Running out of money in retirement

[bjl584]

This post is geared towards running out of money after FIRE
But it does bring up a bigger issue.
Whether you retire young or wait until a more traditional age, the threat of running out of money is real.



I’ve been reading FIRE posts for a while, and one thing I’ve noticed is that most people seem pretty conservative before pulling the trigger — 3–4% withdrawal rates, several years of cash, backup plans, etc.

But I rarely see posts from people who actually FIRE’d and then had things go badly.

So I’m curious — has anyone here been FIRE’d for 5–10+ years and had their original plan seriously tested?
Did your portfolio drop much faster than expected? Did you have to cut spending or go back to work? How did you adjust your lifestyle when reality didn’t match the plan?

Or did things actually turn out much better than your projections?

I also wonder if we simply haven’t seen many FIRE failures because the last decade or so has generally been a pretty favorable period for investors.

And for those who have been FIRE’d for a long time — looking back, do you think you could have pulled the trigger earlier?

Would love to hear the real-life experiences, especially from people who have been at it for a while.

[Drake3287]

Interesting question. I think a decade or two ago most people retiring had both a pension and SS so having things go badly wasn't as common a problem because money was almost guaranteed. Of course it's way different now with so many people having a 401k instead of a guaranteed form of income. Although our socially has been pretty lucky with the stock market for the last 20 years, it's only a matter of time until things go south for many people depending on how they're invested. It's then that we'll see people with problems. I for one never put all my eggs in one basket like many do.

[kork13]

I'm sure this happens occasionally, when a FIREd person hits headwinds or some other challenge that imperils their future or forces them back to work. But by and large, I've mostly found that the FIRE community trends strongly toward the over-conservative. People have multiple years of OMY-syndrome, conservative growth estimates, seeking "99% success" in FIRE-Calc, and so on. I think the majority of the FIRE community ends up like DisneySteve, Fishindude, and many others who retire and have their portfolios continue to grow significantly over time, in spite of pulling out a healthy annual income from it. After all, everyone emphasizes the need to be prepared for things to go sideways, bad years or periods in the markets, inflation, etc. I think most people would say that if your FIRE plan can't take a crisis or three in stride, you're probably not ready to retire early. Diversify assets & taxation, forecast & mitigate risks, maintain a solid buffer, and be prepared for the unexpected. If you don't plan out a couple of backup options if things go awry, you'll likely regret that poor preparation when the storms roll in.

[MonkeyMama]

I'm sure this happens occasionally, when a FIREd person hits headwinds or some other challenge that imperils their future or forces them back to work. But by and large, I've mostly found that the FIRE community trends strongly toward the over-conservative.

Agreed. These type personalities (at any age) will be far more prepared than the average retiree.

While I do think it's very logical to point out this absurdly long stock market bull run... (Certainly a factor in my Dad retiring unexpectedly/early due to a health issue, and quickly having more money than he would ever know what to do with.) I find that generationally it doesn't make any difference re: my very financially conservative family. I am convinced that no one in my family ever relied on social security (a new benefit for my grandparents' generation). Of course, most of that generation (born 1920s) did not invest at all (when it comes to my family). What they probably did was take advantage of massive interest rates on their cash. I don't know the specifics, but they managed to end up with far more than they would ever spend. It clearly has to do with how they treated money, how we are all wired genetically, etc., versus the circumstances of their time.

[Fishindude77]

I've been retired from the workforce since end of 2017, so about nine years. During this time, the market has been so good that we have more in our IRA than we started with despite withdrawing $4k per month and two significant withdrawals for major purchases.
A big market drop would definitely be significant if all you are relying on is IRA withdrawals.

We also have multiple other income streams in addition to the IRA which provide a cushion; farm crop rental income, dividend stocks, I have a board position for a company that pays a monthly directors fee, I do a little construction consulting (former career) for a company I'm close with, and will start getting SS payments in a couple weeks. Additional streams of income will be very valuable in the event of a big market downturn.

