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BEHOLD: MY CAPE posted:So there is no contractual determination of the interest rate, it's just whatever the bank decides? In the United States typically the way a variable rate mortgage works is that there is a 5 to 7 year introductory fixed-rate and following that time the rate is determined every year and is typically indexed to the Libor rate plus an agreed-upon fixed percentage premium. So for example your rate may be Libor plus 2% or something like that and calculated annually. In other words neither party has any discretion in the rate, it is set by contract. In Australia and New Zealand it depends on market rates entirely. The best we can do is get 5 or 10 year fixed rates, but the interest premium on those makes it not worthwhile which is why I use 1 to 3 year fixed rates only. If you have been with the bank for a few years they will typically offer lower unofficial interest rates. So there are some upsides although my recent refinancing is only 2 bps below the official rate, which suggests margins are getting tight at the banks.
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May 6, 2018 21:07
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FieryBalrog posted:What's the best way to invest in gold futures over the internet? Any online broker. Buy GLD instead.
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May 6, 2018 23:01
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danse macabre posted:[*]Splitting my weekly 'savings/investment' money in half. I'd invest half into those Vanguard funds and use half to pay down the mortgage faster. This is probably the thing to do. You'll get exposure to both a guaranteed return (3.92% interest abatement) as well as potentially better returns in the Vanguard funds. There's a distraction about the price of the house and Australia's real estate market in general, but I don't think that's relevant to where you put money you can elect to invest, you gotta pay off that mortgage (or declare bankruptcy) either way.
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May 8, 2018 17:54
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Dwight Eisenhower posted:There's a distraction about the price of the house and Australia's real estate market in general, but I don't think that's relevant to where you put money you can elect to invest, you gotta pay off that mortgage (or declare bankruptcy) either way. I agree the mortgage is just a debt to be serviced, the fact that it's backed by an asset where the market value could vary doesn't come into it.
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May 9, 2018 05:28
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Devian666 posted:I agree the mortgage is just a debt to be serviced, the fact that it's backed by an asset where the market value could vary doesn't come into it. Well with this variable, short term mortgage in particular there is interest rate risk and refinancing risk. If the real estate market goes into the shitter and your backing asset is suddenly worth say 30% less then it may be more difficult to refinance your mortgage at the end of the term. I don't know how these work, maybe the bank is required by law or contract to offer a refinance no matter what the fluctuation in underlying asset value. In the United States it is generally not possible to refinance an underwater property without bringing cash to closing. At the very least it is in principle a little bit different than a standard United States style fixed 15 or 30 year mortgage and a somewhat more risky form of debt for that reason.
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May 9, 2018 13:41
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BEHOLD: MY CAPE posted:Well with this variable, short term mortgage in particular there is interest rate risk and refinancing risk. If the real estate market goes into the shitter and your backing asset is suddenly worth say 30% less then it may be more difficult to refinance your mortgage at the end of the term. I don't know how these work, maybe the bank is required by law or contract to offer a refinance no matter what the fluctuation in underlying asset value. In the United States it is generally not possible to refinance an underwater property without bringing cash to closing. At the very least it is in principle a little bit different than a standard United States style fixed 15 or 30 year mortgage and a somewhat more risky form of debt for that reason. This is prima facie interesting but if you run it through to the conclusion, actually keeping it apples to apples, it's still a distraction. The case for this being interesting is that with a variable rate mortgage, paying it down mitigates the risk of being able to refinance because if your home lost value then you'd need to bring cash to a refinancing in the degenerate cases. The counterpoint to that argument is that if you had an investment that peformed better than 3.92%p/a then you could bring even more cash to closing when you refinanced than you'd have tied up in the home. For this to be interesting, every dollar in the comparsion is going either to principal abatement or to be invested in some security. And it still comes down to "the best thing is to put it in the place with the best rate of return, which you don't know a priori", so splitting and getting both principal abatement and investment exposure is a strong move in the face of that uncertainty.
