Sydney over at Retirement: A Full Time Job wrote a great post on how much you need to retire, which addressed the sliding scale issue of the earlier you retire and the more money you are going to need. The concept is obvious in some respects but she specifically looked at the longer time horizon and the fact you need a lower withdrawal rate to safely get through.
Typically most people like to talk about needing 25 times your yearly spending (or the 4% safe withdrawal rule). Yet in the case of very long retirement periods of 50 years you may require up to 33 times your yearly spending for a safe withdrawal (or around 3% withdrawal rate). Rates like this will typically insure you will survive any period of history that has already occurred including the great depression.
Rules like this always give me a headache. Why? Because everyone keeps looking for this ‘safe’ amount of money to retire on and rather ignores the fact by working an extra five years to be safe, you could just drop dead the day after you retire. Both sides are extremes. Life is constantly about risk and trying to avoid it entirely just seems silly to me.
I do totally agree with some risk management and contingency planning when planning your retirement. Stuff will not go according to plan. So having a few backup plans isn’t a bad idea, but trying to plan for everything is just a waste of time. Life happens, so adjust as you go along (oh, just like the rest of your life before retirement).
In the end, beyond all the math and investments you will one day decide that your horde is enough and retire. The decision won’t be purely rational, but rather heavily emotionally involved as well. I’ve seen both sides where the emotion overruled a person who was light on cash, and a person who really didn’t need a dime more but keeps working. In the end, your choice will be yours. No one but you can make it.
PS: I’ve got an interview with Sydney coming up soon. I just have to finish up the editing. So hang on as we meet both blogger and an early retiree next week.