Thru Hike When I Retire

[Coffee]

I think the key, if you really want to retire early, is to lower your consumption dramatically. Just think, seriously, about how much "stuff" you have and worry about that is completely unnecessary and not really contributing, in any significant way, to your happiness or health. It's mind boggling.

Lowering consumption during working years also has the beneficial effect of requiring less savings to maintain that lifestyle in retirement. Otherwise, people will experience a "cliff" where they go from consuming a lot while working to much less in retirement. For most people, the goal is to maintain standard of living in retirement. Of course it is easier to maintain a standard of living that costs less money to begin with. The good news is that the backpacking lifestyle is minimalist by nature. Not everyone takes the minimalism of the trail into "real life" but those who do will be able to retire sooner than others.

I've never believed that higher levels of consumption leads to happiness. Some of the most miserable people on earth are very rich and consume a great deal and it still doesn't make them happy.

[rhjanes]

First step should be to see what you are currently spending. The "budget". In 2012, my company started laying off people. I called our financial guy in a panic. He let me ramble on and then said "you live well within your means.....your retirement is already fully funded....so what you NEED to do, is go home and determine what you are spending. The cash flow". I did that. I found out that we could "almost" live on my wife's salary. She hopes to work 7 more years. So that should be our health insurance (a MAJOR part of any retirement or early retirement). There are a lot of things I wish to do, that she has no interest in. Hiking, car travel. So, our plan had me retiring early (62) and I'd be good to go do those things....awaiting her to retire and then if she wants that "airplane, to Paris, to London"....OK.....I'll go because I've already driven up to visit all the places I want to go see (and she doesn't).

The 4 percent rule. I have a spread sheet and track our retirement funds. Social included. Hence by plugging in those numbers, the 4 % applies and I know "when we retire, we will have the SAME income we have now.....the one we don't spend!". I was discussing the 4 percent "rule of thumb" with the financial guy and he said "it still is a decent enough what-if number......AND, early in your retirement, don't sweat taking MORE of that....". Why? Well, when you are 65 and in decent health a 3 week trip to Europe, or a car trip around the USA, or.....you will spend MORE than the 4 percent that year. But when you are 78, have two bad knees, and other health issues, now a 3 week car trip is probably out of the question.

Everyone is unique....

I keep reminding the kids "save for retirement and those rainy days".....

[Coffee]

Well, when you are 65 and in decent health a 3 week trip to Europe, or a car trip around the USA, or.....you will spend MORE than the 4 percent that year. But when you are 78, have two bad knees, and other health issues, now a 3 week car trip is probably out of the question.

That's true. But the flip side is that later in retirement health care costs can rise dramatically, especially for nursing care, and even more so it one wants to avoid nursing homes. You can plan and plan and still fall short so there's something to be said for seizing opportunities to get out and do active pursuits while still able to.

[perrymk]

[soilman]

I retired over 8 years ago. One thing that is overlooked when planning retirement is the cost of working. When I was working over 20% of my salary went towards retirement. I was spending over $200/month on parking and gas. Then you have the wear and tear on your car. I used to average about 15k miles/year, now I am about 6k/year. I no longer have to buy clothes and shoes for work.

[rickb]

Vanquard, Fidelity etc. have calculators online that can help you figure out how much you will need to retire, how long your savings will last etc. Check out this link https://investor.vanguard.com/retirement/

Thanks TexasBob.

While speaking of calculations, I think I found a very good one here:

https://maximizemysocialsecurity.com/

It is $40 for a 1 year license, but allows you to down load your earnings record from Social Security Administration, and is not “dumbed down” like so many you find on line.

I have run run more than a few “What if scenarios” at 3AM.

I do think this stuff is very much Trail related .

[TexasBob]

Thanks TexasBob.

While speaking of calculations, I think I found a very good one here:

https://maximizemysocialsecurity.com/

It is $40 for a 1 year license, but allows you to down load your earnings record from Social Security Administration, and is not “dumbed down” like so many you find on line.

I have run run more than a few “What if scenarios” at 3AM.

I do think this stuff is very much Trail related .

You are welcome and good luck.

[colorado_rob]

That whole "when to draw Social Security" is a complex subject. I did a thorough Monte Carlo analysis for our own particular situation a couple years ago, the bottom line for us is, statistically, for me to start drawing at 65. For a sanity check of my own calculations, I might have to check out that $40 thing, thanks for the link, thanks Rickb.

[Coffee]

I plan to draw social security only when I am 70 to maximize benefits. These are the only benefits I'll ever have that are "officially" inflation protected. I view it as insurance against living to an extremely old age. I also have Roth IRAs that will be totally off limits until extreme old age (if not, my heirs will inherit the Roths). I'd like to avoid institutional settings if I ever need nursing care.

