# How much to walk away?



## oob (Apr 4, 2011)

Just curious - 

For those of you that aren't retired, how much net worth do you need to walk away from having a conventional day job? What would you do instead?
Obviously you don't need to disclose, but age and family situation would be helpful context.


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## fraser (May 15, 2010)

There is not pat answer. It depends on your lifestyle and your f'cast spend. Plus your assets that can serve to reduce you expenditures, ie fully paid for home. Next is health, ie your longevity and the longevity of your spouse. Next is existing income streams...CPP, OAP, any DB pensions.

Too many variables at play to answer your question.


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## OnlyMyOpinion (Sep 1, 2013)

It was interesting that the 12 folks who just won the $60 million Lotto Max ($5MM each) all said they were going to keep working (all work at Black Book). 
But I suspect that after a bit of soak time a number of them will reconsider.


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## OptsyEagle (Nov 29, 2009)

It also depends on your motivation to walk away from work. If you love your job you will need a lot more money to possibly create the lifestyle that would convince you to leave it. If, like probably most people, you are getting more then a little tired of the daily grind, you would need a lot less, since you would be motivated to make do with less.

I suspect most people could live with a lot less then they think they could when they are preparing their financial plans. The difference between what they want and what they really need will primarily come down to motivation.


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## Sampson (Apr 3, 2009)

oob said:


> Just curious -
> 
> For those of you that aren't retired, how much net worth do you need to walk away from having a conventional day job? What would you do instead?
> Obviously you don't need to disclose, but age and family situation would be helpful context.


My Findenpendence depends on my income generating assets, not total net worth.

Since I own (part of it anyway) my principle residence, and it generates no income, it does not factor into when I can walk away.

My personal number is $2M (for the household) in equities, bonds, cash, and REITs. I assume no CPP, OAS, or other government monies since I place to reach Findependence day well before those kick in, an the large sum means the portfolio hopefully lasts 50 years - well 25 years, then government benefits and DB begin to factor in.

Age:36, married, 2 kids.


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## oob (Apr 4, 2011)

fraser said:


> There is not pat answer. It depends on your lifestyle and your f'cast spend. Plus your assets that can serve to reduce you expenditures, ie fully paid for home. Next is health, ie your longevity and the longevity of your spouse. Next is existing income streams...CPP, OAP, any DB pensions.
> 
> Too many variables at play to answer your question.


I meant you personally.


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## HaroldCrump (Jun 10, 2009)

Sampson said:


> Since I own (part of it anyway) my principle residence, and it generates no income, it does not factor into when I can walk away.


It does factor in - indirectly.
The more you own, the less you owe > the less you owe, the less your monthly mortgage liability > which means you can get by on less investment income.
A monthly mortgage payment is a fixed liability, and therefore requires you to dedicate a fixed part of your investment/passive income to it.

This is the good ol' pay mortgage vs. invest question.


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## My Own Advisor (Sep 24, 2012)

Our math (i.e., expenses, burn rate, travel plans, whatever) says we need >$1M in invested assets + paid off home + zero debt + workplace pensions >15 years in the bank to "walk away".

We are still working on all these things. The assets will take more time. The house might be done in 5-7 years. The pensions will be there in a couple of years. 

We exclude CPP and OAS in our math. That will be bonus money.


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## Sampson (Apr 3, 2009)

HaroldCrump said:


> It does factor in - indirectly.


Fair enough, I should add the statement, 0 liabilities when I walk away. Somehow I always think this is a given, but the debt and insolvency rates of retirees shows the typically situation is that retirees still hold significant mortgages.


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## My Own Advisor (Sep 24, 2012)

Sampson said:


> Fair enough, I should add the statement, 0 liabilities when I walk away. Somehow I always think this is a given, but the debt and insolvency rates of retirees shows the typically situation is that retirees still hold significant mortgages.


It should be a given, I know it is for people like you Sampson, but I don't think you're typical....i.e., you don't want debt at time of pulling the plug. Neither do I


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## Sampson (Apr 3, 2009)

My Own Advisor said:


> That will be bonus money.


Q: how do old farts spend bonus money?

I take a more cynical view, future governments will face severe ballooned pension liabilities and either the date to start receiving funds, or the magnitude of funds will be reduced... can't count on them much in my view.