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May 9, 2018 14:42
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BEHOLD: MY CAPE posted:Well with this variable, short term mortgage in particular there is interest rate risk and refinancing risk. If the real estate market goes into the shitter and your backing asset is suddenly worth say 30% less then it may be more difficult to refinance your mortgage at the end of the term. I don't know how these work, maybe the bank is required by law or contract to offer a refinance no matter what the fluctuation in underlying asset value. In the United States it is generally not possible to refinance an underwater property without bringing cash to closing. At the very least it is in principle a little bit different than a standard United States style fixed 15 or 30 year mortgage and a somewhat more risky form of debt for that reason. In Australia and New Zealand even if your house was underwater if you keep making payments they are likely to refinance. Of course this could change at any time especially with 1/3 of Australian mortgages being found to be fraudulent. The banks are carrying out a clean up but if people are making payments they aren't as concerned. Mortgage calculations are carried out differently due to the short term fixed rates. A number of banks use a 7% interest rate to calculate affordability. So any large shifts in interest rates should be affordable by the majority. However we'll see what the real risks are like here as the interest rates climb.
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May 9, 2018 21:05
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The mortgage contracts can have a clause that say if your security drops below a certain ratio of your outstanding balance you can be required to make a payment to bring up the ratio to a safe amount.
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May 9, 2018 23:29
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They have clauses that state payment on demand (full repayment) which covers more scenarios than just being underwater. My mortgage contract (which is specific to the bank) states that they can sell my house any time they like without requiring any reason to take that action. In practice the clauses applied for an underwater mortgage doesn't get implemented often but there hasn't been a major property crash in New Zealand since the 70s. I believe it's similar in Australia. Although the regulators are trying to defuse the potential mortgage timebomb that we're sitting on right now.
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May 9, 2018 23:46
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Devian666 posted:They have clauses that state payment on demand (full repayment) which covers more scenarios than just being underwater. My mortgage contract (which is specific to the bank) states that they can sell my house any time they like without requiring any reason to take that action. How do they sell the house at any time? I assume that title and foreclosure law in New Zealand is fairly similar to that in the United States seeing as they both basically derive from common law. How is the mortgage lien structured such that they have a completely free right to foreclose at any time without any material violation of the mortgage terms?
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May 10, 2018 03:30
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BEHOLD: MY CAPE posted:How do they sell the house at any time? I assume that title and foreclosure law in New Zealand is fairly similar to that in the United States seeing as they both basically derive from common law. How is the mortgage lien structured such that they have a completely free right to foreclose at any time without any material violation of the mortgage terms? Correct it's quite similar in terms of closing the sale. So the scenario you are asking about is when there is still a portion of the mortgage in fixed term. What the bank does is to calculate the difference in interest rate given they will have to lend the money at current rates. The the difference between a higher existing rate and the current rate multiplied by the remaining time is the break cost + fees. When the current interest rate is higher there's no break cost other than the administration fees. Break costs got really high around 2015 as people were breaking 6-7% mortgages when the rates were 4-5%. Most mortgages are on 1 year fixed so if someone plans to sell they let the fixed term expire and roll over into a floating rate mortgage. The right to foreclose at any time is not used under normal circumstances and it only seems to be there for the purpose of protecting the bank's interests if someone decides to try to stop a mortgagee sale by taking legal action. Given the recent uptick in mortgagee sales here and that the specific clause has not been amended it appears to be effective. On the flip side if the bank decided to just randomly sell someone's house and the payments were current they would need to come up with a good explanation as I am sure there are other provisions in the applicable legislation that would apply. Such an action would draw media attention (along with insolvency speculation). A complaint to the banking ombudsman would likely resultant in a more appropriate solution (unofficially each complaint costs about $30k-$50k of bank money and time to address so that process is avoided where ever possible). There are protections, and no bank would want to draw unwanted attention while the Royal Commission in Australia is investigating bank activities, and the financial media in New Zealand has been putting the pressure on the Reserve Bank of New Zealand for an investigation here. Hopefully that's a more complete answer as to how the process works in practice.
