Dale Roberts had an article at Seeking Alpha about why his firm doesn't rely on the 4% rule for advising clients. The very short version is that very little in life is so linear, especially spending needs and spending wants. I believe in the 4% rule for sustainability but of course life is lumpier than 4% per year. The 4% can give a better chance for weathering unexpected events that result in spending more than 4% in some random year.
What was more interesting though were his thoughts (backed up by data) about retiree discretionary spending being the highest between the ages of 65 and 70. He notes the small declines that occur each year until much later when someone is much older and most likely to be in need of advanced care of some sort. The reasoning here is clear and something you've probably seen before. Younger and presumably healthier retirees tend to be more active taking trips and other activities that cost money. At some point retirees become less active the thinking goes and so maybe taking two trips instead of four or something like that. Later still in retirement less activity and then very little activity closer to the end of retirement whether that is at a relatively younger age or hopefully a very old age. At this point the spending pendulum swings to potentially having to spend a lot on some form of advanced care. (another topic I like to write about is how to have a shot at staving off that outcome or at least delaying it)
I don't love these types of generalizations about age ranges but that is a different blog post but the arc of this rings true.
Yesterday's blog post including this snippet;
If you can retire with no mortgage and you determine that your basic lifestyle will cost $50,000 and you'll get $30,000 all in from Social Security then you can ballpark that you need to find $20,000 from somewhere. Assuming the 4% rule for withdrawals, that implies your number is $500,000. That doesn't leave much room for error though...
If you don't think you have much room for error or would like more room for error and/or want to do things that will cost money then an obvious answer is some sort of job/monetized hobby/something else. In this context I've talked primarily about a monetized hobby because it easier to own your time that way. Sticking with the numbers in the quoted excerpt, the more of the $20,000 that can be made from a hobby or something else means less coming from the portfolio or the same coming from the portfolio with more to spend (the earned income on top of the portfolio income).
I have two hobbies that have the potential to be monetized; my firefighting and my photography. Assuming for a moment that I could monetize my firefighting that hobby might be limited based on physical capability. Here I am talking about working in a position helping to manage the incident not digging a fire line, the former requires long days, many meetings and plenty of office-type work the latter 12-16 hours of grueling physical work for many successive days. I'd like to think I could do the former to an older age but no one who is 52 knows what they'll be able to do at 68 and the ages we're referencing for this post are mid-60's to early 70's. Photography doesn't have to be as physically challenging to get to your subject matter (depends on what your subject matter is) but where photography is an artistic endeavor, my pictures may not be good enough to sell with any meaningful consistency plus smart phones make us all photographers, if that's true then why does anyone need my pictures?
The point of the previous paragraph is to point out that monetizing a hobby will have challenges which is an argument to start working on this now if you hope to have it be part of your financial/retirement plan for any reason. Further, some sort of plan B also makes sense in case it doesn't work out.
Zooming out further the idea of generating some sort of earned income early in retirement while having the physical benefits of keeping you challenged and engaged also addresses the notion that for many of us, where retirement planning is concerned something will have to give due to not quite having as much as you think you need.