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Most liked posts in thread: What's your retirement asset allocation percentages?

  1. Sharkman

    Sharkman

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    to my understanding, the terms "fat" and "lean" refer to how extravagant your planned lifestyle is, rather than how badly you would be affected by a market crash. but there probably aren't any official definitions, it can be whatever you want it to mean i guess. i do think there are 2 separate factors to consider here though, rather than a single fat <--> lean spectrum: how extravagant your lifestyle is, and what margin of safety you have to maintain that lifestyle.

    to me, fat means travelling a lot, eating out a lot, frequently buying new gadgets and forms of entertainment etc. lean means mostly or even entirely avoiding consumerism, maybe even growing your own vegetables, DIY fixes, and partaking in forms of recreation that don't cost much (or anything at all).

    you can be lean yet still keep the same lifestyle even if the market drops eg. your yearly expenses are 25K and you retire with 1 million for a 2.5% drawdown. or you can be fat but have to compromise your lifestyle in the event of a downturn eg. your yearly expenses are 100K but you retire with 2 million for a 5% drawdown.

    but if you are lean with a low margin of safety/high drawdown, then a market crash could result in your portfolio being unable to sustain even a minimalist lifestyle, and you have to return to the workforce. if that happens after you've been retired a few years, your knowledge will have become outdated and your skills will have decayed, making this a difficult ask unless, as you say, there's an employer like Bunnings willing to give you a go.

    this is a horrifying proposition in my eyes, i'm petrified of this happening to me when i get old, and it's that fear that helps me find the willpower to suffer thru a few more years of the corporate treadmill in pursuit of the ideal combination - fat FIRE plus a high margin of safety.

    funny that you should mention rice and beans. i grew up in a lower income household, and that is literally what we often had for dinner until i was in my early teens - rice, beans (or some other vegetable) with a bit of oyster/fish/soy (whatever was on sale at the time) sauce thrown in for a modicum of flavour. that's it. sometimes we had meat if that was on special, sometimes we didn't.

    i have no desire to return to a diet like that ever again, so i guess that's also a factor which nudged me towards chasing fat FIRE with a 2.5% drawdown. i figure if there is a GFC-esque 40-50% drop, that 2.5% becomes 4% temporarily, and i can wait it out, continuing to eat well until the recovery.
     
    aus_trader, Zaxon, barney and 5 others like this.
  2. sptrawler

    sptrawler

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    It is amazing how good a motivator childhood experience is, I as you lived in a very poor house hold and as you say it drives you to ensure history never repeats.:xyxthumbs
     
    Skate, Zaxon, aus_trader and 4 others like this.
  3. Sharkman

    Sharkman

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    my target is 2.5%. i'm currently in the low 3s, so i probably could retire now, but as much as i've grown to hate the corporate treadmill these days, i can still summon up the willpower to stay with the plan and stick it out another 2-3 years. though if one day i wake up and feel that i really can't take it any more, i always have the option of throwing in the towel and calling it quits in my back pocket.

    think i wrote about this a while ago, can't remember the specific topic now, think it was something to do with ETFs, but i'm not too keen on the widely touted 4%, for a number of reasons.

    it has a small but noticeable chance of failure, AND it's based on a 30 year retirement timeframe. all four of my grandparents lived into their 90s (one is still alive), not only did they live during a time when humankind was less technologically advanced, but they lived their whole lives in developing nations. so with that genetic background and the medical advancements of today, i have to consider the (tantalising/frightening/somewhere-in-between) possibility that i may actually wind up hitting triple figures. since i'm looking at retiring in my early 40s, that could be 60 years of retirement to fund. i don't want to be continually worrying about that small chance of failure for decades on end. of course nothing's ever 100%, but i'd like to think a 2.5% drawdown is at least a 99.

    as tech/a wrote, it is far easier to expand your lifestyle to fit your budget, than expand your budget to fit your lifestyle. i'm far more at ease with the idea of planning super conservatively, then living more luxuriously if the risks don't eventuate, and if things go to crap, probably still being able to live comfortably without cutting back on lifestyle significantly.

    i'm not looking to merely maintain my current lifestyle in retirement, i want to be able to improve my quality of life during it. new medical treatments, the fancy new gadgets/toys/forms of entertainment that people can come up with in the future, those things probably aren't going to come cheap. i'd like to be able to afford those without constantly worrying about outliving my capital. that's the point of retirement isn't it, to enjoy life, not to be always stressing about your finances. so i'm after the extra growth that a 2.5% drawdown should provide, to cover for both actual inflation and lifestyle inflation, and i'm willing to grind thru a few more years of the rat race to get there (for now, anyway).
     
    peter2, qldfrog, barney and 3 others like this.