Lenzo questions and answers :
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I am 61 years old and
have been retired for 28
years.I started work at
30 years of age — and I
had a very basic
retirement at 33.
In this answer I will give
you my personal story
and teach you how
to “think across time”
about money and how to
construct your own
financial projection
spreadsheet.
To do these projections, you need nothing but a calculator and some paper.
Don’t use Quicken, Excel, or Lotus.
DO IT BY HAND—so you are 100% sure that you are 100% sure that you are 100% sure — that you know how this works. It’s not rocket science. (Lenzo has PhD in Quantum Physics, Stanford University 1990)
I started in Japan as a senior scientist for a big industrial firm in June 1991.
I began earning US$3K over-&-above my rent every month. I arrived in Japan with $15K in recent credit card debt (suits, shoes, rent in CA, some travel).
BIG QUESTION: How fast could I pay this down? Credit-card debt is stupid.
For my first 6 months, I lived like a student and killed the credit cards. During this time, I began to learn the ropes of living-well in one of the world’s most expensive countries without hemorrhaging money continuously.
By Nov 1991 I was debt- free. I went a little crazy in December — but quickly returned to saving with a determination. I got a raise to US$3.5K over-&- above my rent.
Here is a record of what happened, slightly simplified — starting from (essentially) zero net worth on January1st, 1992 (the start of my 8th month in Japan).
SAVINGS YEAR ONE:
I continued to live like a
student. I got pretty good
at saving so that every
month I mailed home $3K
and I bought stock with
that. Here is a spread-
sheet very similar to the
one which I used to
predict ahead-of-time
where my savings would
be at any given time in
1992. The monthly
interest is calculated at
0.75% of the previous
month’s nestegg. That
sums to 9% annually —
the 100 year average of
the US stock market.
In point of fact, my actual
savings /earnings very
very closely approximated
the values in this table:
Nestegg
Nestegg
Jan 3.00 Feb 6.02 Mar 9.07 Apr 12.18 May 15.27 June 18.38 July 21.52 Aug 24.68 Sep 27.87 Oct 31.08 Nov 34.31 Dec 37.57
SAVINGS YEAR TWO:
I continued to live like a student. I got a fat raise somewhere along the line plus the yen appreciated against the dollar — so that every month I was now mailing home $4K and buying stock with that. Here’s my progress:
Nestegg Jan 41.85 Feb 46.16 Mar 50.51 Apr 54.89 May 59.30 June 63.74 July 68.22 Aug 72.73 Sep 77.28 Oct 81.86 Nov 86.47 Dec 91.11
As you might imagine, living in Japan can be ***stressful*** for a westerner. By my 24th month I began to have difficulties. I am not joking about this — I had eczema on both cheeks; I had become a regular drinker; I was sleeping poorly. My self-diagnosis: depression. And so, I made arrangements to leave Japan. At that point my nestegg was $65K.
The company, wanting to keep me, offered me yet another raise if I would stay on longer. So, I ran the spreadsheet forward to see what might be possible — and realized that my nestegg would cross a threshold at end of my 37th month in Japan.
Upon achieving $125,000
I would be able to
withdraw $1000-plus
every month, for life. My
relationship to “the plow-
share” would be forever
changed.
SAVINGS YEAR THREE:
The decision to stay in
Japan a 3rd year was
thus a calculated gamble
— I was gambling my
short-term health
against
long-term retirement.
My depression lifted.
I continued to live like a student. (Are you getting the idea yet??) The raise helped and by this point I was an absolute pro at living frugally. I put away $5K/month. Here’s what happened:
Nestegg
Jan 96.79 Feb 102.52 Mar 108.24 Apr 114.05 May 119.91 June 125.81
That’s going from zero to
a “basic retirement” in
30 months.
Summary:
Obviously, while I was in
Japan there were
variations in how much
money I sent home each
month. Also the jumps
from $3–4–5K per month
were actually gradual.
Nonetheless, these
tables are a very good
approximation of what
what I actually saved.
Converting to 2019 dollars:
When you convert
$125,000 1994 dollars to
2019 dollars you get
$200,000 — which is
exactly the minimum
necessary to retire as I’ve
explained elsewhere.
Now that you are retired,
how do you project the
draw-down of your
nestegg?? 🪹 or 🪺
As I’ve noted here, you can live on rather more than the interest which comes in. How to do a financial projection of this?