[BuckeyeBill]

I had to go to a rehab center after having surgery and It cost me over $1,700.00 per month plus rehab charges and a bunch of prescriptions. I had great insurance but a high deductible. The people that work at my two businesses have the same insurance plan, but I pay their deductible. They are the greatest group of people you have in your employ and I enjoy taking care of them.

[glenlawson]

I'm planning a thru hike in 2028 or 2029. I'm a teacher and I plan on going SOBO once the final school year has ended. My long term goal is to keep all the body parts in working order so I can make this happen.

[jefals]

I plan to draw social security only when I am 70 to maximize benefits. These are the only benefits I'll ever have that are "officially" inflation protected. I view it as insurance against living to an extremely old age. I also have Roth IRAs that will be totally off limits until extreme old age (if not, my heirs will inherit the Roths). I'd like to avoid institutional settings if I ever need nursing care.

Yeah, that's what I did on the social, too, and REALLY glad I did. My experience with most financial websites is they mostly tell you to do this, too, if you're reasonably healthy and can afford to wait...

[colorado_rob]

Be a little bit cautious on the "wait to 70" thing for SS, it will depend a lot on the prevailing interest rates and inflation in your mid-60's, and whether or not SS is doing reasonable COLA's (and of course on your overall health/longevity expectations). This is all built in to a detailed statistical (Monte Carlo) analysis, if you care to do one sometime.

[Nanatuk]

I worry that they will eventually start applying a "Means" test to SS. Might still be an insurance policy but you'll have to spend down your assets to get to it.

[TexasBob]

I worry that they will eventually start applying a "Means" test to SS..................

I think it is a just a matter of time before this happens. I hope I am wrong.

[One Half]

I plan to draw social security only when I am 70 to maximize benefits. These are the only benefits I'll ever have that are "officially" inflation protected. I view it as insurance against living to an extremely old age. I also have Roth IRAs that will be totally off limits until extreme old age (if not, my heirs will inherit the Roths). I'd like to avoid institutional settings if I ever need nursing care.

"inflation protected" is a joke if you look at the "official inflation rate" lately. The .gov loves to claim inflation is low even though they have to screw with the numbers and formula to make it look like that. Reality is in the pocket book!

And I have no idea how old you are but we used to get an annual SS statement that specifically laid out that by 2027(?) SSA predicts they will only be paying out 78% of "earned benefits." So if you qualify for $1000/mo. Too bad. They will only have $780 for you. And it gets worse from there on out "without major changes to the system." (ie increase in withholdings from current/future earners) I think you can find this info on the SSA website.

[jefals]

Be a little bit cautious on the "wait to 70" thing for SS, it will depend a lot on the prevailing interest rates and inflation in your mid-60's, and whether or not SS is doing reasonable COLA's (and of course on your overall health/longevity expectations). This is all built in to a detailed statistical (Monte Carlo) analysis, if you care to do one sometime.

Then there's the question of whether or not you need the income before 70. If you're still working and can live on your work income, why not let that SS ride so that when you do retire and really need it, you'll be getting as much as possible.

[Coffee]

I work in finance so I'm aware of the games the government plays with CPI. Nevertheless, having some degree of inflation adjustment is not common and very valuable unless something fundamental in the social contract changes. There seems to be no support in either party to mess with social security or Medicare. I'm a couple of decades from benefitting from either program so obviously much can change but if I had to bet, I'd bet on higher levels of taxation and no cuts in real benefits of entitlements.

[colorado_rob]

Then there's the question of whether or not you need the income before 70. If you're still working and can live on your work income, why not let that SS ride so that when you do retire and really need it, you'll be getting as much as possible.

yup, it's complex. I need X amount of money a year above my meagher pension, and I can either keep draining my savings from 65-70, hoping my investment returns sorta keep up, or start drawing SS earlier. Simulations show for my situation the latter makes more sense. Waiting for 70 just because you'll get more income then, though losing income earlier that could be making returns, is not a good reason.

[rickb]

S

yup, it's complex. I need X amount of money a year above my meagher pension, and I can either keep draining my savings from 65-70, hoping my investment returns sorta keep up, or start drawing SS earlier. Simulations show for my situation the latter makes more sense. Waiting for 70 just because you'll get more income then, though losing income earlier that could be making returns, is not a good reason.

That $40 calculator I linked to is clever in that after you enter the retirement dates for both you and your spouse — and expected life expectancies — it will calculate the present value of your SS checks. It will also show the retirement dates that give the maximum possible present value for that income stream.

It allows you to manipulate every possible varriabe including inflation and real rate of retun used to discount the cash flow, and does a decent job of explaining why it picked the default values it did — and why you should understand the theory behind them before just plugging in your own number (but it’s hard to resist).

While I am not sure I want to be one of the 2% of retirees that wait until age 70 to take my benefits, the calculator suggested it was a strategy worth considering for most of the “what ifs” I have run so far.


On thing I have not been able to wrap my head around is how taking benefits early impacts Widow benefits — which I understand can impacted dramatically by that strategy. My MBA didn’t prepare me for this!