In the years leading up to my retirement, I maintained a complicated spreadsheet to help me decide when I had accumulated enough money to retire. In my post, How Much Money Do You Need to Retire, I covered the conventional wisdom, that to retire at my age, I needed something in the range of 33 times my annual expenses to retire (almost) worry-free.
But I didn't actually approach the when-to-retire question by waiting for my nest egg to grow that large. My actual approach was closer to what Jacob at Early Retirement Extreme wrote about a couple of days ago, How Little Do You Need to Retire?
If I had waited to retire until my portfolio reached 33 times our annual spending, I'd still be waiting. Instead of asking "is this nest egg big enough to cover my current lifestyle?" I asked, "what lifestyle would this nest egg support, and could I live with that?" In other words, instead of multiplying your current expenses by 33 to figure out if you have enough money saved, divide your retirement savings by 33 and ask, "is that enough for me?"
Alas, although I retired with 33 times the budget for our remodeled lifestyle, the market has since reduced that nest egg to 28 times the retirement budget. So what do we do now? The same thing I did when I decided to retire, the same thing Jacob writes about: reduce the expense budget.
As it turns out, so far we are only spending about 90% of what I originally budgeted for our retirement spending, without even trying (much). So even though the market has ravaged the nest egg, since we are spending less, it actually represents a pretty healthy 30 times our annual spending.
I still hold the hope that the market will start changing direction, but in the meantime, the situation is really not as dire as it has felt these last few months.
Don't forget to get out there and vote!
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Don't forget that we can always find ways to make a little extra "side income" if we are coming up a bit short. Things like writing an article, teaching a class, selling stuff on eBay, maybe even some freelance work. This thought helps keep me calm when I start worrying about the nest egg. I remind myself that it was never my intention to stop earning, just to escape the fulltime corporate job.
Posted by: RetiredAt47 | November 04, 2008 at 04:24 AM
I guess it will be more Kentucky Fried Chicken dinners for us...I can do that!
Posted by: Retired and Married to Syd | November 04, 2008 at 08:26 AM
RetiredAt47 & Married to Syd:
I'd way rather eat more KFC than go pick up a part-time job--good thinking!
Posted by: Retired Syd | November 04, 2008 at 08:29 AM
LOL!! You and your husband are just too funny! OK, I won't bring up the "extra income" idea again ;-)
Posted by: RetiredAt47 | November 04, 2008 at 11:17 AM