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Responses above are good, but personally, I wouldn't rely on 4% (unless you are close to 65, which it doesn't sound like it). If you're younger, the better drawdown from the research is something like 2.5-3%.
Subject Expert
Also the original 4% rule was based on historical US data, which is a very positive outlier among all countries. It is generally not considered reliable that the same countries which outperformed in the past will continue to do so.
I waited until my kids got out or college and did not require high cost intervention for things like drug and alcohol abuse, legal trouble, pregnancy, etc. They were fine but I know many others who fall into those traps. Also look closely at what your healthcare insurance will cost. There is no employer subsidy and it is the largest single thing I pay for other than federal income tax.
I don't love the 4% rule because it makes people scared and overly conservative. They worry that for periods longer than 30 years it needs to be 3% or less, but the reality is in the vast majority of scenarios you give up some of your best years and end up with an account valued 10x its starting value.
If you're worried about a major crash right after retirement, invest in a higher amount of fixed income. You can get preferred stocks that pay 8% yield and never touch the principle. Reinvest 4% every year to combat inflation.
I assumed you were advocating to hold a decent chunk of bonds as the standard FIRE portfolio is generally considered to be 60/40 and you said during downturns you'd sell bonds to buy stock. Going 100% equities would magnify your SORR.
Preferred stocks can offer a better risk adjusted return than both stocks and bonds. There's not a lot of research out there, but here's one study:
https://www.spglobal.com/spdji/en/documents/research/research-combining-low-volatility-and-dividend-yield-in-u.s.-preferred-stocks.pdf
Mentor
Simple test - break out the kid expenses (tuition, competitive sports, quick estimate for things like clothes and other things that you pay) and then add back a contingency (maybe 25%) for expenses that will continue for the kids that you don't know about right now. Do you budget both staying current house and moving to smaller/cheaper to get a range of realities (let's be honest - you're not selling 15 minutes after youngest moves out). I'm in process of retiring in 50s while some kids not in college yet. I over-budgeted for them. When in doubt, over estimate. Sounds like you have school covered, but don't forget stuff like cars and car insurance while they are under your roof. That added thousands per kid annually, for example. I went from competative sports to transportation expenses. :-) Good luck!
5 million in brokerage isn’t really 5 million unless this is mostly cash. Don’t forget to figure in taxes long term short term capital gains, and if you happen to have a windfall, then you also have to sell more to pay future expected quarterly payments. You’ve made it this far, the further is hard to predict. You have the skills to achieve whatever you decide.
Man just wanted to congratulate you on these numbers.
Subject Expert
I recommend using a planning tool such as Boldin or projection lab.
You can model expenses across years, setting rules to start or stop spending for different categories in particular years.
You can add literally everything (college expenses, mortgage, taxes, spending categories, increased health insurance costs, etc)
It will allow you to visualize a reasonable estimate of your spending over the rest of your life, year by year.
It will also track your portfolio using growth assumptions you to alter.
How about making your adult children pay for their own cars and insurance. Teach them the value of a dollar. Downsize that huge house. Chances are you only utilize 1/2 of it and the other half is used for storage for all the "stuff" you never use anyway.
This is a joke post surely!!! “AI” eats these numbers for breakfast:
If your post-kids annual spending ends up around $150-200k (common for comfortable empty-nesters), $5M supports 3-4% withdrawal rates very safely for 40+ years.
That’s why you don’t need financial planners anymore.
I consider this a joke cause conservative pensioners live off 30-50k as 4% rule to retire. Your yearly at estimate 50 yrs is 150-200k per year.
This put you at the 99th percentile or better for households in their mid-50s.
Create a detailed budget and do your best guess. I think this is also very difficult to get right until you are somewhat close to R-day.
Subject Expert
You have to estimate how your expenses will change, or wait until your kids leave and then measure.
This is one of the reasons people recommend putting some buffer in your expense estimate.
