Calculating Our "Enough" -- Determining the Numbers Behind Our Financial Independence and Early Retirement Planwe've learned

How We Calculated Our “Enough” Number for Early Retirement

Today I’m (finally) sharing something that I’ve wanted to write about for a long time, but haven’t tackled because there is no easy formula: how to determine what is “enough” to save for early retirement.

“Enough” is perhaps the centrally important concept to early retirement.

Calculating it with some degree of accuracy is critical for everyone, especially when we’re talking about much longer retirements than most traditional retirement advice is based on. All of us eyeing early retirement fall somewhere on a spectrum: those in a hurry to quit as soon as possible, regardless of whether they’ve truly saved a safe amount, and those (like us) who are inclined to oversave and are at risk of working forever if we don’t force ourselves to take the plunge. (There’s no risk-free option, after all. Either risk saving too little or risk spending all your good years at work.) Those in the former camp probably have a natural tendency to underestimate their enough, while those in the latter likely overestimate. It’s good to know your own probable tendency heading in, so that you can correct for it in the calculation.


As with all of our posts, I don’t share our actual numbers (here’s why), but starting with someone else’s numbers is the worst way to think about this anyway, because it artificially anchors your own thinking to a set of circumstances that may not apply to you at all. If you’ve read financial independence blogs for more than a post or two, you’ve probably seen numbers in the range of $1,000,000 in investable assets and $40,000 in annual spending multiple times, which makes those numbers feel like the “right” range, when they may, in fact, be totally wrong for you. (Or totally wrong from a future safe withdrawal rate perspective. Remember recency bias.)

If you already have your “enough” number in mind, then consider this post a method of pressure testing your thinking to ensure you have adequate wiggle room built in. And if you’re just starting your planning, this will help you think about the key factors that determine how much you’ll want to save before you pull the plug.

How We Calculated Our

Before we talk “enough,” I can’t not mention the eclipse, and how incredibly lucky we felt to get a blissful and unobstructed 2 minutes of totality. (Which we may or may not have traveled to see.) ;-) We definitely learned that a total solar eclipse is two events: the partial eclipse leading up, which is cool but not life changing, and the time of totality, the enormity of which we were completely unprepared for. Pictures and video will never be able to capture what totality actually looks (or feels) like, and while we were stoked to get this shot of the corona, in real life the sky did not look black, and the light was so much more shimmery and nuanced than the photos show. Aside from the incredible beauty of totality, we were both totally caught off-guard by how much emotion came with the moment. We now completely understand the “totality or nothing” sentiment that eclipse chasers espouse, and hope all of you who didn’t get to experience totality this time around will find a way to experience it in a future event like the eastern North America eclipse in 2024 (we’re eyeing Durango, Mexico for that one), if not sooner elsewhere. Odds are good after this one that we’ll soon count ourselves among the eclipse chasers of the world — a privilege early retirement will allow us! 

And now back to “enough.”

“Enough” As a Concept

In these days of nonstop talk of decluttering, downsizing and minimalism, “enough” has taken on a meaning of “not too much.” Which it for sure does mean. But for those inclined to rush the journey to early retirement, it’s worth reminding ourselves that it also means “not too little.” Especially if you’re planning to quit work for good, there’s a lot riding on that number, and it’s essential to your future happiness that you not shrink it down too much, lest you find yourself short on funds at the very time, in your later years, when you’re least able to hustle for more.

Your “enough” should ideally be many things:

  • Enough to allow you to live the lifestyle that allows you the greatest stoke and fulfillment
  • Enough to minimize future money stress, even in turbulent markets and recessions
  • Enough to cover emergencies and unexpected expenses without derailing your plan
  • Enough to let you dream big occasionally
  • Enough to let you sleep at night

If your “enough” doesn’t check off all of those — say, it has enough to cover your lifestyle, but not enough to sustain a recession or emergency in the early years of your retirement — then it’s probably not actually enough. And conversely, if your “enough” easily checks off everything, and then some, there’s a chance you’re falling into the “one more year syndrome” trap and working longer than you need to.

“Enough” As a Number

Your “enough” number should be based on four main factors:

  1. Your annual spending, and spending trends over time
  2. Your contingency plans
  3. Your income sources
  4. Your projection method(s)

Determining your annual spending and multiplying it by 25, as the 4 percent safe withdrawal rate says you can, gives you a rough starting estimate. But 25x is a crude metric for a number that needs to account for a range of factors unique to you.

Fortunately, by determining the four main factors in detail, you can arrive at a number that incorporates the nuance your particulars dictate.

1. Determine Annual Spending, and Spending Trends

If you’re reading here, you probably don’t need me to tell you that determining your annual spending is the single most important step in calculating any form of early retirement plan. Or that decreasing what you spend by chopping out mindless purchases will shrink that number, and in turn shrink your big savings target, allowing you to retire faster. That’s all obvious.

But what might not be obvious is that you may not want to spend the same amount every year in retirement, and your spending now may bear little resemblance to what you’d actually spend in an ideal world in retirement.

For example, most bloggers I know who write about early retirement talk about how much more they’ll travel after they quit. Which is great! But: travel isn’t free. And even travel hacking isn’t free. It often falls into that “spend to save fallacy” that tricks us into believing we’re saving money when really we’re spending more. Or they assume they can practice geographical arbitrage by renting out their place while they travel, which is great if it works. But what if the market turns south for an extended time and renters are hard to find? What if the market becomes saturated with airbnbs and you can’t rent your place out? Will you just skip the travel then? Or will you wish you’d boosted your spending estimate a bit more to be less reliant on a set of circumstances out of your control? All of this impacts your spending estimates.

On the stuff front, the things we buy for free time activities is vastly more voluminous than the stuff we buy for work. And when we suddenly have more free time, I don’t know how realistic it is that we will never want to buy things that aid the activities we’ll fill that free time with. If left to our own devices, wouldn’t we actually be likely to want more stuff, because we’ll have more time to spend on hobbies? Even Mr. Money Mustache has a whole bunch of bikes, guitars, tools and other non-free hobby stuff. We’ll have more time to hunt for deals and find things used, sure, but we’ve made sure to account for this tendency in our future spending.

That Thing? You Don't Need It // Hiking Is Walking, and Should Be Free! You Don't Need $1000 Worth of Stuff to Go for a Walk!

We definitely don’t need all those things. But we still might want some stuff.

On the question of spending trends, it’s worth thinking about whether level spending throughout your life is realistic. We plan to travel on the cheap in our 40s and 50s, but recognize that we probably won’t be quite as enthused about crappy mattresses in cheap hotels in our 60s, and might even want to take a cruise or two (or fly first class once our miles are exhausted). Or we might get sick of living in a cold house in the mountains and decide we’d rather spend a little more to live at the beach. That’s the thinking behind our two-phase retirement approach, with our leaner early years and our more cushy “traditional retirement.” Our plan is based on lower spending in the first 18 years of retirement, and then roughly doubled spending after age 60, perhaps more if our returns significantly outpace our projections. (Also helpful if we need long-term care, which currently costs multiple times what many early retirees plan to spend each year and is not covered by Medicare.)

In determining your “enough” spending level, ask yourself all of those questions:

  • Does your planned spending level allow you to live a life you love even if everything doesn’t go to plan?
  • Is your planned spending level realistic given how different life will be?
  • Does keeping your spending level equal over time make sense for you?