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May 10, 2018 05:36
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Also Australian here - another thing to consider is that mortgage offset is a tax free return effectively. Sorry if you’ve already thought of that; but you don’t pay tax on “interest you didn’t pay” because of the offset, so that might make your numbers look differently. I think taking some of your big lump in offset and moving it to Vanguard then splitting future contributions is smart!
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May 14, 2018 05:32
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Hi, I'd like to get advice on whether my 401k fund allocation is correct for me. I'm 24. Previously I was just contributing 6% (employer match) but recently I upped it to like 25% so that I'll have it maxed out by the end of this year ($18500). My current allocation is: * 24% bonds * 39% large US equity * 15% small/mid US equity * 22% international equity Is this allocation correct? Or should I just change it to a Target Retirement 2060 Fund? (I'm pursuing FI/RE with the ultimate goal of retiring by 45ish, if that changes anything). Also, how do I know if the fees are too much? What's a good reference point? Dangerous Mind fucked around with this message at 04:34 on May 16, 2018 |
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May 16, 2018 04:21
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Dangerous Mind posted:Is this allocation correct? Or should I just change it to a Target Retirement 2060 Fund? (I'm pursuing FI/RE with the ultimate goal of retiring by 45ish, if that changes anything). 24% bonds is pretty high if you are targeting FIRE. You likely need/want to be more aggressive than that. If targeting ~20 years out, even the Vanguard 2040 fund is only ~15% bonds, which also assumes that you are on a traditional age ~65 retirement path so you would be ~45 today if you are invested in that fund. You're much, much younger than that and should probably be more aggressive in equities. You've got time to ride out the ebbs and flows of the equity markets, you are not in a capital preservation phase yet. And fee wise, hopefully you have passive index funds with ERs in the <0.2% range. Anything under that I'd consider good enough to not fret about. If you're stuck with active funds, hopefully they are under 1%, ideally under like 0.6~0.7% and they are relatively close to their benchmarks. quote:Or should I just change it to a Target Retirement 2060 Fund? This may not be a bad plan of action if you want to put it on autopilot for a while. Vanguard 2060 is sitting at about 54% domestic equities, 36% foreign equities, and 10% bonds. That's probably more inline with what you should be targeting at only 24. Guinness fucked around with this message at 05:07 on May 16, 2018 |
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May 16, 2018 05:01
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Dangerous Mind posted:Hi, I'd like to get advice on whether my 401k fund allocation is correct for me. I'm 24. Previously I was just contributing 6% (employer match) but recently I upped it to like 25% so that I'll have it maxed out by the end of this year ($18500). Way to go on getting this maxed out. Focus on increasing income and keeping spending at your current level and you will be FIRE before you know it. Guinness is right on all counts. Bond allocation is too high for someone focused on FIRE; 50+ year strategies historically depend heavily on high equity allocation and you're on the low end. You probably want to look more at FIRE withdrawal and maintenance strategies in order to position yourself correctly when you pull the trigger, but in the meantime Target Retirement 2060 is a fine place for the foreseeable future. Do make sure the ER either isn't terrible (0.1-0.4%, lower is better), or at least isn't substantially worse than the cheapest broad index funds available in the 401k. In the latter case, you would invest in the broad index fund(s) and use a taxable or IRA account to add diversification in the appropriate areas.
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May 16, 2018 12:28
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Looks like I've got an ER of 0.198%.
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May 17, 2018 03:07
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Dangerous Mind posted:Looks like I've got an ER of 0.198%. For a 401k, that's very competitive as long as there are no other fees charged directly to your account. Any such fees can quickly bump up the effective ER meaningfully all the way into hundreds of thousands of assets, and it's much worse on the low end quite often. Additionally, some places add "proportionate" fees where you pay an effective ER fee for the 401k provider.
