A couple of weeks ago, the online magazine, The Ken*, published an article on retiring at 40, which sparked off hyperactive exchanges on the net, especially on Linkedin. Early retirement is a subject I know something about, and I posted my own, simplified view on Linkedin.
The cynic and realist in me thinks that entirety of this excellent wisdom is captured in just one simple wish of all Bihari parents for their kids - just get a government job, any government job.
That's also retirement, at whatever age you land the job! Guaranteed income for life, little to no work expected from both the government and public.
This is also based on the underlying principal lying untouched. Am I right? If one drawsdown from the principal, a lesser factor could suffice. Of course, we are then betting on our longevity as well.
That was my point. Equities may give you higher return over the long term but you will have to deal with the volatility and which may not be in your favour at times of need.
I retired from regular paid work at 39 over a decade ago.
Although we were not "rich" and never will be, my wife and I were comfortable with our then lifestyle. So we used a safe withdrawal rate of 4% (25 times annual expenses instead of 20 times or 5% SWR as you suggested).
A 55 equity: 35 fixed income: 10 others (mainly gold) portfolio has been chugging along. 11 years on, I realise I overestimated the withdrawal rate, and 5% SWR would have worked fine. But being conservative by nature, the buffer is nice to have.🙂
You could also look at annuities to provide guaranteed regular income to take care of basic household expenses.
The cynic and realist in me thinks that entirety of this excellent wisdom is captured in just one simple wish of all Bihari parents for their kids - just get a government job, any government job.
That's also retirement, at whatever age you land the job! Guaranteed income for life, little to no work expected from both the government and public.
Annuities are based on an underlying interest rate, and quickly lose buying power.
Annuity takes away longevity risk as well as gives you a locked in rate. And you can ladder annuities every few years to take account for inflation.
This is also based on the underlying principal lying untouched. Am I right? If one drawsdown from the principal, a lesser factor could suffice. Of course, we are then betting on our longevity as well.
That was my point. Equities may give you higher return over the long term but you will have to deal with the volatility and which may not be in your favour at times of need.
But you certainly need both.
Dhiren,
There is certainly some value to annuities, but longevity risk is better eliminated by a.portfolio of equities, which never go to zero.
So simple and elegant. Thank you!
Love this !
I retired from regular paid work at 39 over a decade ago.
Although we were not "rich" and never will be, my wife and I were comfortable with our then lifestyle. So we used a safe withdrawal rate of 4% (25 times annual expenses instead of 20 times or 5% SWR as you suggested).
A 55 equity: 35 fixed income: 10 others (mainly gold) portfolio has been chugging along. 11 years on, I realise I overestimated the withdrawal rate, and 5% SWR would have worked fine. But being conservative by nature, the buffer is nice to have.🙂
Yes, a buffer is always useful.
You hinted that you do something after retirement (and get paid for it) even though you do not strictly need that money.
What do you do? Do you do that on a part time basis? I am always jealous of people who can freelance at will.
Sambaran,
I have a few board positions, I occasionally act, write, lecture - a real miscellany.
Most of my working time, though, is spent in the start-up eco-system, researching ideas, mentoring founders, etc.