2. Determine Contingency Plan Philosophy

I have written lots on contingencies and won’t rehash that here, but it’s super important to think through your own contingency philosophy, meaning what you are or aren’t willing to give up to make your retirement stay solvent, should things not go to plan. That could mean thinking through factors like:

Locality-specific natural disaster deductibles — If you live in an area with hurricanes, wildfires, earthquakes or tornadoes, you may have specialized insurance for those events that comes with much higher than normal homeowners insurance deductibles. If you found yourself having to pay a $30,000 deductible one year, could your plan withstand that hit? Or might you want to consider holding an amount equal to your specific deductible in a separate account, above and beyond what you’re saving for retirement?

Sequence of returns risk — What happens if you retire into a recession (as it looks like we might)? Will your plan be able to sustain you if you deplete more of your assets early in your retirement? Will you plan to go back to work before your resume gap gets too long, or will you drastically trim back your spending? In our case, our spending plan can be cut up to 50 percent if necessary, not that that would be especially fun, but we’ll plan to cut our spending by roughly the percentage of the market drop. Fortunately, we have boatloads of travel miles stockpiled and can still travel even if we are in a constrained spending situation.

Big ticket items — What happens if you need to replace a vehicle? Buy new appliances? Make a major home repair? Move to a new place? How will you factor these harder to predict expenditures into your spending plan? In our case, we have a buffer in our magic number that allows for a chunk of big ticket items. If we don’t end up using the allotted amounts in each given timeframe, then we can do fun things like home renovation projects, but if we need to replace a car, we’ll be glad to have that slush fund set aside.

3. Determine Income Sources Over Time

At the recent Lola Retreat, Emma Pattee talked about how she became financially independent with rental income (in her 20s, y’all. Un-freaking-believable). Mrs. Frugalwoods talked about how their financial independence is based on a combo of assets and rental income, paired with some blog and book income. Ours on the other hand is based entirely on our investable assets, even though we also have a single rental property. That was a good reminder for me that FI is not necessarily based on wealth at all, but on passive income. Does your passive income cover your expenses? is the most important question, not How much do you have?

Which means that how much you need is based not just on how much you wish to spend, but on what sources that income comes from, and how much income those sources generate. If your spending target in retirement is $50,000 a year, that could come from $1,250,000 in invested assets (if you trust the 4% rule, or $1.6M with 3%, or somewhere in between) that you sell off a little at a time. It could come from collecting enough rent to to clear $50K after expenses. It could come from dividends alone on $2.5M worth of stocks (assuming an average 2% yield — though I know dividend investors aim for better than that).

Here’s our income source breakdown, which varies over time:

Our retirement income sources over time // Conservative investment returns in early retirement

I’ve been pretty blatant in my assertion that more people should build a two-phase plan like ours, as opposed to converting a lot of those tax-deferred funds for use in early retirement, as the Roth ladder allows, to avoid selling out future you who probably needs that money more than younger, industrious you does. But what matters most is that you know where your income is coming from at each stage.

4. Determine Projection Method

The final factor in calculating your “enough,” after you know your spending levels at each phase, how much extra you might wish to set aside for contingencies, and where your income will come from, is to decide which method to use to calculate your projections. The 4%/25x method is the simplest, but we’re big fans of doing more in-depth calculations that factor in various inflation and market returns scenarios. (I know there are lots of spreadsheet fans out there, so I know we’re not alone.)

In the example we’ve shared here before, which uses IMAGINARY NUMBERS, we show the type of projection that our plan is based on. It’s nowhere near as simple as a 4 percent rule calculation, but it takes into account multiple factors like when our rental income kicks in, when we can switch over to tax-deferred accounts (401(k)s that are soon to be converted to IRAs), different withdrawal levels in each phase (more spending in later years), and what we can expect to have at different rates of return. How you factor in inflation is also important, and whether you want to adjust numbers for inflation or adjust your projected rates of return downward to keep things in today’s dollars terms. Inflation has historically tended to be in the 2 to 3 percent range annually, so if you believe that markets will continue to average 8ish percent in the future, you can run your projections at 5 percent (8% minus 3%) to get a sense of what that will do. Again, these are not our real numbers, but in our actual projections, we use a 3%-after-inflation standard to ensure we’re not basing our plans on overly optimistic future returns.

Income by retirement phase // Conservative investment returns projections in early retirement

NOT real numbers

Building out a spreadsheet like this with the formulas baked in is incredibly helpful for testing out different rates of return or different starting amounts. And a more detailed version could account for likely return differences between invested assets and assets held in cash (currently marginal returns), as well as spending differences over time. It was ultimately by building ours and playing around with it that we arrived at our magic “enough” number for phase one, and verified that our 401(k) balances are already above where we need them to be, meaning we should be set for phase two.

How Do You Think About “Enough”?

Anyone struggling to figure out your “enough” number and have specific questions? Anyone feel extra good about yours and want to share your method for calculating it? Anything you think I missed in this breakdown of how to think about it? Other thoughts, comments, questions? Let’s discuss in the comments!

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137 replies »

  1. I do not see a calculation for social,security? If your are estimated to receive 20k a year from social,secruity, that is like having 500k in assets ( using the 4% rule)…maybe even better because SSI does have inflation factor built in?

    • A few things: For those over 55 now, it’s relatively safe to factor in Social Security, but for the rest of us, there’s still too much uncertainty to bank on any particulars. That’s why we don’t talk about it here, because it’s not part of our “for sure” plan. If it goes away entirely (not at all likely, but not impossible), we don’t want to be in trouble. Or if it ends up being means-tested, which could disqualify many of us, we also don’t want to be in trouble. So that’s the main answer to your question. Second part is on the inflation metric: cost of living adjustments are not automatic on SS, and often come in under inflation, so in real terms they don’t actually keep up, and generally result in lower spending power over time.

      • Agree with you on the inflation factor for SS and understand your concerns about the longevity of SS….I do not believe it will happen but that is much of a political conversation as it is a financial conversation so using SS as gravy to a plan is a good idea.

      • I can say all of that, of course, because we’re in the crazy fortunate position of having oversized 401(k) funds. So we can afford to count SS as gravy without working longer. We definitely know not many people can say that, and for everyone in that camp, there’s no easy answer here, and it really comes down to your own risk tolerance. Banking on SS is risky, but the flipside is risking spending too many good years at work.

      • Now to really blow your minds, who’s planning for what happens if (as Obama proposed) the government decides 401(k)s should all be invested in treasuries…

      • Just a fact check: Did Obama really propose that? Because there were a lot of later-debunked rumors floating around that were politically motivated. For example: Fortunately for all of us, Wall Street’s powerful lobbyists will never let this happen, because they’d lose a huge percentage of their funds under management. Maybe this is the one time we all side with Wall Street? ;-)

      • He did. And yes, he was immediately slammed and dialed it back within 24 hours. The ultimate proposal omitted the idea (your link is right about that). It’ll be a lot more interesting, however, in the midst of an intense recession or debt crisis (think Greece), when there aren’t great options on the table for anyone, and some people will lose massively…then it’ll be interesting to see what happens.

        All the more reason to diversify the buckets for retirement (early or otherwise) so there’s flexibility.