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May 17, 2018 03:20
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baquerd posted:For a 401k, that's very competitive as long as there are no other fees charged directly to your account. Any such fees can quickly bump up the effective ER meaningfully all the way into hundreds of thousands of assets, and it's much worse on the low end quite often. Additionally, some places add "proportionate" fees where you pay an effective ER fee for the 401k provider. Ya, if that's your total effective ER then I'd say you're in good shape. It's not the absolute-best-possible, but it's way better than most and the marginal difference between 0.2% and 0.05% is not that huge in actuality. With ERs under 0.2% your allocation matters more than chasing a few bps.
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May 17, 2018 03:42
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Quick sanity check: I want to "retire" (likely w/ some side income) as early as possible. I've been maxing IRA/401k and adding to a taxable account for the past ~4-5 years. As long as I plan on actually living past 59.5, it makes sense to continue maxing 401k, yeah? Is there ever an inflection point where you have too much 401k-to-taxable ratio, and that you should instead have a higher amount in a taxable account to support your years before 59.5? Or is it safe to assume that I'll always either be able to spend close to the full 401k balance in retirement, or worst case, take substantially equal periodic payments? Current savings: Taxable: $102k 401k: $88k IRA: $30k HSA: $6k Total: $226k No real goals outside of retiring early. I plan on renting for the rest of my life and will very likely not have kids.
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Jun 8, 2018 21:45
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Blinky2099 posted:Quick sanity check: I want to "retire" (likely w/ some side income) as early as possible. I've been maxing IRA/401k and adding to a taxable account for the past ~4-5 years. As long as I plan on actually living past 59.5, it makes sense to continue maxing 401k, yeah? Is there ever an inflection point where you have too much 401k-to-taxable ratio, and that you should instead have a higher amount in a taxable account to support your years before 59.5? Or is it safe to assume that I'll always either be able to spend close to the full 401k balance in retirement, or worst case, take substantially equal periodic payments? Assuming you are OK with your 401k being used to replace your income (as opposed to being a bank account that you can withdraw arbitrary amounts from at will) then SEPP means that having more money in tax-advantaged vehicles is going to be better, all else being equal.
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Jun 8, 2018 22:19
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Blinky2099 posted:Quick sanity check: I want to "retire" (likely w/ some side income) as early as possible. I've been maxing IRA/401k and adding to a taxable account for the past ~4-5 years. As long as I plan on actually living past 59.5, it makes sense to continue maxing 401k, yeah? Is there ever an inflection point where you have too much 401k-to-taxable ratio, and that you should instead have a higher amount in a taxable account to support your years before 59.5? Or is it safe to assume that I'll always either be able to spend close to the full 401k balance in retirement, or worst case, take substantially equal periodic payments? How old are you and at what age do you wish to retire?
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Jun 9, 2018 04:39
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Animal posted:How old are you and at what age do you wish to retire? As long as I'm safe to just dump 18.5k into 401k every year and it's basically never a disadvantage (assuming I have no interest in buying a house or needing a ton of cash for anything else) then I'll just blindly keep maxing stuff and make decisions down the road about when I can/cannot retire rather than stress now, I guess... right?
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Jun 9, 2018 04:48
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Blinky2099 posted:27 now. I used to have a really aggressive goal of ~33-35 but recently changed careers & dropped income quite a bit (so that I can enjoy work more) so I'm not saving enough for that goal now. I'm constantly stuck between "I can retire at $400k and just make sure I always have side income" and "I need at least $1M saved period." It also doesn't help that I only have a very rough estimate of my expected expenses, especially due to uncertainties around healthcare cost, living expenses only being a rough guess, side income no loving clue, and then adding safety factors on top for market variance and all that. You also have options like a Roth IRA conversion ladder to access those funds early, meaning that as long as you have five years worth of living expenses in taxable accounts when you pull the trigger then you should be good to go.