Another key is carrying no debt. We've not owed money on anything for a decade or more pre-retirement, so don't have crazy bills. Also have way more real estate than we need, so a piece or two could be sold off pretty quickly if things got tough.

I would encourage anyone that can do it to get some type of income generating side gig going for yourself that you can continue into retirement, in addition to relying on your pension, SS & 401k. Something that you fully control and has long term income potential.

[bjl584]

I'm sure this happens occasionally, when a FIREd person hits headwinds or some other challenge that imperils their future or forces them back to work. But by and large, I've mostly found that the FIRE community trends strongly toward the over-conservative. People have multiple years of OMY-syndrome, conservative growth estimates, seeking "99% success" in FIRE-Calc, and so on. I think the majority of the FIRE community ends up like DisneySteve, Fishindude, and many others who retire and have their portfolios continue to grow significantly over time, in spite of pulling out a healthy annual income from it. After all, everyone emphasizes the need to be prepared for things to go sideways, bad years or periods in the markets, inflation, etc. I think most people would say that if your FIRE plan can't take a crisis or three in stride, you're probably not ready to retire early. Diversify assets & taxation, forecast & mitigate risks, maintain a solid buffer, and be prepared for the unexpected. If you don't plan out a couple of backup options if things go awry, you'll likely regret that poor preparation when the storms roll in.

Another big concern in the FIRE community, is if one is forced back to work, what does that entail?
Someone out of work for an extended period of time will suffer from some level of skill set erosion, or possibly some certification that they once had will now be expired.
If someone is forced back to work, it will probably look a lot different than what they were accustomed to.
They will probably make much less money than before and possibly be in a much less favorable work environment. (longer more erratic hours, less PTO, etc.)

[Fishindude77]

Another big concern in the FIRE community, is if one is forced back to work, what does that entail?
Someone out of work for an extended period of time will suffer from some level of skill set erosion, or possibly some certification that they once had will now be expired.
If someone is forced back to work, it will probably look a lot different than what they were accustomed to.
They will probably make much less money than before and possibly be in a much less favorable work environment. (longer more erratic hours, less PTO, etc.)

For sure !
Anyone of advanced age and that has been out of the workforce for an extended time is not going to be a very desireable employee.
I see a folks my age working part time jobs stocking shelves or running the register in retail stores, cutting grass, making deliveries, helping out farmers, etc. Some are doing it just due to boredom "for something to do" but I'm sure most need the income and that's all the better job they can get.

I guess if you're retirement outlook is a little sketchy, you should probably stay in the workforce a couple years longer rather than bailing out.

[LivingAlmostLarge]

but something people never want to address is that a lot of people have home equity that people refuse to tap becaues they want to stay in their house. The home equity could probably my guess is stabilize a portfolio and make it such maybe FIRE people don't have to work. Especially in HCOLA.

[bjl584]

but something people never want to address is that a lot of people have home equity that people refuse to tap becaues they want to stay in their house. The home equity could probably my guess is stabilize a portfolio and make it such maybe FIRE people don't have to work. Especially in HCOLA.

assuming you mean sell the house and move to a cheaper cost of living area and invest the equity?

[LivingAlmostLarge]

It could be selling that 4000 sq ft $3m home and downsizing in the same area to a 1500 sq ft ranch and pocketing 1.5m I know people with a lot of equity that moving to a condo or something else. It's really bad for people who still have mortgages.

[bjl584]

It could be selling that 4000 sq ft $3m home and downsizing in the same area to a 1500 sq ft ranch and pocketing 1.5m I know people with a lot of equity that moving to a condo or something else. It's really bad for people who still have mortgages.

Couple people I know took full advantage of working from home during Covid.
Sold their homes in California for north of $1M and moved out this way to Pennsylvania.
Bought a similar home for less than $200K before the prices went to the moon, and pocketed the difference