      • Retiring at 40 greatly reduces future social security payments. The final check is based on earned income for your best 35 years of work. Even if you max out SS during work by earning ~ 128k this year, if you only work 18 years, you only get 50% of the max payment. You get more credit for the 1st dollar in wages than the last, so you could also reach 50% by earning ~ 40k, adjusted for inflation, for 35 years.

        A nice hedge would be to keep a side gig. That would give you an entry for the 15 years or so that will give you $0 credits. As long as your hours are small, or it is really fun – like ski instructor – you have my permission to called yourselves retired.

      • Haha — you know how I feel about “permission.” ;-) There are a LOT of good reasons to keep a side gig, and social security is one of them. I also think it depends heavily on what folks want. We’re lucky in that we have well-padded 401(k)s so don’t NEED that SS money in our 60s and beyond (though we won’t turn it down if we get it, of course!), so have the privilege of being able to turn down virtually all work in retirement. But for others in different circumstances, a side gig is a smart hedge against SOR risk, just generally running out of money, and it could help with SS padding (or even basic SS qualification credits for those retiring especially young).

      • i’m glad you made that point. Even leaving a little early can have an impact on your benefits.

  2. Wow your real numbers look great! Ha! Just kidding. I think you mentioned somewhere in there those are fake numbers. :)

    I’m in the “just get me outta here already!” camp. My number was set low to begin with, and I might just say hang the numbers and make a happy living doing low paid work while letting my nest egg compound and grow over the next 30 years.

    • LOL — After seeing from the survey how many people skim, I wanted to be sure no one missed my caveat. ;-)

      I could see multiple paths for you — doing fun work for longer while letting your investments grow, saving up a bigger number, combining forces with a partner to save faster, or — most likely — building up your real estate empire to take the pressure off your portfolio and provide you with rental income. ;-)

  3. I have struggled to come up with a number (and am actually working on it right now so this a timely post) for a few reasons – we now have a kid and our expenses will include her for the next 18 years (and possibly and additional one down the road), our expenses still include non-mortgage debt and while I don’t plan on going back into debt after they are gone, I won’t say that we are done buying new or new-ish cars forever.

    The list of assumptions is hard to sort through – will we have a mortgage, will we have a rental, how much should we specifically set aside for travel on top of our annual spend, what level of safety do we want baked in, since I don’t plan on working in corporate America for 18 more years how expensive is health care adding in a kids.

    Will definitely be adjusting the number once we have one, but I want to have a goal to shoot for as well.

    • (Nothing wrong with buying new cars! We bought both of ours new, and don’t regret it. Take that, used car-only proselytizers!) ;-)

      Your set of factors may be unique to you guys, but you’re definitely not alone in attempting to balance so many different unknowns. That’s the biggest challenge of all with this stuff, and why I’m so against just calculating a number based on the 4% rule and calling it a day. If we all end up working just a little longer before pulling the plug, or working some in retirement, I think that’s a good trade-off for knowing that we have more adaptability built into our plans. We can’t predict all this stuff, but we can leave ourselves more wiggle room!

  4. I think sequence of returns risk is a very important factor and I’m glad you accounted for that. On a recent ChooseFI podcast, the guys interviewed Big Urn and he deconstructed this concept for me. In almost any case, no matter how big your nest egg is, if there is a significant downturn right after you retire your portfolio will be affected. Ensuring you have a contingency plan in the event of a downturn right after retirement is imperative.

  5. Kudos for tackling a post on this very difficult topic. As a scientist looking at this problem, I worry about how significantly we can estimate each factor. In my own planning, I’ve realized that the uncertainty in each variable means that I’m fooling myself with an unrealistic level of accuracy in my spreadsheets.

    What I’ve done personally is focus on the best estimates for my retirement lifestyle spending…the biggest changes are no childcare (yay!) and higher estimates for health care assuming subsidies go away (boo!). Generally it seems that your spending will end up being similar before and after retirement so that is a good starting point to make adjustments from.

    Once I have my spending predicted as well as I can, I use a 3% withdrawal rate as a long-term conservative estimate of what I can pull for spending. I will also adjust spending down or up depending on big market moves over short and long periods. Anything more detailed than that becomes an exercise in fooling myself that I can predict the future (inflation rates, social security changes, future tax rates, future college costs, health care, etc).

    The comforting thing is that a 3-4% withdrawal rate has worked globally through a million changes over long periods of time. If it doesn’t work in the future, the world will have big enough problems that any planning based on investments will be worthless. I don’t see the world’s entire economic system collapsing so I don’t plan around that scenario.

    • It’s funny — we think it’s quite likely that our spending will go UP in retirement, not down (or level). Both because we plan to travel more (without work paying for any of it), and because by traveling for work less, and therefore having fewer meals paid for, we’ll need to spend more on groceries. Just offering that as a counterpoint to the assumption that retirement spending doesn’t generally go up. ;-)

      Re: your last paragraph, I think it’s a mistake to assume that needing to go with a more conservative withdrawal rate equals worldwide economic collapse, and therefore can’t be planned for. It could be that what we all need is a plan based on 3% (assuming we have 60/40 or 70/30 allocations, or a lower percentage for more conservative allocations) paired with multiple contingencies.

  6. This is a great concept to counter the oversimplifications commonly seen in the FIRE world. For us, enough means that we can cover our basic expenses for quite a while (20+years) and have enough security to start our transition. I don’t think you ever know for sure if you have “enough” because there are many variables that change over time, and you have little control over many of them (inflation, investment returns, your health, political conditions to name a few). This is the major drawback to traditional retirement planning that is often glossed over. I think that it is very easy to get caught in one more year syndrome if you need certainty which is never achievable and you could end up saving way more than necessary. On the flip side, if you are overconfident that your numbers will stay constant and you don’t account for some emergencies and things to be worse than in the past, that can also be a recipe for disaster. Our answer is having “enough’ to take the initial leap and then having plans to grow our wealth in “retirement” and maintaining the ability to adapt and change with a changing world.

    • Thanks, buddy! :-) I think your approach of continuing to grow your wealth is super smart. It’s very similar to our thinking about continuing to work in small ways in retirement. For us, being so risk-averse, we wanted a magic number that will likely cover us forever without needing to work, but to use post-ER work as an additional hedge against SOR risk, a way to fund occasional splurges, etc., and not an essential element of our plan. But for those who don’t mind continuing to work in some way, that frees up a lot of the need to have a rock-solid plan that accounts for a gajillion different contingencies.

  7. Very well thought out Ms ONL.

    One thing missing from many plans is a realistic cost of replacing or maintaining stuff.

    Everything breaks or wears out eventually, and a lot of it would get replaced when it does. Fixtures and fittings inside your house, furnishings, cladding and roof outside, car, clothes, toys, etc.

    Consider how much a building and contents insurance coverage is set to. Likely a big number. Does a budget factor in 5% of this as an anticipated outgoing each year? 10%? Whatever the arbitrary number chosen, the one certainty is we’ll need to pay it eventually.

    I suspect the ONL plan does so and more, but it is a big hole in many FIRE plans I’ve seen published by PF bloggers.

    • Thanks, friend! :-D I think that’s all totally right. In an average year, most of us aren’t dealing with huge replacement costs, so basing future spending on that kind of year leaves out big X factor expenses, many of which are knowable!

  8. I haven’t thought much about “enough” number due to our unique circumstances. My wife is locked into working another 2-3 years for her military pension which is the strongest of our 4-5 leg retirement “chair.”