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Jun 9, 2018 16:55
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HummedExplosions posted:You also have options like a Roth IRA conversion ladder to access those funds early, meaning that as long as you have five years worth of living expenses in taxable accounts when you pull the trigger then you should be good to go. Oh yeah, thanks. I forgot this was even a thing. Also, apparently paying the 10% early withdrawal fee is better than putting money in a taxable account? I'll just continue maxing 401k. although I think I need to start contributing more to traditional instead of Roth if I assume I'll have much lower tax brackets come early retirement time.
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Jun 9, 2018 19:55
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Blinky2099 posted:Oh yeah, thanks. I forgot this was even a thing. Also, apparently paying the 10% early withdrawal fee is better than putting money in a taxable account? I'll just continue maxing 401k. although I think I need to start contributing more to traditional instead of Roth if I assume I'll have much lower tax brackets come early retirement time. Edit: Seconding Roth ladders. baquerd fucked around with this message at 00:28 on Jun 10, 2018 |
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Jun 10, 2018 00:25
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Hey friends, it's me, the local neighborhood gambling addict whose thread annoyingly bubbles up to the top of BFC way too often. Over the last six months I've managed to turn my budget and spending around to the point where I'm actually saving money instead of putting it to credit card interest. And so, obviously, now that I've hit zero net worth I'm instantly thinking about early retirement. My goal is age 40 or so (which would be a decade from now) but even the most generous massaging of firecalc assumptions aren't looking good for that date; I simply don't make enough money. Which is fine! I'm not optimistic about staying in my job forever, but I do enjoy it enough that I don't NEED to retire asap. I can afford to invest about $1000 a month in addition to $300~ in 401k pre-tax contributions (maxing out employer match and then some), so 20 years is more likely than 10, but we'll see. I'm mostly just posting in here to force myself to take a look at my current retirement plans which i haven't logged into and looked at for years. Now that i've done that, here's my current situation and plans if anyone wants to comment: ~$50k in 401k from current job and last one combined. Current allocation is Vanguard 2040 and the ER is 0.09, I believe. $15k in emergency fund (someone convince me this is overkill, I know it is but worry about being unemployed for a year or something and don't want to have to touch credit cards again) $5500 in Roth IRA -- Just deposited this, waiting for it to clear. Not sure where to allocate it for the time being, the plan is to drop another $5500 in early next year and pick up VTSAX. VTSMX for now? I've listened to and read a lot of FI material and everyone seems to love VTSAX as the main long-term investment (at least on the volatile side). I'm probably going to have a lot of dumb questions so apologies and thank you in advance! e: i know there's a retirement/investing thread this might be more suited for, but i'm kind of viewing it specifically through the FI lens of what I'll need at 40-50 and not 67+. If it should be there instead feel free to tell me to scram
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Jun 25, 2018 17:25
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Spokes posted:Hey friends, it's me, the local neighborhood gambling addict whose thread annoyingly bubbles up to the top of BFC Congrats on zeroing your net worth it’s a huge step, as is the commitment of saving your money in the Roth. I love my Roth. Once you find actual enjoyment in saving, it becomes easy. How old are you? And if you don’t mind me asking, what your gross income now, what you expect it to be in 10 years, and same for cost of living?
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Jun 25, 2018 17:49
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Spokes posted:My goal is age 40 or so (which would be a decade from now) but even the most generous massaging of firecalc assumptions aren't looking good for that date; You will also need to factor in what a safe withdrawal rate looks like for you. If you want to retire at 40, you may need that money to last 50 years. That means that withdrawing 4% a year is probably too risky. Something like 3.5% or even 3% is more appropriate. Make sure that you are ok with the amount of risk you are potentially taking as well. The stock market has been going up for the last decade, so it's easy to say that you want all of your money in stocks (VTSAX). If your portfolio drops from $200k to $100k over the course of 1-2 years, could you handle that? Your emergency fund seems fine. You want enough to cover any reasonable expenses you may face, including extended joblessness.
