at the time of withdrawal. So if your portfolio performed poorly and lost 10% of its value, you would end up drawing a lot more than just 4.14% (which is 4% * 1.035). In this example, your actual draw for year 2 would be 4.8% of the total portfolio value.

In the Trinity study, this strategy had something like a 90% chance of success after 30-40 years. In reality, anything more than a 90% chance of success is probably just noise anyway.

A more conservative strategy is to index the percentage of withdrawal to inflation, which means you withdraw lower amounts in years when your portfolio has not done so hot, and more when it is doing well. To incorporate this strategy you would need to be able to adjust your standard of living in lean years.

[MonkeyMama]

Okay so where does this leave someone with a 100-year time horizon?

IT doesn't really answer my question.

Not that it matters. I wouldn't bother running the #s because I really have no desire to retire in the near term. In a decade I may be more curious about the answer to this question.

[jIM_Ohio]

Okay so where does this leave someone with a 100-year time horizon?

IT doesn't really answer my question.

Not that it matters. I wouldn't bother running the #s because I really have no desire to retire in the near term. In a decade I may be more curious about the answer to this question.

If you can live off dividend yield from a 100% allocation to dividend paying stocks, history shows a 99.9% chance of never running out of money (and probably having more money at death than you did when you decided to retire).

[jIM_Ohio]

To follow up on this, the Trinity study assumed you pick an initial withdrawal rate of 4% and adjusted the dollar amount upward each year for inflation

One comment on this- the 4% was the conclusion of the trinity study, not an assumption. Trinity study evaluated several withdraw rates (2%, 2.5%, 3%, 3.5%, 4% etc...) and back tested these SWR against market returns using various asset allocations.

4% was the "sweet spot- high enough to suggest not needing to oversave, and low enough that the portfolio survived down markets.

There are new studies out which tweak the trinity study conclusions (on how to withdraw in down years).

[Ima saver]

I could easily retire on 2 million!!