    Our “enough” number also varies greatly on how much we want to spend our two kids’ education. We’re in love with a Pre-K to 8 school that will cost around $250,000 for the two of them. Our high school could either be a prestigious one that costs as much some private colleges (which seems crazy to me, but I’m not ruling it out) or it could be our local public high school (which is good) and perhaps some community college classes (yes, I’m a bit of a Tiger Dad). And then college is once again a question that is all over the map. Our state is already offering free tuition for a couple of years at a state school.

    Our “solution” is to use as much passive-ish income (pension, rental properties, blog) and side gigs (dog sitting) to let our investable assets grow.

    This is clearly one of those high-class good problems to have. It’s just impossible to figure out so far in advance. At least, unlike with health care, the worst case scenario isn’t that bad.

    • On the kid schooling front, I will just say that neither Mr. ONL nor I went to private school for one day in our lives, and here we are. ;-)

      And you guys have the fortunate position of having multiple income streams that make having a set magic number in the bank less critical. So I totally get why you’re viewing it all as you do.

      • Neither my wife or I went to private school either. I never envisioned private school part of the plans, but a combination of the 50% military discount and the tour completely changed our mind.

        Education is a weird thing. People are always quick to say, “Invest in yourself”, but blanket statements like that can go very wrong. My theory is that if we can get the kids going in the right direction at an early age, it may snowball/compound/etc. down the line. I’ve written about it before, but I’d love to read your thoughts in a post sometime.

      • Okay, I will put this on the post list! And hey, I’m not second-guessing you guys. They’re your kids and you’re looking out for their best interests, whatever that means. I don’t blame you at all for considering private school, especially if you get a discount! And I think you’re right about the compounding/snowballing from early education!

      • So I went to a private Kindergarten and first grade because it was apparently cheaper (or maybe just a little more expensive, but much more convenient) to go to the parochial school that my parents used for my younger brother’s day care than than to pay for my before- and after-school care at the local public school. I was then in a pretty bad elementary school, then moved to a mediocre elementary and middle school, then went to a pretty ok high school and the local state school where I lived at home and commuted to save money, and then went to a super prestigious private graduate school on scholarship.

        I always felt that it was good enough, and I was happy with my public education, but something I’m realizing now in my late 20’s is the networking disadvantage that it put me in–I just don’t have the broad network that some of my acquaintances who went to better schools (or who generally grew up more wealthy than I did) have, and I don’t have the schmoozy skills and social capabilities/awareness/whatever that they’ve learned from a young age (a lot of my friends from high school didn’t go to/finish college). I have other friends who grew up in much more abject poverty (although we were pretty poor when I was pretty young) and we often see things or experience things and think “Damn. I am not white enough for this.” (The friends I am referring to and I are white).

        I’ve also decided that no matter what my kids are interested in, they have to minor in business in college because there are so many things that my “I’m going to be a professor, I don’t need to study such banal things!” undergrad self didn’t expose herself to that older, not-a-professor me regrets (turns out being a professor means being super poor well into your 30s and means you can’t pick where you live and means that your mental health and probably physical health take a big, big hit).

      • Can you write a post about your education growing up and perhaps your husband’s too? We have 4 kid s ages 10-16 ‘just ok’ public schools. I do believe that through Advanced honors and AP courses we can give them a great education however I am always curious as to how others have done it and if you have any advice on how to get the most out of a public education.

      • You bet! Appreciate you and Lazy Man suggesting the topic! :-) (Not that we have all the answers, but we can certainly share our experience.)

  9. I think there are so many factors, it becomes very challenging to put a concrete plan around it. Yet you have to start somewhere and be fully prepared to be flexible. The flexibility part is the hardest, I imagine, as it may have to verge on extreme in certain circumstances. Cutting expenses by 30-50% may be very hard as it eats away at the very reasons one retires. e.g. to pursue hobbies, extended travel – which may be quite expensive depending on the specifics.

    Four factors that I think are relevant for the (early) retiree today.

    1. Sequence of Returns. If you believe in the Bogle projection of 4% equity returns and factoring in 2% inflation, you end up with a real return of 2%. This may be pessimistic but I think we are unlikely to see anything like the returns we have experienced through the last 8 years. Set equity expectations lower, set your SWR lower and be pleasantly surprised if you are wrong. The OMY or T(two/three)MY syndrome may ultimately be your best friend. Any aspiring retiree planning for a SWR of 4% in the current environment is placing a very bad bet, IMHO.

    2. Asset Allocation. Tough one this as the retiree may actually have to juice up the equity allocation to compensate for a future low return environment. A traditional 60:40 equity: bonds is unlikely to cut it unless you intend to adopt an accelerated equity glide path. i.e increase equity portion on an annual basis. That higher equity % may also eat away at tolerance of risk due to volatility.

    3. Diverse Income Sources – the obvious ones – home rental(s), pension, side income or any combination thereof. Just anything that is not subjected to equity market forces.

    4. Social Security – depending on age and AIME (Average Indexed Monthly Earnings), this may be a significant factor and should be accounted for. Clearly, the closer you are to SS, the better the chances of SS not changing too significantly by any administration regulations. I am sure you have run your numbers. The Physician on Fire had a great post on SS Bend points. For one/two high earners over a 10-15 year period, the AIME (over 35 years) might still be reasonable, hence a nice future paycheck lies ahead.

    Would also add in strategies to keep taxes low – e.g. geo-arbitrage and lower state, real estate taxes. This naturally plays into a lower SWR and the SoR mitigation.

    For us personally, points #1, #3 and #4 are the most relevant.

    Look forward to seeing the other comments today on such an important topic. Thanks for pulling together a variety of key topics into a single post.

    • I should have asked you to write this post for me! ;-) Agree 100% on 1 and 2. Most people looking at the 4% rule don’t even understand that it’s based on a particular allocation, and that any variance from that changes the calculation. Re: SS, we fall more into the “be pleasantly surprised” camp than the “count on it” camp, only because it would be extremely costly to be wrong on that one. We’d rather ensure we have enough independently than to be wholly reliant on a program with a lot of uncertainty to be our savior down the road.

      Re: state taxes, I will always throw out this caveat: the states that tend to have the lowest state taxes also tend to have the worst health care outlook (, so going based on the typical recommendations is not always wise. (Those recs also tend to overplay income tax, which is less relevant for early retirees who fall into low brackets anyway, and underplay property taxes, which are generally higher in low- or no-income tax states.)

  10. This is great. And not just for early retirees, but retirement in general. Really, I feel like traditional retirement needs to have these numbers figured out even more, because they’re less like to want/be able to go back to work if things don’t plan out as expected.

    Another contingency I’m paying attention to is DIY house and car repair. While we can easily climb on our roof and clean our gutters now, it might not be feasible at 70 or 80. Home repair gets a LOT more expensive if you have to hire it out, and I would have to hate to sell just because we hadn’t factored that in.

    • Amen to that! We talked about higher labor costs because DIY gets tougher two posts ago, on planning for later retirement, not just early retirement. One of many possible costs that could go up in traditional retirement, making us question whether level spending is truly realistic!

  11. This is true. You need to know your “enough” number so you won’t succumb to the “just one more…” whatever syndrome. The efforts of the present are all about the fruits of the future; why put off enjoying what you’ve worked so hard for to reach an arbitrary number?

