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February 21, 2012

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R

This post is quite a coincidence.

I just returned my Mercedes sedan, for a Subaru Outback! Similar vehicle to yours & all your comments, are echoed here.

i am not retired yet, but getting ready...

Howard Schaeffer

Are you aware that most times when you write an update, it is to brag about what you have either done, bought or been?

Your last entries were of a trip to Hawaii, photos of your glorious living room at Holiday time, snapshots of Wall Street I am assuming you took yourself when you were in New York, and now your new car, the Prius.

Is your retirement nothing more than materialistic blaggardry?

Retired Syd

@Howard: Good point. I'll be sure to post some pictures of me cleaning my house, reading a book, watching tv, pulling the weeds, and of course taking a nap to really share some excitement.

penta

That response to Howard is pretty funny...But suspect what you're really getting from him is a bit of envy, I know because am feeling it too...But that just goes with with the territory I suspect....So keep em coming anyway, I need the inspiration - Tomorrow is only hump day.

Retired Syd

@Penta: If only retirement sucked, I could paint a bleaker picture and banish all envy! But you forgot it's a short week too, so it's even better than a normal hump day! There, is that inspirational?

penta

um, yes..., in fact the little insight that early retirement is the opposite of sucking is probably more inspirational than you might remember...

Rick

Syd,
Good to have a post from you! Both the metaphor and the actual decision give me something to chew on. Take care.

Retired Syd

@Rick: It appears most of you understood this post was not about a car. Maybe "Howard" will get his aha! moment soon. Metaphors can be tricky.

To be fair, this may really have been more of a simile than a metaphor. My mistake.

Steve

I'm not seeing a lot of materialism here; experiences, fulfilling activities and an economy car all focused on a good life not dominated by employment. Love your posts but I doubt that enthusiasm will continue if you set up a webcam of you reading a book!

Leisa Dreps

Hmmmm, I think there's no specific car for a retiree because the choice of vehicle depends on his/her preferences. The Prius is a good choice, though, because you get to save money from the gas pump, and that's definitely important, considering the limited resources you have when you retire.

Newly Retired

I did the opposite of what you did. After driving economy commuter cars during my working career, I decided to reward myself with a Mercedes when I retired last year. Why wear down a nice car in clogged commuter traffic and short trips to the market for groceries, etc. Retirement is when one has the time to really enjoy the attributes of a luxury car.

I manage to save about 30 % off the new price of car, by buying a certified preowned car with less than 10,000 miles. Keep up the good blog !

Amother Reader

While I enjoy your posts, it looks like your large Silicon Valley house on a large lot in an upscale neighborhood, cars, vacations and other lifestyle costs are not paid for by your earnings alone. Correct me if I am wrong, but doesn't your husband's income pay for a lot of this?

I'm curious how much of your early retirement lifestyle would be achievable on your income alone. Would you have even been able to retire so early if you did not have the backing of that second income?

Retired Syd

@Another Reader: I hate to accuse you of being sexist when I don't even know you, but you're being sexist.

First, my husband does not work. He retired several years before I did, not because he made a fortune (his company went belly up), but because my very good job (and adjustments to our lifestyle) allowed us to live on one income (mine). For many years before that, we were a dual income couple, but yes, you are wrong to think that he is still working and supporting us. And you are wrong to assume that a woman can't make more than a man.

Now I agree that if he had never worked, we would not have saved as much as we did being a dual career couple, and our retirement would have been delayed. That's just simple math. Dual career couples are quite common these days.

But to answer your unasked question, if I were single and only saving for one retirement, I would have gotten there a lot sooner since I wouldn't have needed enough money to carry two people through retirement, only one.

Having said all that, I don't think of it the way you phrased it (his income vs. my income). We are a team that achieves our joint goals together, each doing what we can to make a happy retirement. And mine wouldn't be nearly as happy without him.


Claire

Yeah I also wondered about your lifestyle and your financials, I think I would have to work until 90 and then some to be able to retire and live as you do. I sometimes think that you must have been the best paid accountant ever, or you secretely won the lottery LOL :)

Retired Syd

@Claire: Well I was the CFO of a successful venture capital company, so definitely among the highly paid accountants.

David Ebersman (CFO of Facebook) may win the prize as highest paid accountant ever though, and there are certainly many others between him and me. Facebook IPO definitely qualifies as winning the lotto in my book!

As a side note, at least three of my early-retiree readers were accountants, so maybe there's a lesson here . . .

Another Reader

Sorry, Syd, but I'm not being sexist. I just don't see how one person's income as an employee, even as a CPA, could buy the material possessions and fully fund the retirement investments you apparently have. Most folks are dual income couples these days, so it's a reasonable assumption your spouse's income was a major factor.

It looks like from your last comment you did not earn the material possessions and the retirement savings as a typical employee. Instead, you were paid as a CFO of a venture capital firm and your husband worked in another career. Your level of asset accumulation is not a realistic goal for most of your readers, even the professional couples out there.

I would like to see some accounting of how you really got to where you are. An understanding of what you and your husband earned over the years, how much was saved/invested and in what investment vehicles, and how you intend to use your assets to produce income in retirement would be helpful to your aging and more middle income readership.

Retired Syd

@Another Reader: You are absolutely right. I'll go even further, my level of asset accumulation is NOT a realistic goal for ANY of my readers. That's why I don't publish my level of asset accumulation.