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## Kail (Feb 7, 2012)

OnlyMyOpinion said:


> It was interesting that the 12 folks who just won the $60 million Lotto Max ($5MM each) all said they were going to keep working (all work at Black Book).
> But I suspect that after a bit of soak time a number of them will reconsider.


5 million? I would return to work only to quit on the spot as soon as my boss got in. 

You wouldn't even need to touch the principal on this and just let it grow. Ahh...such is the dream anyway. I'm 33 and would probably end up doing something I loved part time just to keep me busy, but in a much warmer climate outside of Canada.


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## fraser (May 15, 2010)

Our threshold was a combination of no debt, a fixed cashflow (DB, CPP etc. which is quantifiable as a lump sum number), and equity investments generating a return in excess of the rate of inflation.

Our after tax projected burn rate was $72K which has held steady for the past three years but now has to be uplifted for inflation. 

Our net worth has actually increased over the past three years even though we have less employment income and spend more. This is due to timing of returns and asset mix. We did not anticipate this fortuitous situation. Some other even could have caused the opposite to occur.

We spend much more on travel and much less on shelter and automobiles. At some point our travel expense will decline.


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## My Own Advisor (Sep 24, 2012)

Sampson said:


> Q: how do old farts spend bonus money?


This is what I mean. If I get CPP and/or OAS, it's gravy. I don't expect it or the I expect the programs to change. I don't want to rely on the government any more than I have to.


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## 1980z28 (Mar 4, 2010)

oob said:


> Just curious -
> 
> For those of you that aren't retired, how much net worth do you need to walk away from having a conventional day job? What would you do instead?
> Obviously you don't need to disclose, but age and family situation would be helpful context.


I will stop working in 18 months,at 56,would do it now but have son at home in school

Will play around with stuff

Will not need anymore than I have saved,so govt plans would be used to finance my children as I do not believe I will need it to survive to 100


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## Tawcan (Aug 3, 2012)

My Own Advisor said:


> This is what I mean. If I get CPP and/or OAS, it's gravy. I don't expect it or the I expect the programs to change. I don't want to rely on the government any more than I have to.


That's what I do in my calculation too. Exclude CPP and OAS.


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## birdman (Feb 12, 2013)

I retired 13 years ago at age 55 and figured I needed enough pension, savings, etc. to generate an after tax income of $55,000. PA plus inflation which I adjust annually. I also added another $20/30,000. PA for miscellaneous large expenditures such as Home repairs (new roof, new deck, new furnace & heat pump)which cost 50,000. one year, a new vehicle which cost about 30,000. or so, and a couple of vacations which cost maybe 10-15,000. Also slip the kids a few bucks when times are tough. Married with clear title house. So far I am doing fine and perhaps my expenditures will go down as I get older. In saying that, I need a need truck which will cost $40,000 or thereabouts.


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## Jaberwock (Aug 22, 2012)

Beware of the commonly held view that you need to have 70% of your working income when you retire.

If you want to maintain your lifestyle, you will need more than that. I would aim to have a portfolio which provides 90% of your previous income. CPP can be included in your income, but only include OAS if you will be below the clawback level.

If you invest in a mix of blue chip dividend paying stocks and REITs, you should be able to generate 4.5% in perpetuity, with dividend increases covering inflation. If you were earning $100k/yr before tax, then aim to earn $90k after retirement, subtract $13k for CPP leaves you with $77k from investments. If you live off the earnings without touching the capital, then you will need $1.7 million in an RRSP, or about $1.5 million outside of an RRSP (dividends are taxed at a lower rate than RRSP withdrawals).

Medical expenses go up. Don't rely on the seniors drug benefit in Ontario - a lot of commonly prescribed drugs are not covered. If you once had a drug plan at work, make sure you account for having to pay for dentists, chiropractors etc. You may want to set aside some extra money if you intend to travel and enjoy life in the few years that are left between retiring and falling apart.


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## HaroldCrump (Jun 10, 2009)

^ Excellent post by Jaberwock above.
The % income replacement required depends on desired lifestyle and age.

The earlier you retire, the higher recreational expenses will likely be, such as travel, entertainment, etc.
If not, why retire? 
These recreational expenses will likely be higher than they were while you were working.

At this point, health expenses will stay relatively same, except for replacing any extended health benefits, drug plan etc. previously paid by employer and through salary.

The later one retires, the lower the recreational expenses are likely to be, and higher the health expenses.

