In this episode, we break down exactly how much you need to retire early. What is ‘enough’? We explore the famous 4% rule, where it came from, and whether it’s still a reliable rule of thumb.
We also explain how to live off your assets in practice, other considerations like home ownership and property investments, as well as how to approach financial planning with flexibility and common sense.
This is our last episode for 2020. We’re taking one fortnight off, and we’ll be back with the goods in January! Thanks for listening and for your support this year 😀
Listen here…
(you can also download the mp3 file here)
Discussion points…
- How do we figure out how much we need to retire? (02:51)
- The famous 4% rule – what is it and how does it work? (06:42)
- Arguments for and against the 4% rule working in the future (09:23)
- What level of wealth is enough for you? Dollar-figure examples (14:56)
- How did Pat and Dave decide on their FI number? (16:42)
- Living off your assets – how it works in practice (21:32)
- Selling shares without running out of money (26:00)
- Dealing with downturns and a bad patch of returns (30:24)
- Other things to consider (36:58)
- Why you might need more money and the 4% rule won’t work (42:22)
- Takeaways (47:46)
Further reading…
- The Creator of the 4% Rule, Bill Bengen
- Credit Suisse Yearbook (research of 120 years of returns) – Summary and Complete Yearbook PDF.
- Vanguard Article on Safe Withdrawal Rates and Spending Flexibility
- Semi-Retirement – Your Shortcut to Freedom?
- Financial Independence Backup Plans – Part One and Part Two
- Big ERN – Safe Withdrawal Rate Series
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Do you have something to add to this discussion? Share your thoughts in the comments below…
Hey Dave, great ep!
When calculating he amout I will need to retire, should superannuation be factored in? Or do you recommend using only assets available until preservation age is reached?
Hey Liam, glad you liked it 🙂
Personally, I didn’t include super assets, given the distance from access and it not being a massive amount. But they can definitely be included, especially for those who will be retiring in their 40s/50s, since access is then a lot sooner and it’s more practical to include in the numbers at that point.
Thanks for your response, dave.
I’m only 25. So for now it makes sense to focus only ln my assets outside of super for now.
Cheers
Yes, I think so mate, especially if you want to retire pretty early 😉
I’ll listen to this as I drive into work later today – my 3rd last commute.
My retirement is looming – seemed like it would never come but now it’s almost here.
Tomorrow I give my farewell speech at our staff Christmas function. Maybe I’d better start giving some serious thought as to what I’m going to say…
(ps. I better not have second thoughts about pulling the pin on the career after I listen to your poddie!!!)
I love hearing your thoughts as it approaches 😀
Haha I don’t think we’ll cause you to have second thoughts – both Pat and I are pretty optimistic for early retirees!
Gotta say I’m disappointed Pat cut his rant short on the age pension and home ownership. Man, that could have been epic! 😉
Good podcast otherwise though! I think the most important thing to keep in mind is that in the majority of scenarios you end up with more money than you started with. The real key is not having big market drops in the first 5 years after you retire. if you can avoid those or ride them out, then you’re pretty much golden.
Haha yes, maybe we’ll save that one for another day!
Hitting a rough patch at the start is definitely a concern, but as mentioned, there are multiple ways to approach a scenario like that. And to add to your point, I think in most cases those who actually leave work end up earning money again in some shape or form even if they didn’t plan to, which makes a mindblowing difference to the portfolio needed (or not needed rather).
Hey, I love the podcast. I was just wondering is the email we use to send in questions fireandchillpod@gmail.com ?
Thanks Murray 🙂 Yes, that’s the one!