Comments on: How Much Money Is “Walk Away From It All” Money?

By: Nick

Nick — Fri, 17 Apr 2009 17:29:57 +0000

Quote from Will: “Calculations for walk away from it all money should include research for applicable unemployment benefits so they can be included in the projections.”

I’m sorry, I’m aware this is almost a year old, but this post angered me enough that I feel I should reply.

If you’re trying (or able) to save enough money that you can live comfortably while not working by *choice*, there’s no reason you should receive a cent of unemployment compensation.

By: AJC @ 7million7years

AJC @ 7million7years — Sun, 20 Apr 2008 17:06:34 +0000

Unfortunately, the amount that you can invest in TIPS through a tax shelter (ROTH IRA, etc.) MAY be too limited to support a reasonable retirement (it is for me).

If that’s you, too, then here are a couple of ‘tips’ in TIPS:

1. Buy as many TIPS as you can inside a legal tax shelter, then

2. Buy additional Inflation-Protected MUNI’s from your normal (tax-paid) accounts – these are state/federal (be sure to check!) tax free.

3. Hold back, say, 5% of your portfolio to buy Call Options (this gives you exposure to the potential upside of the stock market and limits the downside to 5% of your total portfolio … sweet!).

4. Read: “Worry Free Investing” by Zvi Bodie.

By: Todd

Todd — Sun, 20 Apr 2008 02:36:56 +0000

At 39 with a wife and 2 young children, for me to walk away (paying off any debt, securing my children’s college educations, living only on interest income) would take just over $2 million. Sometimes I think people underestimate their earning power over their lifetimes, and in doing so, squander a vast majority of it financing either lifestyle or cars.

By: partgypsy

partgypsy — Fri, 18 Apr 2008 13:59:01 +0000

Oh, was going to say, my walking away money for my life right now would have be quite a bit bigger!

By: partgypsy

partgypsy — Fri, 18 Apr 2008 13:54:44 +0000

It was not planned, but when I was young I got to walk away from it all for about a year. After college I worked at an office making around 22K a year. After a year and a half even though I valued my job, I ended up having to give my resignation out of principle (long story). However since I lived so frugally and from my job saved 7K, I lived the bohemian life for a year before going to graduate school, supplementing my income with a part time phone job for maybe 4 months out of that year. I went on a vacation with my mom, did art, and knocked around a big city doing fun cheap things with my friends. And I still had 3500 left when I went to grad school, which was a big help.

By: Rob in Madrid

Rob in Madrid — Fri, 18 Apr 2008 07:03:53 +0000

Very interesting, it’s something that my wife and I have been thinking about for a while. The real secret is knowing your real (as verses your estimated) cost of living. Unfortunately for me I’m good at the concept but really struggle with details which is shy I find it so hard to track my spending.

Our walk away from the corporate rat race to partime work is 10 years. So for us the real goal is having a paid for house. It also helps alot that the boom over here has gone bust big time and house prices are dropping like a rock.

By: Toby

Toby — Fri, 18 Apr 2008 06:12:09 +0000

I hit my walking away money 1.5 million at 32 years old. I did not work for 3 years. It was great for about 3 months and then got really boreing. I am now 38 years old now and wait tables. I love it , compared to building my own business it does not even seem like work its fun. I feel so sorry for all the kids I work with. They all complain constantly about working, I want to go home I want to go home I want to go home is all they say.

By: Bill

Bill — Thu, 17 Apr 2008 23:47:37 +0000

Plans for walking away should include the scenario of a sick relative – think parent/child.

During the 8 years of my mom’s terminal illness I also saw friends lose 2 of their 3 kids to illness, over the space of a couple of years.

Plan on having to take time off sometime in your life to care for those loved ones who will have no one else to care for them.

Though I hope you are older than I was when that time came – I wasn’t any older than Trent, and wish I had had more life experience.

By: DB

DB — Thu, 17 Apr 2008 20:06:21 +0000

As a public school teacher, I don’t anticipate being able to “walk away” until I’m about 65 – which is a pretty damn old crotchety teacher (I didn’t have that “epiphany” until a little later in life, and only began my career at age 35)… On the other hand, we do have a decent defined pension plan with health care, and even though I am quite unlikely to ever take a true sabbatical, I think it’s awfully hard to put a price tag on June, July, and August!

PS: Of course, the greatest thing about teaching is being able to touch the future by impacting the lives of my students.

By: Nicole

Nicole — Thu, 17 Apr 2008 19:34:53 +0000

I’ve been debating about when to look into ESPlanner for this exact scenario – when can we scale-down while still maintaining our standard of living. It is a pretty cool method of planning for life’s changes. I hear they have a free 30 day trial if you ask for it. Maybe you could look into it and write a review.

