Hacker News Reader

I've always viewed employment as a spigot that you turn up or down as required to match the lifestyle you want. So depending on your definitions, you could say I "retired" from working 2000 hour years at around age 30.

I'd work maybe 3 months on a contract, save as much as possible, then head off traveling until funds ran low or I felt like working again (which was usually the deciding factor). I had a stint in my early 40s where I took a long term consulting gig and went heads down and did 4 day weeks for 4 years, so I guess if we're being pedantic we can say that moved the "retirement" age back to 45 before I downed tools completely.

In the meantime, I built a couple Software as a Service products that do their thing in the background and require pretty close to zero maintenance or customer support. That's the main income stream, though I still pick up consulting gigs on fun tech with fun teams as a sort of a hobby. Never more than a couple days a week though.

From this viewpoint, the bullet points up top don't make a lot of sense. I don't have $5M in the bank. I certainly couldn't imagine spending $150k in a single year, though I wouldn't consider anything about my lifestyle to be "austere". And of course I plan on making more "fun money" consulting. It's a fun job, and the people you do it with are fun to be around. It's just the part where they want you to do it 5 days a week every week that gets old. Never quit doing anything completely if you like doing it.

The two keys for me were consulting rather than W2 work, since that easily doubles your income while letting you jump in and out of work whenever you want, and the SaaS products, which keep a background income coming in when I don't feel like working.

Here's the long version of how I got into this position: https://www.expatsoftware.com/articles/guy-on-the-beach-with...

Has the FU level of money changed? You referenced FU as $5-9M, unless I'm mis-reading.

I see it as something around $4M, possibly lower. If you conservatively estimate 5% earnings per year on average, that will get you gross $200k/year just on earnings without dipping into the $4M. After taxes/penalties that is $100k/year, depending locale, until 59.5 here in US where you don't have a 10% early withdrawal penalty.

If you are mid-40's and estimate having to live for another 40 years then you will have some years that dip in to the nest egg and other years where you get 5% more in interest. Inflation will eat into it some I suppose.

If your goal is to have used all of it before expiring then $4M sounds like more than enough. If you intend on leaving some for descendants then I suppose you could hold off.

I'm mid-forties and often have thoughts about when retirement is possible. So one idea is to work contract work part time (like 6 months/year) for a few years to "stay in the game" so to speak and experience mini-retirement periods of time if you are hesitant.

My post wasn’t clear, sorry. I consider FU to be >$10M. So I would think folks in my boat would have $5-$9M in assets. I don’t think $4M is enough for the burn rate I’ve described. It’s close though so sure if someone here retired at $4M then would still be happy to hear about it.

Curious then if you are simply not investing it at all?

Average returns over 10 years for something like VTSAX (total stock market index) is 13%, granted the last 10 years has been a bull market. 13% of $4M is $520k even half that is $260k before taxes which I think is comfortable to live on, exception of HCOL areas.

There is sequence of return risk. The average return by itself can hide that risk. Imagine if the day you retire you experience a series of bad crashes, followed by years of stagnant growth, and finally the last couple decades of your life of massive growth. In that case, the average will tell you one thing, but in reality you’ll be destitute because you’ll have to consume your capital during those early years while it is depressed.

A Monte Carlo simulation is the best practical estimation for looking at that. I believe that historically a ~3% withdrawal rate was the highest you could go, for retirement periods of 50 years or longer with substantial equity investments.

3% withdrawal for 50 yr equity based retirement is interesting. Hadn’t heard that before. Our burn rate is between 2-3%. So we may in fact be done.

If you are paying anywhere close to 50% in taxes you need to fire your accountant.

The long-term capital gains tax is 0 - 20%. For a couple, the first 78k can be withdrawn tax-free. The rest can be withdrawn at 15% tax rate.

In the unlucky case all 4M is in an IRA, you take a 72t election to avoid the early withdrawal penalty. Then, the rest can be withdrawn (if needed) with the 10% penalty + 15% tax rate (above 78k). Not sure how you're getting anywhere close to 50%.

I was doing napkin math, assuming a large distribution would hit the 37% bracket + 10% penalty + state income tax somewhere in 1-10% range. I know that 37% is the highest bracket and really only applies to income over a threshold but that depends on filing status, exemptions, etc. My example was more thinking the nest egg OP has is more than enough, especially since I've over-estimated taxes.

Also if it is in a tax-protected 401k/IRA then capital gains is irrelevant since it is income tax for distributions as I understand it.

This 72T election is an interesting concept for an early retirement scenario, thanks for sharing that, I never heard about it.

> Firecalc’s Monte Carlo gives me zero failure cycles. Vanguard puts me at 98% success.

It is worth keeping in mind how "failure" and "success" are defined in the context of these models. Deferring retirement while continuing to work, but then dying suddenly, would be regarded as a "success" - since you died before running out of money. With a broader perspective of what we're trying to achieve (perhaps something like: "make the best use out of our life", but this can be highly personal), that kind of scenario sounds like a failure to me.

Similarly, the estimates of those retirement models assume that the past is roughly a representative sample from some distribution that the future will also be sampled from. But there's no guarantee that will be the case.