    • Flipside is not to rush that enjoyment if you truly do need to save more to be safe in the future. ;-) But 100% agree on not putting off all enjoyment to the future!

  12. Continuing the theme of spending less than you earn from the accumulation phase can serve well in retirement. Is a SWR of 4% that safe? Well, 3% is safer. Will 3% cover those expenses? If not, then “enough” may be more. Just don’t feel that spending 3-4% is an entitlement. We might spend more like 4% before starting SS at 70, and then cut back on spending from other retirement funds correspondingly. Now, we may likely still have RMDs to worry about at 70.5+, but that doesn’t mean we have to spend those funds, just that they become taxable. Let’s see what can be Rothified by then.

    Sequence of return risk is a concern. Our portfolio allocation became more conservative (~50/50) as we achieved FI, compared to more aggressive earlier during accumulation. We didn’t want to have achieved FI, and then lose it in a market downturn. We may choose a more aggressive allocation glide path as we approach SS at 70 and beyond.

    • I’d love to know — what’s your reasoning for going to such a conservative allocation now? Most of that money you won’t need for decades, so I’m curious. Also, it’s worth remembering that the Trinity Study that gave us the 4% rule assumed a more aggressive allocation than 50/50, so 4% doesn’t necessarily apply at more conservative ratios.

      • Wade Pfau did a study (read it on on allocation throughout work into retirement and found that the 10 years around the actual retirement date need to be the most conservative due to sequence of return risk. On a chart, it makes a big U. We are at about 50/50 with a large cash cushion. I plan to draw down the bonds first when the cash gets thin in order to move our allocation to something more aggressive.

      • That’s interesting. I’ve tended to think of that rule as only applying partially to early retirees, since a lot of the funds will continue to grow for decades, which isn’t always necessarily true with traditional retirees. So in our case, we have a slightly more conservative allocation for our phase 1 funds, but a much more aggressive allocation for our phase 2 funds that we don’t need for almost 20 years, even though we are retiring now.

      • Goldfinch answered well on the rising equity glide path with the work by Pfau and Kitces. I officially got started pursuing FIRE three years ago when I was sent a link to Darrow Kirkpatrick’s ( review on retirement calculators. My earlier pursuits were based on generally living on less than we earned, and favorable markets in the ’80’s-’90’s. I didn’t know FIRE was a “thing”. Darrow’s reviews have continued, and a number of the calcs are free. He has also done simulations with varied asset allocations and withdrawal strategies. I like his site, as he thinks like an engineer.

      • The question I still have is whether it makes sense in early retirement to shift asset allocation the same way we would for traditional retirement. In our case, because we have two distinct pools of assets, we have made some more conservative moves with our phase 1 funds, but will leave the phase 2/traditional retirement accounts in aggressive allocations so that they have every opportunity to keep growing. Then we’ll shift the allocations on those gradually, as we get closer. It’s interesting to think about how the math changes for ER!

  13. Our number has evolved a LOT over the years. We’ve accounted for slow growth, negative growth, decent growth, etc… Replacement of vehicles every 8 yrs, home maintenance costs similar to our current home – freakin’ money pit, lol. Kids college, more kid costs when they hit middle school, more costs for groceries as they age and become human vacuums…

    Mrs. SSC built in a random nubemr function to use as our return rate in one spreadsheet scenario and it’s interesting seeing how negative returns affect everything. Knowing we’re still comfortable with our numbers during those periods, as well as knowing we have cushions in place like allowances that can be cut, and other things that can be cut. Like you, we could live off of half our projected yearly spend if need be, but it wouldn’t be the most amazing lifestyle.

    We may Roth some funds from tax deferred to use pre-60, but it should be minimal and hopefully more of a tax strategy which we will definitely be using when I lose my high income status.

    It’s a tricky thing to figure out a number and be comfortable that you’ve accounted for “everything tangible” like home repairs, vehicle repair and/or replacements, health costs increasing (needing more prescriptions,etc… as you age), and more gets tough to estimate. Add in unknown kid costs and I can see why One More Year syndrome gets to be so appealing. :)

    • Oh, amen to that! I totally see the appeal of OMY! It seems like you guys have been super thorough and built a lot of assumptions into your “enough” number. And no hate from me on converting funds to Roth for tax purposes so long as you aren’t spending money you’ll need more later. ;-) (Also, good to look at health care subsidies, if such things still exist in a few years! Those limits are lower than tax limits.)

  14. Definitely struggling with our magic number… more specifically, how to calculate it when our annual withdrawal will go down over time based on S.S., Medicare, withdrawals from taxable vs. tax-free investments, etc. As a bit of background… when we retire at 52, we’re going to roll-over all POST-tax contributions from our 401k/403b and Roth 401k/403b into our Roth IRAs, so not only will the contributions continue to be tax-free, but the earnings will also be tax-free from that point forward. Additionally, we’ll be rolling over all our PRE-tax contributions and earnings in our 401k/403b into traditional IRAs. To allow our Roth IRAs to grow as long as possible, between 52 – 62, we’ll be spending down as much of IRAs as we can as permitted by the calculated SEPP per the IRS rule of 72(t). So what’s our magic number? Let’s stay at 52 we need $24K per year + $12K for health insurance on open market + $6K for taxes on PRE-tax investments + $6K travel/contingency = $48K. Based on the 4% rule (allowing for inflation adjustments each year afterwards), we’d need $1.2M to walk away. At 62, however, S.S. will reduce our annual withdrawal need. At 65, Medicare should further reduce our annual withdrawal need. And at some point, we’ll pay less taxes or no taxes when we begin withdrawing from our Roth IRAs. Going back at our initial $48K per year… by the time we’re 65, this will have grown to needing $66K per year as adjusted for inflation. But subtract out S.S benefits for me and my wife, reduce our health care costs due to Medicare, reduce our taxes as we move from PRE-tax investments to POST-tax investments… and our initial rate of withdrawal may no longer be based on 4%, but may actually be down around 2%. So what I’m questioning is… is 4% actually too conservative if that’s not what you’re going to stay at for 30+ years? And if so, how can you conservatively, but still accurately better calculate an initial withdrawal rate that will work? Trust me… I’m the king of spreadsheets… and calculated this every which way imaginable… but I’d love to see a monte carlo based simulation/calculation for early retires where these future “reduction” variables are considered. In the end, I’d rather have too much than too little… but there’s a point where too much means missed FIRE opportunities. As always… thank you Mrs. ONL for a very thought provoking post… and the opportunity to join in on the discussion.

    • May I suggest you go take a look at the Retirement Calculator by Todd Tressider over at the Financial Mentor. A very intuitive tool where you can input income streams, SS projections, inflation, tax rate, portfolio size, longevity. It produces a downloadable spreadsheet of all the numbers you might need.

      There are other much more sophisticated calculators (they have a fee for use)

      Worth a look at least and hope this helps with your needs. Best of luck with your planning.

    • I’m sure you already know that I don’t have an easy answer for this! ;-) You’ll note I didn’t even mention Social Security here because my bias is toward not counting on it and considering it gravy if and when we get any. First because some major policy changes need to happen to make it viable by the time many of us reach our 60s, and second because early retirees are throwing a lot of $0 earned income years into the calculation (average of top 35 earning years) of benefits, meaning the payout according to the current formula will be on the low side. I also wondered given your pre-65 calculation if you’re overbudgeting for taxes, but only you know the answer to that based on your circumstances. As to whether your withdrawals will really drop down after SS kicks in, keep in mind that Medicare doesn’t cover all health care (see two posts ago on traditional retirement costs), long-term care costs a fortune, and you will likely need to hire out work that you can do yourself now. So level spending across your lifetime may not be realistic, and you might very well need the SS benefit to supplement your 4ish% withdrawals just to keep you afloat.