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Jun 25, 2018 18:21
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Animal posted:Congrats on zeroing your net worth it’s a huge step, as is the commitment of saving your money in the Roth. I love my Roth. Once you find actual enjoyment in saving, it becomes easy. How old are you? And if you don’t mind me asking, what your gross income now, what you expect it to be in 10 years, and same for cost of living? Gross income now is ~43k, I expect to be around $56k in 10 years. Cost of living is currently $24k a year, I don't expect it to increase, so $29-30k with inflation? I also plan to earn extra money in retirement but don't plan to count on it. Inept posted:Make sure that you are ok with the amount of risk you are potentially taking as well. The stock market has been going up for the last decade, so it's easy to say that you want all of your money in stocks (VTSAX). If your portfolio drops from $200k to $100k over the course of 1-2 years, could you handle that? This is a great point -- Long-term I'm considering something like what's outlined in the If You Can booklet, just keeping equal amounts in a US stock fund, International stock fund, and US Bond fund. I wanted to hop right into VTSAX with my first two years' contributions since it puts me over the threshold but maybe I should just do VTSMX for a third while investing equally in bonds/international and then once the US Stocks portion of my portfolio hits 10k THEN move it over to VTSAX.
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Jun 25, 2018 19:46
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for what it's worth most FIRE stuff is predicate on going extremely stock heavy
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Jun 25, 2018 19:48
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Spokes posted:Gross income now is ~43k, I expect to be around $56k in 10 years. Cost of living is currently $24k a year, I don't expect it to increase, so $29-30k with inflation? I also plan to earn extra money in retirement but don't plan to count on it. Allocation is FAR more important than the literal few dollars in expense ratio between Investor/Admiral share classes. Buy the ratio you want and worry about converting to Admiral shares some day in the future.
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Jun 25, 2018 19:49
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I've been reading this thread for the last couple of weeks and I am finally caught up. While it was some time ago, a few pages back people were talking about withdrawal strategies and it reminded me of this blog post on the same subject: https://rikatillsammans.se/uttagsstrategier/ It's in Swedish, but google translate does an ok job of translating it. As well as variations on the 4% rules, it mentions a simple rule of thumb method: quote:"Feel free" and "No more than" rules Not the most scientific method, but perhaps good enough for quick estimates. However, the more interesting part of the post was this: quote:Vanguard's dynamic hybrid model So for example, you have $1,000,000. The first year you decide to take out 4%, so $40,000. All simple. But you use that 40k to calculate the floor and ceiling rate for next year. If we use -2.5% and 5% that'd be 39,000 and 42,000. Now imagine your portfolio does well and you end that year with $1,060,000. If you were to take 4% again, that would be $42,400, but that is over the ceiling so you only withdraw $42,000. On the other hand, imagine your stocks fell and you were down to $940,000. 4% of that would be $37,600, but that is below the floor so you would withdraw $39,000. It seems like if you can accept your income form capital varying a bit you can withdraw a bit more on average since overall the market is up more than it's down. I also found the Vanguard paper about it here: https://vanguard.com/pdf/icrmda.pdf and there's a few other interesting links at the end of the blog post from Vanguard and others.
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Jul 1, 2018 16:21
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Blinky2099 posted:Oh yeah, thanks. I forgot this was even a thing. Also, apparently paying the 10% early withdrawal fee is better than putting money in a taxable account? I'll just continue maxing 401k. although I think I need to start contributing more to traditional instead of Roth if I assume I'll have much lower tax brackets come early retirement time. Re: numbers, $400k is a good interim goal to shoot for if the million seems like it's just too far away to be motivating. But unless you're planning some truly serious geo-arbitrage, having $400k saved is less financial "independence" and more financial flexibility. I've found that it's really helpful, for me at least, to have the end goal in mind, but to keep my focus on yearly targets that bring about satisfying progression. Like, eliminate student loans -> put what would have gone toward that into taxable account for house down payment -> purchase home -> if market is lovely, pay down mortgage, if market is good, contribute more to taxable account, etc... If you're already maxing out your tax-advantaged contributions and saving/investing %50+ of your income in sensible ways, there's probably not much else that you can tangibly be doing toward the end goal. But targeting and observing smaller victories along the way can help a lot toward staying motivated.
