A different way to think about retirement planning

[disneysteve]

This stems from a comment that was made over on the early retirement forum.

Our current nest egg could support our pre-COVID spending for 20 years. That's not including SS and assuming a 0% return on our portfolio (but not factoring in inflation).

Once I have received the inheritance that I'll be getting within the next year, and assuming no market crash, our nest egg at that point would support our spending for at least 30 years. Again, not counting SS or any return over time.

Seems to me that based on that, we should be set for retirement. Even if I factor in taxes, our post-inheritance numbers should cover us for 25 years. Add in SS and even a modest 4% average annual return going forward and we should certainly have enough for the rest of our lives.

Does that make sense? Is there anything faulty about my logic here? If looking at the numbers this way makes sense, it seems a much easier way to tell when you're ready than a lot of other methods.

[srblanco7]

Seems to me that based on that, we should be set for retirement. Even if I factor in taxes, our post-inheritance numbers should cover us for 25 years. Add in SS and even a modest 4% average annual return going forward and we should certainly have enough for the rest of our lives.

Does that make sense? Is there anything faulty about my logic here? If looking at the numbers this way makes sense, it seems a much easier way to tell when you're ready than a lot of other methods.

Nothing faulty at all and makes sense. 25x expenses is a solid rule of thumb for a retirement nest egg and becomes the 4% rule as an initial withdrawal rate 100%/4% = 25.

Recognizing of course that inflation will cause expenses to rise year over year, and with a 4% withdrawal rate, hopefully you'll earn more than a 4% annual return!

[TexasHusker]

Sounds like you’re fixed up fatty style.

[LivingAlmostLarge]

I like the simplicity in thinking about it that way.

[terri77]

Very exciting! Your hard work has really paid off.

[AirForce]

If you have a certain amount to support you for the next 20-30 years, you have nothing to worry about. My friends had a similar situation. They got an inheritance and this money was enough to provide themselves for at least 20 years. They decided to use this amount to start their own small business. In order to avoid financial problems that arise at an early stage of starting a business, they used the services of a factoring company. Having received funding, they have a lot of prospects for the development and replenishment of the client base. You can use your money as you like, but I decided to tell you about one of the ways.

[jIM_MI]

This stems from a comment that was made over on the early retirement forum.

Our current nest egg could support our pre-COVID spending for 20 years. That's not including SS and assuming a 0% return on our portfolio (but not factoring in inflation).

Once I have received the inheritance that I'll be getting within the next year, and assuming no market crash, our nest egg at that point would support our spending for at least 30 years. Again, not counting SS or any return over time.

Seems to me that based on that, we should be set for retirement. Even if I factor in taxes, our post-inheritance numbers should cover us for 25 years. Add in SS and even a modest 4% average annual return going forward and we should certainly have enough for the rest of our lives.

Does that make sense? Is there anything faulty about my logic here? If looking at the numbers this way makes sense, it seems a much easier way to tell when you're ready than a lot of other methods.

I see no faults, I would suggest more analysis is needed. What if 1970s era inflation hits? I know you said portfolio didn't need to grow, but what if inflation required spending to double in a short time period?

[disneysteve]

I see no faults, I would suggest more analysis is needed. What if 1970s era inflation hits? I know you said portfolio didn't need to grow, but what if inflation required spending to double in a short time period?

I think to some extent inflation isn't the scary thing it is often made out to be. I remember that period. Yes, inflation was high but CDs were paying 13% interest. You were spending more but you were also earning more on your savings. Between those higher earnings and trimming our discretionary spending, I think we'd be just fine.

I also think the Fed has a much tighter grip on the markets today than they did back then and double digit inflation is far less likely to occur now.

[LivingAlmostLarge]

Yeah the days of high inflation. We sort of need that I feel to bring housing back in line. We need wages to raise. But it would be hard for retirees except if they are aggressively invested but maybe not

[jIM_MI]

I think to some extent inflation isn't the scary thing it is often made out to be. I remember that period. Yes, inflation was high but CDs were paying 13% interest. You were spending more but you were also earning more on your savings. Between those higher earnings and trimming our discretionary spending, I think we'd be just fine.

I also think the Fed has a much tighter grip on the markets today than they did back then and double digit inflation is far less likely to occur now.

I think inflation is understated. Between the Fed adding new money to supply, and the government suppression/manipulating CPI, inflation now is way higher than the 3% the government tells us. Yet CDs are paying an all time low...