      • Yeah… this whole planning thing is tricky. I don’t want to count on S.S. either…. but I’m 8 years older than you with another 4 more years (at least) before early retirement (dang kids… totally kidding of course). Those 12 years of working replace a lot of zeros. With our very low COL… if S.S. does pan out… even at 75% of what it is now… it could literally cover most, if not all of our living expenses…that’s a LOT of gravy. As always… love that you read the replies you get and take the time to respond. Thanks for your other notes on taxes and Medicare… worth more consideration. As I’ve said before… the best laid plans… the biggest unknown which unfortunately may make the biggest impact on whether or not we got our magic number “right”… is our health. Prayers to all for good health.

      • You’re tapping into the central frustration that so many of us feel — and you’re clearly in it with us! — of not knowing exactly what to plan for. I get both sides of the political arguments on all of this stuff — health care, SS, Medicare, etc. — but I don’t understand why ANYONE thinks it’s a good idea to keep so many people uncertain about what to plan for. Even those of us who are diligent planners are left guessing because we truly have no idea what might be there for us when we get to each milestone age. :-/ As for SS, plan around what feels right to YOU, not what feels right to me. ;-)

  15. How do I face the fact that how ever many times and ways I do the numbers, I will never have ‘enough’? All of our projections show us running out of money when I’m 75, even if we live frugally forever and never follow our dreams. Which is fine if I died at 74 after a short illness and a wonderful life, but just devastating to face after years of saving as hard as we can. I’m having to face facts that I will never be able to retire and do any of the things I’ve always dreamed of. It feels like my retirement plan has been a lie. My government took social security money from my wages since I was 16, promising me a generous pension when I was 60. Now its been deferred until 67 and is no way generous, and by the time I get there will most likely not be payable until 70+ and will barely keep me above the poverty line. It just feels like, what has been the point of all this?

    • I feel for you big time, and there is no easy answer. Do you have any possible means to earn more in your remaining accumulation years? You can only frugal so much, but earning more is where there’s the best opportunity to get ahead — though having said that, I fully acknowledge that equal opportunity is not available to everyone.

  16. I have ran a few “enough” calculations and each time the number came out slightly differently. It’s a bit tough to say what is it b/c of the 2 growing kids. I suppose it may be easier for you guys since you don’t have to consider kids expenses.

    The thing is, there are so many things that can change overtime. We plan to live abroad at some point so it’s hard to estimate that portion.

    I guess one thing that’s a bit harder for Americans is to estimate the health care cost in FIRE. With universal health care in Canada, it’s a lot easier to calculate the cost.

    • Definitely true that it’s easier for us without kids, but the SSCs and others show it’s possible with kids, too. ;-) And yeah yeah, keep bragging about your free health care. Haha. It’s definitely true that we can’t predict a lot of this stuff, but we can at least beef up our plans to account for more variability!

  17. I enjoy your conservatism. As an accountant, I have been taught to enjoy the principle of conservatism ;-)

    I am a dividend junkie, so I focus my energies on the dividend crossover point. This is where dividend income exceeds expenses. So we spend the dividend income, and let the capital compound hopefully. Using a 3% yield, or a 3% withdrawal rule, I need something like 33 times expenses saved. (someone can “easily” get this yield by using VYM/DVY and get a little more foreign in stock allocation if you do not want to touch individual securities).

    I have struggled with bonds, and told myself I want a bond ladder within 5 years of the retirement date.. To hold 5 years of expenses = 15% allocation to fixed income. Though, if we get those dividends for 5 years in a row, we are in effect having a future receivable..(which in effect is similar to owning a bond ladder of corporate bonds). And as we all know, bonds are not generating real returns today..But if we start a great depression type scenario, bonds are safer than equities..

    The other thing to consider in my opinion is that certain expenses will not be there in retirement, assuming the home is owned mostly free and clear. Of course, real estate markets are highly dependent on your location.. But in my opinion, owning $100K in equities and a house worth $100K to live in it free and clear ( minus $2.5K – $3K in insurance, taxes and maintenance) is “safer” than having $200K in equities and spending $6K/year on rent. Plus, if you mow your yard, you do not need to spend as much money on a gym membership ;-)

    I believe that earning some income in retirement will definitely be helpful. I think I will earn some income no matter what, but then I may also be over optimistic on that. Which is why I don’t include it in calculations.

    Back-up plans/redundancy plans can be helpful. Perhaps if the stock market falls by 50%, you will turn on the ads to your site and start telling us how much you enjoy having all of your accounts linked to the Personal Capital interface ;-) However, based on my experience, if you want to make money in retirement, blogging is a terrible way to do it. It is mostly a labor of love for most of us ;(

    I believe you should account for Social Security, as it will be there for you all at some point in the next 25 – 30 years..The US does not have as bad of a demographics profile as some other countries. Perhaps they will push back the age at which to start benefits, and may tweak the formula to require a higher number of work years. But a major overhaul will likely be stopped by the massive numbers of pensioners..

    • Oh, and before I forget ( I tend to ramble a lot), health is wealth.. So I like the fact that your conservatism looks at the fact that you may need care in older age..

      But I am wondering, perhaps medicare will expand coverage to include that? Or perhaps, you will move abroad? (is it too late for you two o get a Canadian green card ;-))

      This is the part where I do not know whether I am covered or not. It all depends on how the healthcare system looks like in 30 – 40 years, and I have no idea ( and perhaps noone else does either)..

      • Given the political climate, it is hard to imagine Medicare expanding ANY time soon. (Too late to get a Cdn green card, methinks!) ;-)

    • Thanks! And take a look at this recent post on expenses in retirement ( — I’d argue that we can’t spend nearly as much less in those later years as the conventional wisdom dictates. No way I’m letting a 65-year-old Mr. ONL up on a 30-foot ladder to restain our house, for example! But it’s crazy expensive to hire that out. So we’ll pay much more than we’d like to if we stay here.

      Amen to blogging being a labor of love — I am not banking on this site becoming a financial bailout for us. ;-)

      On Social Security, I believe that SOMETHING will be there, but for many of us, there are a lot of years during which things could change. The biggest danger to early retirees would be the addition of a wealth-based means test as opposed to the current income-based taxation test. If that gets added (which, frankly, I would support), then many of us in the FIRE camp would have far less SS in the mix than we might have planned on. That’s one of many reasons why we don’t plan for it and will view it as gravy if we get something when the time comes. ;-) (How’s that for more conservatism?! Haha.)

  18. Great article, as always!

    I wrote about our goal (real numbers) and assumptions here –

    Still we are far enough away that this will be continuously refined as we learn more about our habits, how the market is performing, how we are feeling about work, if we are able to save the aggressive amount we have set out, how healthy we are, debt, what other expenses we may want to help our kids with (besides what we already front-loaded for 529s and the 100k total extra we will have allocated for them in case on post tax accounts) etc.

