A better solution for FIRE planning?

[jfoxcpacfp]

Most everyone planning for retirement is familiar with the 4% rule (that you can distribute a static 4% of your portfolio until death without depleting it). David Blanchett's research on what actually happens in retirement gives us an alternative scenario that more closely models real life spending patterns. Guess what?The news is good, especially for you docs who want to retire as soon as you can safely do so. iow, you may be on track to reach FIRE sooner than you realize.

Why David Blanchett's Retirement Spending Research Is a Big Deal

[NJDoc]

Thanks for sharing, that is indeed good news. Correct me if I'm wrong isn't this similar data to Ty Bernicke's paper from 2005? FIREcalc actually allows this as one option on their calculator, as do others.

As Mr. Blanchett points out, it is really obvious that older folks would spend less. IMHO- the 4% rule and many other sacrosanct financial planning mantras, fall into the category of: " Beware of static answers to dynamic problems".

 

[PhysicianOnFIRE]

Thank you for sharing the link, Johanna. There is certainly truth to the fact that people tend to spend less in their eighties and nineties as compared to their younger selves. One caveat that is discussed is the potential for increased health care spending, which can be covered by LTC insurance, or perhaps self-insured for the well-heeled.

Another caveat for us in the early retirement camp is the fact that the research presented looked at typical retirees. When you retire at 65, you can expect your spending needs and wants to start dropping off in as little as 10 to 15 years. If you're like me and contemplating an early retirement at age 45, it could be 30 or more years before reaching the age at which spending typically starts to wane. That needs to be factored in as well. I think it's important to remain flexible, maintaining the ability to spend less in down years, and more freely after a particularly good year.

Thankfully, with a physicians' salary, working just one more year after you've met your goals can have a profound effect on your future.

Best,

-PoF

 

 

[YYjames]

Ha! So we're calling retiring at 65 early now ?

No modeling can be done for true early retirees. Let's pick arbitrary age 45.

[jfoxcpacfp]

Yes, this comment stood out to me, "In other words, do not apply the right answer to the wrong question." Financial planners must be aware that preserving capital is not necessarily the only goal, or even the ultimate goal. For some, we must open our eyes to the fact that following static rules of thumbs can actually be harmful if our "conservative" recommendations lead to the client not enjoying the life they want to lead while have the energy to do so. Clients often do not have these goals articulated or even well considered when they begin planning. It is up to us to ask the right questions, listen, and give permission to dream big. From my perspective, most people begin planning with fear and doubt. Probably not so much for doctors, in fact at the other end of the spectrum.

[jfoxcpacfp]

YYjames wrote:

Ha! So we’re calling retiring at 65 early now ?

No modeling can be done for true early retirees. Let’s pick arbitrary age 45.

Click to expand...

"We" are not, but for many, that is the truth, especially with longer lifespans. Fortunately, a lot of my clients actually love their jobs and aren't as anxious to retire as many on this forum seem to be.

As for modeling, I doubt there is a wealth of data on 45-y.o. retirees, I'm pretty sure. That doesn't mean that a plan is inconsequential.

[jfoxcpacfp]

NJDoc wrote:

Correct me if I’m wrong isn’t this similar data to Ty Bernicke’s paper from 2005? FIREcalc actually allows this as one option on their calculator, as do others.

Click to expand...

Lol, I couldn't correct you since I'm not familiar with it. Here is the link from the FPA Journal for those who might be interested and I'll read it when I have time. Looks interesting, thx.

[YYjames]

jfoxcpacfp wrote:

YYjames wrote:

Ha! So we’re calling retiring at 65 early now ?

No modeling can be done for true early retirees. Let’s pick arbitrary age 45.

Click to expand…

“We” are not, but for many, that is the truth, especially with longer lifespans. Fortunately, a lot of my clients actually love their jobs and aren’t as anxious to retire as many on this forum seem to be.

As for modeling, I doubt there is a wealth of data on 45-y.o. retirees, I’m pretty sure. That doesn’t mean that a plan is inconsequential.

Click to expand...

Not saying not have a plan. But 65 is not early by any stretch of definition. Also people I have come in contact in medicine don't move careers because they hate their jobs. Most people have many interests.

But you're right, majority adhere to 40 year one job thing.

[jfoxcpacfp]

YYjames wrote:

Not saying not have a plan. But 65 is not early by any stretch of definition. Also people I have come in contact in medicine don’t move careers because they hate their jobs. Most people have many interests.

Click to expand...

Yes, I agree, 65 is not early, at least not for many people. I think it is for me, though. I can't imagine quitting in only 6 years - I simply love what I do too much. As long as it doesn't interfere with grandchildren time and hobbies, I'm happy. It would probably be very different if I worked for someone else.