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Do you FIRE? Financial Independence, Retire Early


UTGrad98

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1 minute ago, Snake Diggity said:

Word.  My job is extremely friendly in terms of work-life balance.  100% from home and I schedule my own commitments, so I am able to be available to my kids as much as needed.  That has actually made it harder for me to decide whether to hang it up or not.  Hard to justify walking away from a good salary when it’s really not that demanding of a job.

Yeah, if you like your job, have time for the kids and everything is working well, sounds like you're in a good place.

 

The one more year thing is someone that is in a job they hate yet they're too afraid to take the plunge.  There's certainly nothing wrong with working even if you don't "need" the money, just make sure it's on your terms.

I liked my job fine and could do it in my sleep, problem is it's located in Minnesota, and I can't wait to put these winters behind me.  

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Wtf? This is surly where I thought everyone was pulling down 7 figs per year. 

On a serious note I don’t necessarily subscribe to fire or fat fire by the book (see: new car thread lol) but I do plan to have enough $$ by 55ish to walk if I want. I love what I do and I’m still 20ish years out from that but I want the flexibility when I get there if I want to walk away. 

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As someone who partially FIRED at 45 and fully at 56, one of the weirdest elements of it is the mental aspect.

People who FIRE are goal oriented, so once you get there you always have two competing thoughts: the desired to continue to increase wealth and/or continue saving, competing with the realization that with health problems etc. you could lose the chance to enjoy the time off. You find yourself in this perpetual state of conflict over those two competing thoughts. 

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10 hours ago, Dbeasy said:

As someone who partially FIRED at 45 and fully at 56, one of the weirdest elements of it is the mental aspect.

People who FIRE are goal oriented, so once you get there you always have two competing thoughts: the desired to continue to increase wealth and/or continue saving, competing with the realization that with health problems etc. you could lose the chance to enjoy the time off. You find yourself in this perpetual state of conflict over those two competing thoughts. 

Counterpoint: At work, we do biweekly reports but sometimes also monthly reports, so often I do a second roundup a mere 24 hours after the previous one.

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Feel like a dumb question but for those who early retired or even normal retired, how do you actually receive your investment  income? Do you sell some shares once per month, a couple of time per year, and then withdraw X amount per month? 

my last 30 years has basically been putting money into the market so the idea of taking it out feels foreign.

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6 hours ago, Nice Guy Eddie said:

Feel like a dumb question but for those who early retired or even normal retired, how do you actually receive your investment  income? Do you sell some shares once per month, a couple of time per year, and then withdraw X amount per month? 

my last 30 years has basically been putting money into the market so the idea of taking it out feels foreign.

It’s a very good question. The most common approach is stick 40% in bonds, 60% in stocks, live off interest and dividends and sell what you need to meet your full expenses. 

However, as we all saw in 2022, you would have been selling bonds or stocks that were down. You string enough years together doing that and you run into what’s called sequence of returns risk. You run out of money because you had to withdraw during down markets. 

I setup my portfolio so that I always have enough income annually to cover base expenses. That way I never sell in a down market. There’s also other approaches, like putting money into buckets. For example, buy CD’s that mature two years from now to pay expenses two years from now. 

I’ve gone down deep rat holes looking at many different asset allocations models and how to maximize risk return. It’s taken me awhile, but I’m finally getting to a place where I feel comfortable. 

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On 3/31/2023 at 2:45 PM, Dbeasy said:

You string enough years together doing that and you run into what’s called sequence of returns risk.

Single biggest mistake one can make in any retirement scenario- failing to take this into account.

That's why looking at average returns isn't all its cracked up to be and people get whipsawed.  Monte Carlo simulations can take this into account and help you plan accordingly or at least understand the real level of risk.  It's pretty staggering what 3-4 years of negative returns (even single digit) will do to a portfolio with income requirements. 

 

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1 hour ago, Nice Guy Eddie said:

@Dbeasy @Reagan1k I’ve heard a few retirement experts talk about having 3 years of expenses always in no-risk accounts.  Then when you face market downturns, you draw your income from these accounts instead of selling investments.  Then when stocks rebound, reload the 3 years.

I have maturing CD’s each of the next three years. 

For running Monte Carlo simulations, there’s a great site called portfolio visualizer. You plug in your portfolio with some assumptions and it will run hundreds of scenarios. 

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18 hours ago, Dbeasy said:

I have maturing CD’s each of the next three years. 

For running Monte Carlo simulations, there’s a great site called portfolio visualizer. You plug in your portfolio with some assumptions and it will run hundreds of scenarios. 

Another benefit of having and refilling a market-neutral current income bucket (beyond neutralizing the sequence of return risk), is that it frees one to make the most tax efficient decisions in both up and down markets.  Loss harvesting, etc. isn't nearly as effective if the proceeds are being spent rather than reinvested.

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  • 2 weeks later...

Got right up to the edge of quitting. For the last week I had made up my mind I was done. Even set a quit date. This Tuesday.  Used up all my pto. Then I did our taxes today and realized my wife doesn't make shit and stepped back. I think this is going to end up like quitting smoking or drinking where it takes a few tries. Now I'm back to early next year as my date. Wife was relieved when I told her. She was getting nervous she'd have to start spending her own money on things. 

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11 hours ago, UTGrad98 said:

Got right up to the edge of quitting. For the last week I had made up my mind I was done. Even set a quit date. This Tuesday.  Used up all my pto. Then I did our taxes today and realized my wife doesn't make shit and stepped back. I think this is going to end up like quitting smoking or drinking where it takes a few tries. Now I'm back to early next year as my date. Wife was relieved when I told her. She was getting nervous she'd have to start spending her own money on things. 

Measure twice, cut once.

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Posted (edited)
On 3/31/2023 at 2:45 PM, Dbeasy said:

It’s a very good question. The most common approach is stick 40% in bonds, 60% in stocks, live off interest and dividends and sell what you need to meet your full expenses. 

I'm retiring in 7 years at 57 and that's roughly my plan. I'm currently leaning to FAGIX for my bond investment and to have a monthly dividend paycheck.  I probably won't touch the investment fund.  My wife will get over six figs a year from her state pension.  She also has a 457 plan at the state and we will probably roll that over into JEPI if it continues to perform over the next 7 years to get more monthly dividends.  At that point, we won't have a mortgage payment and the oldest kid is off the payroll and the youngest headed to college. My wife will continue to get her state employee health care plan for both of us until Medicare kicks in.  It's weird thinking that with less annual income our lifestyle will improve without the kid expenses and debt.

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2 hours ago, CooterBrown said:

I'm retiring in 7 years at 57 and that's roughly my plan. I'm currently leaning to FAGIX for my bond investment and to have a monthly dividend paycheck.  I probably won't touch the investment fund.  My wife will get over six figs a year from her state pension.  She also has a 457 plan at the state and we will probably roll that over into JEPI if it continues to perform over the next 7 years to get more monthly dividends.  At that point, we won't have a mortgage payment and the oldest kid is off the payroll and the youngest headed to college. My wife will continue to get her state employee health care plan for both of us until Medicare kicks in.  It's weird thinking that with less annual income our lifestyle will improve without the kid expenses and debt.

Do state pensions increase/index with inflation?

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