OP, How did you go about saving $5mil by 40s? I’m about halfway there but mid-30s so want to try to accelerate if I can
It’s pretty advertising specific. I left full time to go freelance and made huge bucks during a stretch in my mid thirties when my expenses were low so I just baked most of it year after year and let it grow in the market. Those days are done and I make less than half what I did during the day years, but those savings are growing more per year now than I made through working.
A. Figure out your average annual expenses.
B. Take your current investments, divide by 25.
If B is larger than A, congratulations. You could possibly retire.
So, $5million results in $200,000 of 4% income. If that's more than your expected expense, you're set. If you only need $100K, don't break the bank.
Consider if you are averaging over these returns in your investments, for a period of time. If you are averaging 10% returns from your $5M, you're getting about $500K. You should be able to retire and have a buffer, assuming you don't expect a major downturn (I do) or major expense.
NOT FINANCIAL ADVICE. I am not a financial advisor.
Subject Expert
OK, good, I am glad I misunderstood.
The trouble of course is that markets tank all the time. On average there will be one or two crashes of 50% over a thirty year retirement.
….but it’s hard to know why my annual spend will be once I can downsize and move to cheaper part of the country and no longer have to pay for kids activities and all other kid related expenses. I feel like more than half my spend is on the kids. Anyone have a good solution for this? Thanks.
These rules of thumb are useful for long term strategic choices; not for short- and medium-term tactics.
The real answer is talking to a trustworthy financial advisor to help you navigate your particular situation. "Trustworthy" is the hard part. You want to find someone who charges an hourly rate (not an AUM arrangement), who aligns with your philosophy, who doesn't give you false urgency, and - oddly - who you trust in your gut.
People place too much weight on the "4% rule". It's really just a guideline or a place to start. It says "If you're earning 4% average yield on your assets, and you limit withdrawals to 4%, you'll never run out of money". OP, I'd encourage you to do a more detailed projection of your expenses. Others in this thread have given excellent guidance on what to include. Once you have an idea of monthly spend, you're more able to estimate the level of assets you'll need. I watch weighted average yield on the income portion of my portfolio to understand whether we're tracking.
agree that 4% is overly simplified. If you can find a true 'diversified' wealth planner who is not just trying to get your assets under management, they should be able to bake a plan that asks and answers all the right questions. You might pay $10K for a plan with your assets, but could be less. And they should tell you up front: this is YOUR plan, and you can implement it anywhere you want, and of course, they would also be happy to help you do it in their firm (otherwise they might lack the chops to implement and if they don't implement for anyone how can you believe them?) - this should include trust/will/POAs, asset management plan, true diversification that may bits of life insurance, cds, bonds, equities, and alternatives (real estate syndications, private equity, etc.). Just find a Fee Only planner and be sure to ask them if they presume or anticipate having your assets under management (many firms are based on "just transfer your big retirement accounts to my company, I'll take a % of that no matter how you do every year, and the plan is 'Free' - that is a viable option but not one I like)
I retired in mid 50's with very similar financials and real estate. Only difference is two kids were in college (funded) and one still in high school. Health insurance is something you don't mention, so are you going on Obamacare. We get insurance but almost none of wifes income go to expenses. Just map out all your expenses and then look at what you think investments will average. I don't think you will need 4% with house owned. I pull out about 2.5% per year. I would recommend 60% in equities so you have upside. I think you can do this. Good luck!
I'm already retired at 45; my son is in middle school.
have any of you considered retiring overseas. Like for instance Sri Lanka was identified as the best place to retire?
https://www.newswire.lk/2026/02/17/sri-lanka-named-most-affordable-place-to-retire-in-2026/
I have not considered Sri Lanka. But we have talked about moving overseas to somewhere in Europe. We love Paris for instance. Not sure how realistic as we’re very close with our kids and still wanna be a big part of their lives once they go to college. But we do hope to travel a lot, hence the need for a big retirement spend.