How much in retirement / brokerage accounts to "retire?"

[forgetthebananas]

Had this debate with my friends recently.

What is your magic number in retirement and/or brokerage accounts combined would you need to call it quits / go part time by age 55?

For me, I think 3 million is about right. By the 4% rule, I'm taking out 120k a year, probably enough for my spouse and I. The remaining money would continue to accrue interest of course. I'm also assuming the house is already paid off, and I've saved enough for my kids to go to college, be it private or public. I figure by 3 million, I'd probably have enough to go half time / part time or just completely retire.

Friends said 5 million by 55 at least.

Any thoughts?

[Megalops]

Are your expenses more or less than 120K per year? You'd need to figure out your expenses enough that you can replace "probably enough" with 120K "is" or "isn't" enough

[micawber]

George Foreman said "The question isn't 'when can you retire', it's 'on how much will you retire' "

[Lordosis]

A little depends on age. If I had 3 M now I would not retire but if if I was 55 it would be tempting. I kinda figure if I am over 60 a SWR of 4% is fine to shoot for. If younger I would make it a bit more conservative.

But the biggest factor is spending. We spend 120 a year now. More than half of that is daycare and mortgage. If I am still paying for either of those things in retirement something has gone horribly wrong.

I am sure new expenses will take their place but not all of it and it will not be a major fixed cost like it is now.

Short answer yeah 3M at 55 I pull the plug

[JBME]

You are probably more right than your friends. What are your friends' expenses? Not interested in their salary...expenses. Is it really $175-$200k per year including a paid off mortgage? I'm going to guess their expenses aren't that high.

[bovie]

You are probably more right than your friends. What are your friends' expenses? Not interested in their salary...expenses. Is it really $175-$200k per year including a paid off mortgage? I'm going to guess their expenses aren't that high.

*What will be your friends' expenses.

Subtle but important difference.

Unknowable with high accuracy of course, but some people have specific plans for retirement with expenses that follow accordingly.

Some people just keep on keepin' on, same as they have.

Current expenses (including accounting for mortgage payoff, college, etc.) may or may not accurately reflect retirement expenses.

[Chreeto]

Had this debate with my friends recently.

What is your magic number in retirement and/or brokerage accounts combined would you need to call it quits / go part time by age 55?

For me, I think 3 million is about right. By the 4% rule, I'm taking out 120k a year, probably enough for my spouse and I. The remaining money would continue to accrue interest of course. I'm also assuming the house is already paid off, and I've saved enough for my kids to go to college, be it private or public. I figure by 3 million, I'd probably have enough to go half time / part time or just completely retire.

Friends said 5 million by 55 at least.

Any thoughts?

$3M is a solid number based on your spending. It might be hard to predict the spending pattern of our future self, so I'd like to have some cushion above that number, not just for inflation, but for the unanticipated costs. Poor markets, rise in health care, rise in long term care, etc.

[deanyar]

So, if you are looking to retire early (55), you may want to be a bit more conservative than 4%...maybe in the mid 3's% (so, maybe more like $3.5 mill) - although the truth is that, even at 55, the overwhelming scenarios still look safe at 4%...I find it easier to actually glance through the "numbers" of the tables from the Trinity study (where the 4% rule originated from) to give me more concrete perspective. Here is a link with some of the tables in a Forbes article:

https://www.forbes.com/sites/wadepfau/2018/01/16/the-trinity-study-and-portfolio-success-rates-updated-to-2018/?sh=114bc2db6860

[Tim]

A little depends on age. If I had 3 M now I would not retire but if if I was 55 it would be tempting. I kinda figure if I am over 60 a SWR of 4% is fine to shoot for. If younger I would make it a bit more conservative.

But the biggest factor is spending. We spend 120 a year now. More than half of that is daycare and mortgage. If I am still paying for either of those things in retirement something has gone horribly wrong.

I am sure new expenses will take their place but not all of it and it will not be a major fixed cost like it is now.

