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Old 07-02-2019, 12:24 PM
Machine Elf is offline
Join Date: Feb 2007
Location: Challenger Deep
Posts: 12,290
Originally Posted by Hermitian View Post
I am young (mid-30s), have young kids, live in a high cost of living area, and am pretty conservative about risk.

I did the spreadsheet math and my figure would be $3.3 million.

My Assumptions:

1. The investment will grow (on average) 4% a year
2. For the first year I get to withdraw $102,300 (~3% of investment)
3. Because of inflation, each subsequent year, the withdraw amount is increased by 2%, until age 65 where the increase will be only 1%, until age 75 where the increase will stop (at $189K).

I run out of money at 97.
If you're in your mid-30s, you've (hopefully) got a long time left to live. That's a lot of time in which catastrophes can happen, including major market collapses. Can you arrange your nest egg and spending to weather something like the Great Depression?

I'll assume you're married, and that someday your kids will want to go to college. Is $102K per year enough to live a comfortable life while also socking away for the kids' education? Most people hope to enjoy a rising standard of living as they grow older, e.g. recent college grads may be fine driving rust-bucket cars and eating instant ramen on a regular basis, but they look forward to driving nicer cars and taking their families to upscale restaurants when they are middle-aged, and maybe enjoying regular international travel when they're even older. Does your plan account for this?

Once you start getting a lot of gray hair, you may also find that you want someone else to take care of various household chores - shoveling the driveway, mowing the lawn, fixing the car, and so on. Hopefully you have budgeted for that.

Also, if you quit now, you won't get much in the way of Social Security when you finally become eligible, which means your nest egg will have to cover pretty much the entire cost of your retirement. This includes paying for supplemental health insurance, because Medicare doesn't cover everything. If you and your spouse end up spending significant time in assisted-living, the price tag could be pretty steep (if you're broke, Medicare will keep you off of the street, but from what I've seen and heard, you do NOT want to spend your final few years in a place where Medicare is footing the bill).

If my wife and I hit $4M by the time we're 55, we'll probably leave our jobs. That will provide for an acceptably lavish retirement, along with an acceptable degree of long-term financial security.