You just create another
spreadsheet. Start with a
full nestegg in row-1 and
drawn down $1500 each
month (or whatever your
living expenses might be).
Just add a 4th column to
the spreadsheet with this
minus-figure. Then
advance the table
forwards one line for
every month.
Be aware that your living
expenses will go up
slightly each year due to
inflation (around 2%).
That figures in trivially
when $1500 monthly
draw-down changes to
$1530 in the second year.
SHAZAM!!
Read my other posts on
early retirement:
w.w. Lenzo's answer to What don’t they tell you about retiring early?
What don’t they tell you about retiring early?
First off, who am I?
I am 63 years old and have been retired for 30 years. I own a home on a lake. I travel several months each year. I adopted-&-raised 5 kids during this time who are happy integrated members of society. I have two grandkids.
* * *
What nobody tells you is
that your (non-medical*)
cost-of-living, based on
what is necessary,
actually goes down,
substantially.
*If you are a US citizen,
be sure to examine your
options — the more you
can think laterally, the
more options you have.
Consider $5K-or-larger
deductible plans (these
are often called “major-
medical”). And for non-
emergencies, remember
the world is your mall for
medical/dental/optical.
Actually look at the
numbers: you will find
that US medical pricing
is unsane & rapacious.
You don’t need to dry
clean your office wear.
You no longer have any
need to impress anybody.
You’re not in such a hurry
that you eat in
restaurants out of
convenience.
Cooking becomes a pleasure.
Shopping in the markets
(not on Saturdays anymore!) becomes a pleasure. You’re not in a hurry, so you can actually look at prices & make better decisions.
You don’t need to keep &
maintain a super-reliable
automobile. You can do
your own oil changes —
yes, even you ladies.
You start fixing things
yourself. It’s no longer
necessary to call
plumbers or electricians.
All the info you need is
on the web.
Lastly, when you work on
your monthly budget you
no longer are setting
money aside for
retirement. Obviously.
Mostly you now budget
your time between
friends and hobbies.
Your sense of Time -vs- Money completely rebalances!
And what could be better
to offer your children
(and grandchildren) than
ooodles and ooodles of
time?? Sunsets, BBQ, campfires, you name it!
And lastly, please note
that your entertainment
costs can fall
dramatically. Instead of
being a passive
consumer, You now have
the time to create!!
Here’s a dock I built last summer (doubles as a patio on water):
And the lamp I built to go on that post (34 independent pieces of wood + glass & electrical bits):
And custom-shaped
home-made cushions
for that loveseat over
the water:
Or a 12′x5′ family-sized
bed-swing with home-
made cushions & pillows:
Or a maple floor, each
piece cut by hand, entirely
glued together, three
months in creation:
And doing my own butcher-block counter- tops:
And my latest projects, a
cantilevered butcher-
block cedar Sunset Bar:
And 300 hand-cut pieces
of maple for a parquet
floor in my sunroom:
Read my other posts on
early retirement:
What was the key to your early retirement?
How much do you really need to retire?
What is your best Financial Independence Retire Early strategy and How long till you can FIRE from the start of the plan?
How did you become financially independent?
Why should someone delay receiving Social Security retirement benefits and why would they want to do this?
Why don't more people try to achieve FIRE (Financial Independence and Early Retirement)?
Dow Jones Index barely moved between 1999 and 2005. How does a period like that impact the 0.75% withdrawal plan?
How do you pick the 20 stocks in your retirement plan?
Readers comments:
Wow, thank you for sharing that.
How did u end up retiring just a touch over 30 years old?
Stunning wood art!
Bravo, Seval, bravo!
Exactly! More time to “McGyver-ize”, and enjoy the process of DIY at your own pace.
W.W. Lenzo, you sure put your creative mind to work! Your flooring is BEAUTIFUL!
I also retired early and am spending my time bonding with my dog and competing in dog sports. As they say, “do what you love; love what you do!”
Never bored. I have a dozen intense hobbies ~
Poetry. Woodworking.
Bridge. Chess.
Spearfishing. Kayaking.
Juggling. Fitness.
Grandkids. Politics. Go.
Cooking.
And a dozen or so more
that are less-intense.
w.w. Lenzo's answer to How much money is enough to retire on?
w.w. Lenzo's answer to What kind of stock to buy for retirement saving?
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