Short answer yeah 3M at 55 I pull the plug

This year is a "perfect year" for your own personal stress test.
Retired 9/30/21 at 55. 10 years to medicare, 15 years to SS.
How would you feel?
What would you need to have in place to "calm your nerves"?
Assume 100% S&P 500.
This is where you are:
Down 15.47 % for one year $2,535,900
Down 23.87 for YTD = $2,283,900
Both of those balances do not include any withdrawals.
The wind at your back felt pretty good 1 year ago, not so much now.
Now you have inflation and uncertainty . Your cost of living is up and your balances are down the above PLUS any additional $120k and say 10% $132k next year.
I guarantee you will be hoping for a flat market and much lower inflation. Just how likely will you feel that is?

This is what you need to consider in retiring at 55 years old exactly one year ago. Not intended as a scare tactic, simply to illustrate what recency (optimism) can impact your choices. Most have not relied only on financial assets and experienced significant market losses. Those losses have actually been doubled within your investing careers.

"I'd probably have enough to go half time / part time or just completely retire." Is one way of addressing it.
"Friends said 5 million by 55 at least." Is another way of addressing it.
Not much has changes in retirement life, just markets and income and expenses.
Hope for the best and plan for the worst. Good luck.
Just trying to put a perspective from the down side of the life cycle, the above is real.

[GasFIRE]

What account(s) does this $120K come from? Have you considered the tax burden whether income from retirement or CG from taxable? If not, may need to adjust the "$3M" accordingly.

[Larry Ragman]

One thing ERN does well is calculate SWR for early retirees. I’ll paraphrase his erudite and voluminous analysis: 4% is fine if retiring in your 60s, but 3.5% better in your 50s. So for $120k today, you need ~$3.5M today.

You would need to run the figures forward to 55 to see what inflation does to you, but depending on your age now you might better be thinking about something more like $4M. On the flip side, when you eventually take SS that will reduce your drawdown. Say at 70 you are getting $50K in today’s dollars, so from there going forward you only need to replace $70K per year. So 4 or even 4.5% might be ok at 55 then reduce your drawdown when SS comes on line.

Finally, remember that the Trinity study conclusions that are reported are the percentages that keep you from exhausting your funds after 30 years. Very conservative. In most case you end up with almost twice what you retired with. This will be market and investment mix dependent, but the point is you don’t have to over save.

With your nominal planned expenses and other assumptions, I’d go $3.5M inflated to age 55.

[uksho]

As Tim alluded to , inflation should be considered

[Kamban]

I don't have much by way of traditional retirement savings like IRA and 401K and 457b and all those number/alphabet soups.

My only ( for practical purposes) savings is taxable. So that has to last me for a long time. I like to think my max spending is going to be 200K per year. Most likely below that but that much for the first few years to get the bucket lists out of the way.

So I am aimed for $5-7M.

[StarTrekDoc]

I think most in this forum have a post retirement range ~$150-200k annual.

We have several retirement tiers;
Lean: $150k;
Current spend: $185k;
Fat: $220k;
Burger: $250k

[Tim]

One thing ERN does well is calculate SWR for early retirees. I’ll paraphrase his erudite and voluminous analysis: 4% is fine if retiring in your 60s, but 3.5% better in your 50s. So for $120k today, you need ~$3.5M today.

You would need to run the figures forward to 55 to see what inflation does to you, but depending on your age now you might better be thinking about something more like $4M. On the flip side, when you eventually take SS that will reduce your drawdown. Say at 70 you are getting $50K in today’s dollars, so from there going forward you only need to replace $70K per year. So 4 or even 4.5% might be ok at 55 then reduce your drawdown when SS comes on line.

Finally, remember that the Trinity study conclusions that are reported are the percentages that keep you from exhausting your funds after 30 years. Very conservative. In most case you end up with almost twice what you retired with. This will be market and investment mix dependent, but the point is you don’t have to over save.

With your nominal planned expenses and other assumptions, I’d go $3.5M inflated to age 55.

Your and ERN’s numbers, how are taxes played in?
Might need to adjust the second paragraph withdrawal percentage the same as you did for inflation. Sources being pre-tax or post-tax make a big difference.
I get really concerned when people start considering significant life choices when they have options. The point is that thumbnail rules and sophisticated models are great. Got to do the work on your own details to see if they fit your own circumstances. $3m , $4.5m, $5m? Any formula is only as accurate as the input and assumptions.

Paragraph three, “past results do not”…..over saving is likely. Most preferable is filthy rich rather than destitute. Great exercise to manage expectations.