Each retiree needs a level of asset accumulation equal to a factor OF THEIR OWN SPENDING NEEDS. Not mine. I have written several posts about this, but roughly, to retire in your 40's a reasonably safe withdrawal rate is 3%, which equates to 33 times YOUR OWN SPENDING NEEDS. Not mine.

Since I would bet that absolutely zero readers have exactly the same spending level that I have (some have more, some have less), that exercise (an accounting of my own specific earnings) would not only be silly, it would be unhelpful.

If you are looking for a how-to-retire formula, you've come to the wrong blog. This is simply a blog about retired life, the joys and the challenges. Readers contribute their experiences and I learn from them as well. How you get there is your own business, not mine.

mikeBOS

Good for you, Syd. I don't get these commenters who like to say things like:

1. That's nice, but I don't make that much money, so how do I do what you're doing without being as financially successful?

or 2. That's nice, but I have 7 kids, so this is useless for me.

or 3. That's nice, but I can't stomach owning stocks.

or 4. That's nice, but I would be bored if I retired...


We all make our choices. I see this as a blog about one person's take on retirement, not a primer on how everyone else can retire early.

Anyway, congrats on the new car. I just wanted to point out that you don't have to wait until retirement to choose life in the slow lane. When I was working my high-paying job I would walk to work, in the 'burbs, while all my co-workers tried to talk me into getting some kind of luxury sports car. It's probably a little easier though in retirement without the co-worker pressures to keep up appearances.

Claire

Can I ask a question, the safe withdrawl rate, is that drawing down 3% of the capital, or is it spending 3% of the income the capital produces? I've never quite understood that.

Thanks

Retired Syd

@mikeBOS: That was a very healthy choice, and not just because walking is exercise. Taking the time to be outside and be alone with your thoughts--I'm sure that helped with the pressures of your job.

Funny, being retired doesn't reduce the pressures to keep up appearances though. The VAST majority of my friends and acquaintances hate the Prius and can't believe I would get one. I don't take offense though, I hate their SUV's, so we're even.

@Claire: So the answer is that it's neither. You calculate the withdrawal based on 3% of your assets the first year. Say you had $1M, that would be a $30k withdrawal. Then you never take out 3% again. You take out the $30k, adjusted for that year's inflation rate next year. So if inflation was 3%, you would withdraw $30,900, if it was 1% you would take out $30,300. The following year, you inflate that number to the next year's number (not the original 30k).

In general, your $1M would be growing in the early years as your earnings were larger than that 3% or 3% inflated amount. Many many years down the road, that number will represent a larger % of your nest egg than you are earning and you will be taking out earnings and principal. You don't really distinguish when you take out whether it is earnings or principal. It's just the calculated inflated amount you need to cover those original expenses at the inflated prices.

Under the historical scenarios, approaching your withdrawals with a 3% rate would have never left you penniless over any 50 year historic stretch. One caveat, for those that shun the stock market all together this will not work. In all scenarios, you had to be at least 50% invested in equities. Here's some more explanation: http://retiredsyd.typepad.com/retirement_a_fulltime_job/2008/08/how-much-money-do-you-need-to-retire.html

fred doe

wow! how did a talk about cars turn into rants about how much people make? it is a nice car and your right a good retirement car. did you have to get a special plug/outlet to plug it in? and if i'm not mistaken did you say you lived in san francisco? do you make it up those hills alright?

Retired Syd

@fred: Well I'm thankful it didn't turn into a rant about politics, so I got that goin' for me.

The Prius is a hybrid, so no plugs (although they are coming out with one that will also plug in with a very short-range for electric travel.)

Another of my readers has the Nissan Leaf (all electric) and says it does very well on the hills.

Tamara

Hmmm, I thought this was Syd's blog about Syd's life . . . which happens to be pretty darn wonderful! I guess there are some who are apparently being forced to view this blog against their will.

The way I see it is that almost everyone of us has the life we created for ourselves by virtue of the hundreds and hundreds of saving, spending and career decisions we made throughout our lifetime. If you don't like where you are, might I suggest picking up a mirror and having a discussion with yourself as to why?

Ignore the rare naysayers and keep it coming, please Syd!

Tamara

OK, my first comment was purely in defense of your undeserved attack by Comment responder #2. This one is in response to your actual post.

We are likewise adjusting our priorities as we settle into retirement in order to ensure we have a good chunk of funds to use for ongoing travel. That means we will be happily purchasing all future vehicles pre-owned rather than new, using discount sites for restaurant and entertainment purposes, giving up all recreational shopping, using Red Box and the library for movie and book checkouts, and taking group lessons for our various hobbies rather than private private versions.

None of these changes have affected our fun-factor one iota, much to my pleasant surprise. Quite the opposite actually - we are getting so much more bang for our hard-earned bucks that we've been able to adjust our estimated withdrawal rate downward to @ 2.75% for the time being.

Retired Syd

@Tamara: Well I appreciate both of your comments. We actually wound up experiencing the same thing that you are experiencing, in that we spent less in the first year than we had budgeted for. We wound up taking less than 3% out that first year as well, although at the time it represented way more than 3% of our nest egg at the end of that first year (that was 2008, our nest egg took a big hit that year!) And the truth is, because the official inflation rate didn't really hit our basket of goods uniformly the first year, we didn't increase that withdrawal amount at all, we actually decreased it. (While some expenses, like health insurance went way up, other expenses, like our property taxes went way down and more than counter-balanced the inflation effect on our particular basket of goods.)

It's good if you can take the rules of thumb and then be a little flexible I think.

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