By: Miranda

Miranda — Thu, 17 Apr 2008 18:56:25 +0000

Great post! We are in the process of building up a fund so that we have “walk away” money for retirement in about 15 years. Although any retirement of ours will probably include doing work that we still enjoy…

By: Beth

Beth — Thu, 17 Apr 2008 18:13:06 +0000

This is, of course, where cheap living comes into play. In 2001 I was making ~60k when I got laid off; I started grad school and took a 60% pay cut that fall. And I didn’t feel a single pinch to my quality of life. Why? because I had roommates ($300 rent!), a paid-for car, and no debt. Obviously being single & having no kids was a huge factor in being able to change my life so dramatically!

By: Rick

Rick — Thu, 17 Apr 2008 18:04:23 +0000

While TIPS are safe from market losses and are protected from inflation losses they are not tax efficient. The interest from TIPS is still taxed as income unless it is in a sheltered account such as an IRA.
If you are wanted to walk away before retirement age, you will need to keep money in non sheltered accounts so you can draw from them. Tax efficiency is going to be really important; otherwise the tax man will drain your principle forcing you back to work!
The Bogleheads’ Guide to Investing has a chapter that deals with tax efficient investments that would be good to look over before deciding on a portfolio.

By: Cheryl

Cheryl — Thu, 17 Apr 2008 17:45:06 +0000

My husband walked away from corporate life and is working towards becoming a famous musician. Is my salary enough to cover everything? Everything we need, yes, everything we want, no. But we’re doing it anyway because happiness comes FIRST.
Read my blog if you want to know more about our journey.

By: The Weakonomist

The Weakonomist — Thu, 17 Apr 2008 17:40:25 +0000

Have you read “the number”? My mom is of the boomer type and just couldn’t figure out what her walk away amount is.

I had her read that and then we sat down together and worked out what her number is. Now she’s 6 weeks away from retirement!

Like the intro says, its different for everyone and means something different for everyone. For mom, her number allows her to leave a stressful job (thanks ‘no child left behind’) and get back to actually TEACHING at a specialty school.

By: Kate

Kate — Thu, 17 Apr 2008 16:48:27 +0000

I am actually living the “Cold Career Change” now, but it is only as the result of a long-term and extremely frugal savings strategy.
In 1998, I began working to get out of credit card debt before the coming “Y2K crisis” could screw up credit card company records in its aftermath. I made my goal and fortunately Y2K didn’t turn out as badly as some feared.
Although I didn’t earn a high salary, the company where I worked paid an annual bonus to all employees. While my co-workers talked about how they would spend theirs on cruises and flat-screen TVs, mine went in the bank. Or actually, a credit union with higher rates of savings returns.
I was able to put away money for seven years before unexpectedly losing my job in 2006. Fortunately, I had already begun working on a second bachelor’s degree in business one class at a time (which the company was paying for) and was able to make (free) use of career counseling services at my school’s Career Center.
This goal may be more of a plan for a mid=lifer like me than a twenty-something because I had to meet several other savings goals to do it. I don’t have kids, live in a small but paid-for house and drive a paid-for (used) small car. I work off and on as my class schedule permits but when I am studying all the time, my living costs are actually very low.
The only downside to me is that I have had to put investing on hold for now. But since I plan to be working for many years in my new career, “retirement” is a different concept for me anyway.

By: Maria - Never the Same River Twice

Maria - Never the Same River Twice — Thu, 17 Apr 2008 16:41:38 +0000

Trent, I’d be interested to read your thoughts about the Consumer Price Index and how accurately it tracks “real” inflation. In my opinion, because the Core CPI excludes food and energy prices – the things we all need to survive – it’s not a very valid measure of inflation.

This has real consequences for people looking at TIPS as an investment. If food and energy costs are rising rapidly (like they are now) then inflation is definitely NOT covered by TIPS. However, they may be the best of many not-so-great options.

By: mjukr

mjukr — Thu, 17 Apr 2008 16:28:38 +0000

http://www.firecalc.com

Mind the tabs at the top (kind of an awkward interface). This site will measure how well your portfolio would have fared over 97 different 40-year periods in the past. Pretty neat.

@Andy: Yes, rates are low across the board. UST finally offers 30yr bonds again, but the rates are significantly lower than in the past (such as the 6-9% on which the “Your Money or Your Life” plan is based on…)

By: Andy

Andy — Thu, 17 Apr 2008 16:05:00 +0000

If I am reading the chart correctly, the last tips auction (9 year) had a yield of 1.25% – so right now its pretty low. And there is always some interest rate risk, so TIPS aren’t perfect (and you never said they were). Putting it all in TIPS just seems like something most financial advisers wouldn’t recommend unless the client was very risk averse (and I may be wrong here, if there are any financial advisers reading). Especially for people retiring early, they can probably be tolerate more risk with their retirement money, as they can always go back to work if the market takes a turn for the worse in the first few years. Just some thoughts, good post though, I like retirement planning.

By: Will

Will — Thu, 17 Apr 2008 15:57:53 +0000

Calculations for walk away from it all money should include research for applicable unemployment benefits so they can be included in the projections.

I wrote about assistance options in case of unemployment on my blog. It might be a very nice complement to this post. Link: http://yourfinishrichplan.com/blog/2008/04/08/6-assistance-options-if-youre-unemployed/