    Conservatively (but maybe not next decade!) we are assuming 5.5 rate of return and 3% inflation, so like 2.5% real return…this assume we will be putting a lot of money in year over year for the next decade, which may not be realistic so that will be adapted as we go. On the link above you will see all our other assumptions, social security (not counting on it – woudl be nice surprise), life expectancy, taxes, our view on safe withdrawal rate, starting retirement at lower cost of living places, etc.

    We also assume we will spend about the same we are spending now – we wont have the kids but we will have more healthcare to think about. We already spend a lot on vacations per year we actually don’t think that will go up as we travel to live aboard….we shall see.

    Long term care – that is something we are starting to talk more about and even starting to think about business ideas – oh no, that means working (maybe, why not?!) lol) ;).

    • to add – we are considering converting part of my pre-tax $ into an annuity when the time comes (small part for basics) as it is a choice for my benefits, and our spending already accounts for using some of that money aside for things like contingencies (car, house, etc) though we hope to live car and home free at least first 20 years, in which case it would go back to savings or used for other expenses, we shall see!

      We also hope to have at least 2 years of $ for living expenses available, if possible. Sounds too conservative maybe, but how I want to sleep at night.

      • If it makes you feel better, we are in the two years of cash camp as well, and will absolutely consider an annuity when we get closer to traditional retirement! ;-)

    • It’s great you guys are thinking in such depth! If your real rate of return ends up closer to 2%, will you still be okay? Or do you HAVE to get 2.5% after inflation? If the former, then you’re likely extremely solid. And I definitely like that you aren’t banking on Social Security, but are keeping it in the “gravy” category like we are!

  19. Hello! I’ve been reading for a couple few months now (great site) and something I’ve wondered but haven’t been able to find yet.

    Why do you not roll over a small (10% tax bracket) portion of your Traditional to Roth each year of retirement? Not saying you withdraw it or spend it. You could still leave it invested for retirement and seems like you could save a bunch on taxes when you eventually take it out.

    If you roll over $10,000 every year you’d pay $1,000 in taxes for a total of $10,000 in taxes. Then you could withdraw the $90,000 (100k-10k) from your Roth during your first year of Traditional Retirement Phase tax free.

    If you waited and withdrew the $100,000 from a Traditional account you will pay $16,478 in taxes. A $6,478 difference.

    I do realize you would need to pay the small amount of taxes each year but I think you would save a ton in the long run. You could go all the way up to $18,650/year for married filing jointly, I just used easy numbers.

    Thanks and great blog :)

    • Great question, and the answer is that we *might* do this. A big piece of what has been holding us back is health care. The thresholds for lower health insurance premiums are much lower than the tax level thresholds, but if we can stay under key cliff levels, we may in fact do some *limited* Roth conversions. Though, as you said, we won’t plan to spend that money unless it’s an emergency. Also, I know we are outside the FIRE norm on this, but we believe in taxes and aren’t actively trying to avoid them, so if our investments do well and we owe more taxes later, we’ll consider that a good “problem” to have. ;-)

  20. Great post! I like all of the questions you ask. While you cannot predict the future, it’s good to think about this questions and honestly think about how you would react/feed. It’s good to have a plan going into retirement but you need backup plans B and C waiting in the wings.

    As for me, I’ve run dozens of scenarios through FireCalc , and (lately) through the spreadsheet at The ERN spreadsheet really gave me extra confidence I needed.

    • Thanks, Steve! I agree completely — we can’t predict this stuff, but we can do the hard work of thinking it all through and set ourselves up better than if we just blindly follow the conventional wisdom.

  21. I love that your article on Enough had a total eclipse to talk about the Eclipse and future travel plans for becoming eclipse chasers :) I’m already planning to go to my hometown in Indiana for April 2024 to get my own slice of totality.
    I’m a 4% Rule guy, myself. Actually maybe higher than that. I don’t foresee living into my 80s or 90s, and I’m enough of a risk-taker that I’m willing to jump ship early to enjoy some lean-FIRE years when I get the opportunity. I also feel like I’ll probably do some things that earn me some money, even if it doesn’t look like real work or involve starting a business.
    Yesterday’s PowerBall drawing got me to thinking about what I would do with a 9-figure windfall (besides give half to Uncle Sam, of course). My professional association would definitely get a boost, and I’d build something for the kids in my hometown. But that’s only a couple million. I have no idea how I’d spend between 10-350 million!

    • If you ever come into $300M, call me… I’ve got PLENTY of suggestions for how you could give that money away. ;-) We jokingly talked about that, too, and figured we’d keep about $10M and give the rest away to causes that we’re passionate about.

      If following the 4-or-more-% rule lets you sleep at night, then great! ;-)

      And DO IT. Get that totality. Soooo worth any and all hassle.

    • I agree with leaning toward taking more of a risk. Life is short and today there are many ways to earn a few extra bucks if you find yourself running short.

      • What’s important is that you have a plan that works for YOU. ;-) And I agree that there are lots of ways to make some money. The challenge is that we often don’t know that we’re running out until we’re in our later years when it’s hardest to hustle. But if you’re prepared to keep padding in your younger years, then more power to you!

  22. My husband and I, like many others, have been viewing our $$ as a collective sum-of-all-parts and looking at draw down %s based on the cumulative value. I have seen your posts about the 2-phase plan, was always intrigued, but never modeled for our situation. After this post yesterday, I sat down and put one together and HOLY COW it makes so much sense. I feel like doing it this way will make us feel so much better about ‘traditional retirement’ later in life. Much like you and Mr. ONL, we are planning to retire when we are 38 and 40 in 5.5 years. So thrilled and honored to be on this journey and LOVE reading your blog….xoxo.

    • You totally made my day! I’m so glad to know the 2-phase model makes sense for you guys, too! There is truly something to be said for knowing that you have a big cushion awaiting you in those later years, and you can’t’ put a price on peace of mind. ;-)

  23. I’m curious how you factor in RMDs. If you live to 70.5, you may take some whopping tax hits from there on out, especially if you have SS coming in too. My understanding is that even for a more modest portfolio, RMDs push you towards earlier withdrawals so as to avoid bumping up through income tax brackets. (And all the more so if you think rates will be worse later…)

    • Stay tuned — we have a monster RMD post in the works! :-) It’s a good and important question, and I suspect our answer is different from others’ (we aren’t trying to avoid taxes), but we’ll cover all that stuff.

  24. To what age do you plan to, i.e. do you run your calculations assuming both you and Mr ONL will live to 95 or 100? I think it’s prudent to plan with the assumption that one person in a couple will live to 100, but planning for both people to live to 100 seems over the top. Curious what you think about this. Thanks.

    • Mr. ONL is three years older, so we model everything on him getting to 103 and me getting to 100. We’d rather plan based on optimistic longevity than risk outliving our money! ;-)

  25. I love seeing the thinking behind peoples’ retirement numbers. Thanks so much for putting this together! Thanks also for the spreadsheet screenshots. I’ve modeled way to many scenarios in my time – it’s nice to know I’m not alone :)

    • You’re welcome, Chris! Glad it’s helpful! And you are definitely not alone on the maaaaaaaany spreadsheet models. ;-)

  26. I don’t know how to calculate my enough number because I don’t think I’d have the same expenses/life without work. I can’t even figure out my annual savings rate, and I need to do that and subtract it from my enough number. Taxes…living space…travel…food…I mean, I need a different way to calculate my enough number than current annual spending. What other options are there?