Therefore, it is entirely possible that one may need income replacement of 100% or even more if retiring earlier.
OTOH, retiring late may require as little as 50% income replacement.


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## 1980z28 (Mar 4, 2010)

Jaberwock said:


> Beware of the commonly held view that you need to have 70% of your working income when you retire.
> 
> If you want to maintain your lifestyle, you will need more than that. I would aim to have a portfolio which provides 90% of your previous income. CPP can be included in your income, but only include OAS if you will be below the clawback level.
> 
> ...


wow that seems like a lot of saving

nice to have


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## sags (May 15, 2010)

The CPP isn't going to change. That money is locked up out of politicians hands............and is way ahead of projections for the next 75 years.

The OAS......Harper already changed that, and surprising that it hasn't become a big election issue. Perhaps people are too far away from the change to worry about it now.

It will be changed back to age 65 though. Perhaps as soon as this election............or perhaps later.

There is no way any government is going to eliminate the OAS. They will cut all kinds of spending before they touch that. 

The mere suggestion that Harper was going to change the GIS to an asset based eligibility model..........raised such an uproar they quickly reversed their plans.

People can survive on CPP/OAS/GIS. Their own pensions and personal savings will provide additional income, and they won't need millions of dollars to live the lifestyle most envision.

Just not having to work every day is enough for most people. Traveling the world, fine dining and living in luxury............isn't even on their radar.

We worked for 40 years each to earn a paycheque to pay the bills.

Now we don't have to work to get a paycheque to pay the bills.

That is good enough for us.............and I suspect a lot of people.

I like work so much, I can look out the window all day watching people doing it.

Our retired neighbours all seem happy to stick around, watch television, listen to the radio, sit out back with a drink, putter in their gardens.

People will be less disappointed if they lower their expectations for retirement. 

This is the real world.............not some insurance companies commercial of an imaginary retirement.


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## fraser (May 15, 2010)

CPP is not only secure, it is internationally recognized as being in the top 10-20 of nation sponsored plans in the world. 

The notion that it is insecure is absolutely false. It was true a number of years ago but steps were taken to change the funding model, change the management model, and change the investment model. These changes have been extremely successful.


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## 1980z28 (Mar 4, 2010)

I really have no idea what the govt will provide in amounts for retirement

Before 60 you get Zero

I believe that you will receive CPP at 60 years

OAS not sure

GIS not sure 


Maybe I can put some time into it,maybe 1000 per month or more,not sure what the total would be ,


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## My Own Advisor (Sep 24, 2012)

@sags,

"Our retired neighbours all seem happy to stick around, watch television, listen to the radio, sit out back with a drink, putter in their gardens."

Reads like people in my area! I hope to do more than that, but I know what you're saying: the less you expect, the less disappointment you'll have.

We won't have a luxurious retirement but hopefully a decent one.


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## birdman (Feb 12, 2013)

I don't agree that you always need 70% of your pre retirement income when you retire. This could be the case if you spend all of your earnings but in many cases, like mine, I probably only spent 30-50% of my income in my latter years of working. I was fortunate in being paid very well, children were gone, and everything was paid for.


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## 1980z28 (Mar 4, 2010)

^^^^^^^^^^

Sound like the plan I have assembled with a 100k cushion to get me to 100


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## Itchy54 (Feb 12, 2012)

Three weeks and counting for hubs to retire. He is 58. I work very part time for holiday bucks.
His pension will cover our monthly bills which we have monitored for three years. This includes my gym membership, spending money, minor travel ( to see the folks and stuff), one or two modest purchases (the retirement bike, a nice bed...) basically everything we have spent over the years is covered with some wiggle room. I have a small pension from another job that will cover our medical, extended health and dental insurance.
When all the other pensions kick in at 65, and yes we are counting cpp and OAS, his bridge will be gone and replaced by CPP we will both get OAS and I will have a smaller cpp. He will also receive a very small IWA pension. Pensions will have us covered.
We own our home and two vehicles that will need replacing at seem point. We will travel every year and plan to spend 20,000 a year for at least ten years on that.
We have saved a million. 
We feel comfortable with this retirement plan. We are not big spenders, we don't dine out (rarely) and don't drink. Our retirement is all about enjoying this life we have. Being a stones throw to Jasper, Banff, Whistler, the okanagan....we have enough day trips to last a lifetime. Running away in the winter is a must. We can, and will, do this!
So excited!
I may or may not continue to work. Right now it pays for our Mexican holiday in December (five weeks this year) which is great. I like the job, just not so much the management....