There's a nonzero chance that some largely or completely uninsurable major disruptive event will wipe out some or all of your retirement capital. Looking back over the last hundred or so years: https://voxeu.org/article/inequality-total-war-great-levelle...

What am I trying to argue? There are many more failure modes other than running out of money before you run out of life. Focusing on reducing risk of one failure mode while not thinking about other failure modes leads to sub optimal decisions.

So if you had to translate that to a practical advice, what would that be? Never “retire”, keep your skills sharp and always be ready to work again?

good question. perhaps a confused mix of: don't grind away deferring doing the things you want to do (activities you hope to enjoy in "retirement" etc) for too long, find a way to enjoy the journey. take more holidays and sabbaticals. figure out what "enough" is. & yes, try to remain somewhat productive and potentially useful (perhaps not necessarily in one's hyperspecialised professional niche), but enough to get by or solve some of your own needs if plans go awry.

maybe the latter could better be summarised as "put yourself in a position where you have a better chance of being able to adapt to the unknown or unexpected"

The problem with all the retirement calculators is that they don't account for extreme drawdowns. You need to account for at least a few years where your savings give you a negative return.

In 2008 I dealt with a guy that had to come out of retirement because he would have run out of money if he continued to draw from his savings. Lucky for him he was relatively young and was able to find a job. What would have happened if he was in his 80's?

In your 80s you shouldn't be in volatile investments anymore. Personally I don't get the obsession with "retiring". What's wrong with working a bit here and there? As long as one has a large enough cushion there shouldn't be any pressure. If you invest smart you will have more than enough by the time you turn 60 or so.

I'm a big fan of the doing what you love till you die, or at least aren't able to anymore. My heroes in that vein are those archetypal ripped 100 year old Japanese men chopping wood and fetching water.

I am currently at $3M liquid and plan to pull the plug at $5M, which hopefully won’t be in too long because I have private equity in a pre IPO unicorn…

My biggest fear is running out of funds, so I will maintain an irrationally low withdrawal rate of 1-1.5% during the first ~5 years of retirement, and up my spending after that, in the statistically likely event of those 5 years of frugality eliminating the sequence of return risk. I am 34.

Thanks for the good data, and congrats on your own success. We can’t really get our burn rate below 2%, but it’s also not much higher than 2%. Interesting point to be more conservative in early years, but I don’t think we have that much control on our dial. We live a fairly modest lifestyle, probably own 1/4 of the house we could for example, single POS car is paid off, that sort of thing, but no weird unsustainable FIRE life hacks. So the good news we don’t have to scale our lifestyle down, because we never overdid it, bad news is, we can’t scale our lifestyle down any further realistically unless it means eating at a restaurant zero times a month instead of once or twice a month.

If you don't mind sharing, how you was able to mass $3M liquid at 34? Any way congrats and keep it up :)

Nothing too crazy:

- Very aggressive frugality: living in Silicon Valley on $30-40k a year and saving about $1M over a decade of work, with an average salary of $250k

- Some stock options I had from a previous employer went liquid and netted me about $1M

- Index funds investing did the rest. Never sold any position

Thanks mate for sharing. Nothing too crazy is wise in long term. Keep it up :)

You say "us". If you have a partner, what are the implications if you separate? Are you still financially stable after that?

I'm actually looking to take a different approach, I plan on working high paid contracts, and then taking 3 to 6 months off to travel after each one ends.

Originally I was going to work super hard to try to save up so much money by 40, but this sounds much more fun. Because 40 might slip to 45, 45 might slip to 50 and then I waste it what's left of my youth chasing money instead of seeing the world.

In much of the world you can live very well off of $1,500 a month, if you have a job which lets you save $30,000 a year, you can afford to only work every other year.

I’m 45 with a family so this kind of plan is not feasible or necessary. I could simply move to a much less expensive American city and retire. My burn rate is high partially because I live in an expensive city. But i’m not looking for life hacks to cut corners. This post is simply about knowing when you have enough savings to truly “have enough” to safely retire.

I've been a fan of cutting costs like lower cost provider for cell phones, paying cash for used cell phones instead of brand-new costs, etc. but beyond that the only real cost cutting that is left is house and cars.

Cost cutting with cars should be straightforward - downsize/eliminate or just pay them off and maintain them and use them for a decade.

The only cost cutting with a house is moving to a lower cost of living area or smaller/less costly house. If you have that kind of money saved now, pay off the mortgage, you'll likely save thousands of dollars in interest.

The decision to retire early is not binding. You can always change your mind later, so I wouldn't look for 99% certainty of "success."

The bigger question is whether you'll be happy with a life of leisure. I say count your blessings and try it out and see if you're happy without work! If so, then you can surely tweak your spending rate to match your quite significant savings.

Just curious if you've already seen r/fatFIRE? They're the exact demographic you're looking for.

$5-9M can be f u money in most of the US.

In any case think doing a bit of consulting and keeping yourself employable is wise. It’s good to stay sharp.

Ask HN: Who Has Retired Early?