Ask Big Ern: A Safe Withdrawal Rate Case Study for “Ms. Almost FI”

Welcome to a new installment of our “Ask Big Ern” series with case studies on safe withdrawal calculations. This is already the seventh part, see here for the other parts of the series! Today’s volunteer is Ms. Almost FI and that’s not her real name, of course. She’s planning to retire early in 2019 and this causes a lot of anxiety: Does she have enough money? When should she take her pensions? What about long-term care insurance? All very valid questions, all impossible to answer without a careful customized analysis!Read More »

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Ask Big Ern: A Safe Withdrawal Rate Case Study for “Mr. Corporate”

Welcome to the sixth installment of our “Ask Big Ern” series where I perform case studies in safe withdrawal calculations. See here for the other parts of the series.

Let’s make this Geographic Arbitrage Week because after Monday’s guest post on “Geographic Arbitrage,” I will now feature a case study with the same theme! Meet Mr. Corporate (not his real name) who reached out a while ago for advice on whether he’s ready to leave the corporate life. Just looking at his numbers I knew immediately that there is no way he and his wife can retire in their current location. But Mr. C found that moving to another country with lower living expenses will cut years off the time it takes to reach FIRE. And we’re talking about a country in Europe (he wouldn’t mention which one), with a high quality of life, nice climate, and a good healthcare system! Can he retire now? Let’s look at Mr. C.’s numbers…

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Ask Big Ern: A Safe Withdrawal Rate Case Study for Mrs. “Wish I Could Surf”

Welcome to a new Case Study! This time, Mrs. “Wish I Could Surf” (not her real name) volunteered to open the doors to her finances. And every case study brings up something new to learn for yours truly. Today’s challenge: How would “alternative” investments factor into the Safe Withdrawal Rate exercise? Peer Street, Hard Money Lenders, Lendingclub, Prosper, etc. have gained a lot of popularity, especially in the FIRE crowd. When calculating safe withdrawal rates, I have only worked with stock/bond/cash portfolios because they are the asset classes with returns going back 100+ years. Doing the SWR exercise for a portfolio of Peer Street loans will require some “hacking” in my Safe Withdrawal Rate Google Sheet!

Further challenges come from the fact that Mrs. and Mr. Surf keep their finances separate (similar situation as in the Case Study for Rene) and Mr. Surf will still be working for a number of years, so we have to make some assumptions on how to assign the tax burden between Mr. and Mrs. Surf. Lots of work to do! So let’s get started and look at Mrs. Surf’s finances…

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Ask Big Ern: A Safe Withdrawal Rate Case Study for “Mrs. Greece”

Welcome back to our case study series! To see the previous installments, please check out the first three parts:

Though, before we get started, I got a favor to ask: The nomination phase for the 2018 Plutus Awards is underway until September 8. Please take the time to nominate your favorite bloggers and podcasters to give them the recognition they deserve:

http://www.plutusawards.com/nominate/

You don’t have to fill out the entire form and you can nominate each blog/podcast in multiple categories. And if you like that one blog that does a lot of research on Safe Withdrawal Rates and publishes case studies for fellow FIRE enthusiasts and other fun personal finance content (wink, wink) please consider nominating it in one (or all?) of the following categories:

  • Best New Personal Finance Blog (Yes, that blog was started in 2016!)
  • Best Financial Independence/Early Retirement Blog
  • Best Investing Blog
  • Best Retirement Blog

But now back to our case study. Mrs. Greece, not her real name, not even her country of origin, contacted me a while back and wanted me to take a look at her financial situation. Here’s Mrs. Greece’s background…Read More »

Ask Big Ern: A Safe Withdrawal Rate Case Study for “Rene”

Welcome! Today is the third installment of our Case Study Series. Please check out the other two posts here if you haven’t done so already:

Today’s volunteer “Rene” (not her real name) was laid off earlier in 2017 and is now living off her severance package. She wonders if she has enough of a nest egg to simply call it quits and retire in her late 40s. And many other questions: if/how/when to annuitize any of her assets and what accounts to draw down first? So many questions! As I pointed out in Part 17 of the Safe Withdrawal Series, a safe withdrawal rate calculation has to be a highly customized affair and that’s what we’ll do today again. Let’s see what the numbers say!
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Ask Big Ern: A Safe Withdrawal Rate Case Study for “Captain Ron”

A month ago, I did a case study for a fellow FIRE planner (“John Smith”) and the reception was awesome. So why not do more of those? Without even asking for volunteers, I already got two more fellow FIRE planners who contacted me via email and shared their financial parameters. Today’s case study is for “Captain Ron” and, of course, Ron isn’t his real name, though he is indeed a Captain. Not the “Captain Ron” from the 1992 movie, but just a captain. More on that later!

captain_ron_poster

Why are case studies so exciting? One of the most important lessons I learned from my Safe Withdrawal Rate research (jump to Part 1 of the series here) is that the safe withdrawal calculations are best performed on a one-by-one basis. As we pointed out in our post last week, a withdrawal rate strategy should respond to market factors like equity valuations and bond yields as well as personal factors like age, retirement horizon, and expectations about pension and Social Security benefits. Further complicating the whole calculation is also the fact that we all have different distributions of assets over taxable, tax-deferred and tax-exempt accounts. So, let’s take a closer look at Captain Ron’s situation…

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