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## avrex (Nov 14, 2010)

Jaberwock said:


> *Beware of the commonly held view* that you need to have 70% of your working income when you retire.


Yes, I like what you are saying.  Keep going....



Jaberwock said:


> If you want to maintain your lifestyle, you will need more than that. I would aim to have a portfolio which provides *90% of your previous income*.


No, I don't like what you are saying.


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## avrex (Nov 14, 2010)

One of my biggest *pet peeves*, is with financial planners, journalists, who talk about clients *replacement ratios*. 
In their documentation, they cite that clients need a specific percentage (usually 70%) of a household's pre-retirement income.

But, let's think about this using an example.
Person A declares that he needs $60,000 annually to retire happily.
Person B declares that he needs $35,000 annually to retire happily.
Each person has decided on an amount that will make them happy in retirement.

And now........let's look at their income (not that this is really relevant).
Person A works as a doctor making $450,000 annually. This means his replacement ratio is *13%*.
Person B works in the retail sector making $35,000 annually. This means his replacement ratio is *100%*.

In other words, the ratio if meaningless. 
Every individual has different needs/expectations to make them happy.

In my opinion, the correct answer is to not talk about replacement replacement ratios. Instead let's talk about an actual dollar amount that you think you need.

Only each individual can decided. I say......

*"The amount you need is the amount you think you need."*


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## GoldStone (Mar 6, 2011)

Q: How much to walk away?

A: 33.3333 times our desired pre-tax retirement income.

Why 33.3333? That's the inverse of 3% safe withdrawal rate.

For example:

Desired retirement income: $50K before taxes. 
$50K * 33.3333 = $1,666,666 to walk away

The inverse:

$1,666,666 * 3% withdrawal rate = $50K pre-tax income

Many argue that 3% SWR is too cautious. That's okay. I like to play it safe.

ADDED: I ignored CPP and OAS for simplicity. I do incorporate them in my actual plan.


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## My Own Advisor (Sep 24, 2012)

@Itchy, sounds like you're set!!!!

I struggle with the 90% pre-retirement income. 

The amount you need to retire is highly variable from person to person, but fundamentally is based on expenses regardless of person. You need income in retirement to cover expenses, period. Whatever that is, figure it out folks. 

@GoldStone, I like your call on 3%. Safe is smart when it comes to investing.


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## Sampson (Apr 3, 2009)

My Own Advisor said:


> I like your call on 3%. Safe is smart when it comes to investing.


Ultimately this is the real reason why I discount CPP and OAS - it is actually my buffer to know that even if I am not conservative enough about my withdrawal rate, those benefits will put into safe territory.


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## OnlyMyOpinion (Sep 1, 2013)

Sampson said:


> Ultimately this is the real reason why I discount CPP and OAS - it is actually my buffer to know that even if I am not conservative enough about my withdrawal rate, those benefits will put into safe territory.


I'd agree that not counting CPP/OAS in your planning is probably a good idea at this point. Earlier you said _"I assume no CPP, OAS, or other government monies since I plan to reach Findependence day well before those kick in, and the large sum means the portfolio hopefully lasts 50 years - well 25 years, then government benefits and DB begin to factor in."_ 

If you plan to retire around age 40, your CPP amount at 65 will be limited to your contributory years, so will probably be below average. Jaberwoky suggested in post#18 to assume $13k/yr but that is based on the maximum. The average Canadians receive is only ~$7,7760.

If you haven't tried to figure out what you might get but are interested, refer to Doug's article here: http://retirehappy.ca/how-to-calculate-your-cpp-retirement-pension/
Doug is also here on CMF as Dogger1953 - very knowledgeable!


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## janus10 (Nov 7, 2013)

I think that it is somewhat relevant to a couple's situation as to what they are giving up. If a couple believes that they need $1M in order to retire, and finally achieve that, would anyone be surprised if they walked away from jobs that, combined, brought in $50k/year? What about $250k/year? 

As mentioned early in the thread, the question begets other questions because of many factors that will play into each couple's decisions.


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## Causalien (Apr 4, 2009)

It's simple.

$3 million in liquid investible asset. i.e. not your house, nor car, nor boat and definitely not your business's valuation.

Why? That's the minimum to create a trust fund to make it worth it.


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