    • I don’t have an easy answer for this, but you’re definitely not alone in having this challenge! I think this is a place where you’d want to make your best guesses about what you’d want to be able to spend in the future, or how much work you think you’ll want to do to offset expenses. Questions to ask yourself: How much do you think you’ll want to travel, and in what style? Are you willing to travel hack, house sit, couch surf, etc.? What things do you think you’ll no longer spend money on? Even if your writing/gig work paid your expenses, how big a cushion would you need to feel safe and secure?

  27. A few “real life” observations after three years of early retirement: the cost of replacement vehicles can be staggering. We purchased a small travel trailer to allow us to roam the country (a great investment that has brought us untold joy), but the towing is taxing our 2000 GMC half ton truck (120,000 miles on the odometer). Replacement truck? Easily $50,000 plus for a suitably equipped 3/4 or one ton truck. Admittedly I haven’t truck shopped since we bought the GMC and didn’t ever intend to, but we are now looking at the wisdom of purchasing a replacement truck vs. a small motorhome that would allow us to continue to travel without towing hassles. A good problem to have, but nonetheless, substantial sticker shock either way.
    Another giant wake up call: medical insurance premiums. This is a huge unknown (for everyone), but having seen our premiums double in three years, our solution is to continue to pay for 80% coverage for me (to avoid a deductible), and full supplement for hubby. Current monthly premiums are $1500 before we spend a dime on care. I’ll now take social security next year at age 62 rather than risk waiting any longer, too many unknowns threatening the program and I don’t want to leave any money on the table. Another option is to withdraw sufficient funds to pay the premiums while allowing the social security to continue to accumulate. Many arguments on
    both fronts, most compelling being the kids can inherit our assets but not my social security, but perhaps that’s not that big of an issue anyway.
    Cost of living increases…every budget item on our original retirement budget has increased in the past three years, some significantly. Homeowners insurance has nearly doubled (even with the highest allowable deductible), as has vehicle insurance with the addition of a trailer and a boat. Energy costs are harder and harder to manage, prompting us to consider downsizing after only three years in our dream retirement home. Veterinary costs continue to skyrocket (I don’t recommend multiple pets in retirement). Home maintenance and repairs? Shockingly expensive when you’re working with a fixed income. Appliances break, windows fail, wood burning stoves become inefficient, plumbing breaks, roofs leak, decks splinter (there’s a lot to be said for renting in retirement). All you can do is build in large contingencies, expect some
    surprises, and when the inevitable happens, write the check and move on. What is the one thing I would do differently? Rent!
    Without a doubt, we would have saved a substantial amount of money had we done so. Not possible with our menagerie, but definitely a better plan had we been able to pull it off.

    • Thank you for helping me make the case to Mr. ONL for a self-contained micro class C instead of a truck and trailer! ;-)

      Thanks for sharing your story with us, Laura! You probably know that health care is on our minds BIG TIME, and we’ve heard a number of stories like yours — not to the level of taking SS early to pay for it (yikes!), but I definitely see why you’d make that decision in light of everything.

      We wonder, too, if we’ll stay put in our house for good. The flipside with renting, of course, is that rents can go up, you can be forced to move when it’s not a good time, etc., and that can cause its own set of problems. But I don’t think we’ll be too excited to know how much our repairs are costing us in retirement, either!

      Sounds like you guys have a bunch of decisions ahead of you — good luck with all of them! :-)

  28. I don’t have a true “enough” number yet. I’m still paying down debt and don’t know what my average yearly spend will be once those student loans are gone. Will it be the same? Will it go up or down? I have a guess, but it is just a guess at this point. Whatever level I decide upon, I’m more comfortable with a 3 or 3.5 SWR. The future is barely written for me yet; it’s very exciting.

    • You’ve got a lot of time before you need an enough number! And given your plan to keep working to some extent, you may not have the same need for one. I think what matters is just staying mindful of all the things you’ll need to account for in your planning instead of blindly sticking to some SWR rate just because. But I could never see you doing that anyway. ;-)

  29. I just came across your blog tonight. I do like your section on enough as a concept and enough as a number. It simplify and make sense without the distractions. The distractions I refer to relates to the various taxation, returns and risk that many get carried away with in their commentary and missing the big picture. Similar to what you refer to the big picture being what you are you retiring for and how to get there in a short sentence.

    Luck and health and having a partner or spouse who shares similar tastes, activities, prudent spending patterns and investment thinking, plays a big part. Reading excellent blogs like yours ( and thank you for sharing with all of us ) and insightful comments and advice from different readers has been very useful, too. I am on phase 2 of your so called two-phase retirement ( brilliantly put ) but the spending is maybe 20-30% more than previous and not doubled. No private school fees and University fees to pay. Yeah, we covered the fees even though the elder one did not want it. I hate them having any student debts. I paid my own college fees and went to a public school as my parents were poor.

    There isn’t much point in leaving it behind as the kids will spend it without appreciating the sweat that went into it. It is better to give them a fair go while they are at school and we are living and explaining to them the whys ? So far, no objections. So we are off to fly cruise on the QM2 and QV next for the first time. And we wont be in the Grill suites either. Hope to read more of your blogs in months to come.

    • Glad you found us! Seems like you have things well figured out, and that you are going on some wonderful adventures! In terms of leaving money behind, I’d never suggest that you deprive yourselves to do that, but if you happen to end up with more than you need, you can leave behind a charitable bequest and make a big difference to a cause or to people you wish to help. Just putting that out there! ;-)

      • Hi Tanja n Mark,

        Excellent charitable thoughts and we absolutely agree with that idea. Someway to go before we fall off the perch or becomes a basket case to society.

        Meanwhile, I cannot help noticing the many adventures you both are having already, assuming my deductions are about right from the many splendid, outdoorsy photos and of yourselves, immersing and enjoying nature. I think if one appreciates and active with nature, it enhances one’s health. It is also, may I say reasonably cheap and free at times.

        We hike outdoors and participate in evening social activities where possible and highly recommend it to others. Find a local club and join in. People are like animals, they always like to know and interact with each other over time and within reason. One may need to work on the social norms to fit in like those before them. This will enable one to have a purpose in retirement, as well.

      • You are correct that we prioritize outdoors time as much as we’re able to get out there while still working more than full time. It’s awesome you do the same! The club idea is a good one, or to live in a place like we do where that’s just the culture.

  30. Tanja, would you ever consider sharing the actual excel spreadsheets on your resources page- with fake numbers of course- so that we could see the formulas you’re using and how you’ve structured them? I’ve been digging deep into my memory for finance formulas (future value? present value?) trying to mimic the above spreadsheet to determine the formula and can’t quite get it. If that strikes deep concern in your heart for my ability to actually achieve FI, that’s fair. :) Or of they’re somewhere else on the site, just let me know what post to look for. And lastly, is there by any chance a way to read these posts by date (i.e. starting at the beginning post and working up)? I’m currently just linking on the recommended pages, but I’m ready to seriously binge and prefer going in order. TIA!

  31. Please disregard the above request for a downloadable spreadsheet! I see the link you provided in a comment response above. If posts-by-date are possible though, I’d love to know. Thanks!!

  32. Thanks I see that emoji-face-link now! And woo-hoo about the interactive spreadsheet. Best news of the day! Bated breath over here.

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