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Jul 28, 2018 19:58
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Ersatz posted:Re: numbers, $400k is a good interim goal to shoot for if the million seems like it's just too far away to be motivating. But unless you're planning some truly serious geo-arbitrage, having $400k saved is less financial "independence" and more financial flexibility. I don't expect to stop having side-income projects & I'm crazy confident that I can at least make decent side income doing virtually whatever, but it's just so crazy hard to predict. Will I actually want "do nothing" for 2 years? How much will health insurance eat away at this if I retire at 35 instead of 40 or 45? Then all the calculations assuming my side income is 15k/year, or 25, or 0... $1MM definitely seems excessive for me considering I never want to own a house or have kids and definitely plan on side work and kicking rear end at it for at least some amount of money, but it's hard to find a goal that feels "right." At this point I'm so far away from anything that would actually result in the ability to make a drastic change that I figure it's not even worth doing the exercises anymore until i actually start approaching that ~$500k or $600k number; at least at that point health insurance costs will be better understood & I'll have a better feel for side-income (perhaps I'll be making even more side-income by then.)
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Jul 29, 2018 00:42
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Blinky2099 posted:For sure, I just don't really know what $400, or 600, or 800 gets me. I'm at $243k right now in pure investment (hsa/401k/ira/taxable) and I definitely.. like the feeling of having it, because it's added security in case I lose a job or want to do a couple years of my own thing, but the opportunity cost of not working and continously shoving additional money into accounts would still be so high that it doesn't seem like it'd make sense. That said, the 4% rule for "safe" withdrawals works as a rough guide to what you can realistically expect out of your investments. If you were suddenly unable to continue working and the -only- income that you had came from your nest egg, most financial advisors would tell you that, assuming average historical returns and inflation, you could withdraw 4% annually without reducing the principal. So, $1 million earning 7% on average gets you the equivalent of $40k of retirement income year after year, in today's dollars (after adjusting for 3% inflation). Ersatz fucked around with this message at 01:59 on Jul 29, 2018 |
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Jul 29, 2018 01:47
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I'm a bit scared of 7% assumption, and 3 or 3.5% looks a lot safer than 4 especially when retiring early, and I'll probably have to have a decent chunk of the portfolio not in stocks at the point of retiring right? plus health insurance, figuring out withdrawal schedules when this early, dealing with swings... but yeah, $1MM seems reasonable at like 30k/year if I can manage to actually live comfortably off of that after health insurance (not sure but probably.) $1MM is also absurdly far away so I'll just keep reevaluating every couple years.
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Jul 29, 2018 02:35
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Blinky2099 posted:I'm a bit scared of 7% assumption, and 3 or 3.5% looks a lot safer than 4 especially when retiring early, and I'll probably have to have a decent chunk of the portfolio not in stocks at the point of retiring right? plus health insurance, figuring out withdrawal schedules when this early, dealing with swings... but yeah, $1MM seems reasonable at like 30k/year if I can manage to actually live comfortably off of that after health insurance (not sure but probably.) $1MM is also absurdly far away so I'll just keep reevaluating every couple years.
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Jul 29, 2018 03:05
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It seems that most people who achieve financial independence don’t just sit on their rear end withdrawing 4%. The financial freedom allows them to take on or discover part time gigs or hobbies that they totally enjoy. Something like working for a non profit, agriculture, teaching, bartending at your favorite bar, arts, stuff that in on itself would not generate enough money. But when you are already withdrawing $30,000 then that extra $20,000 from the gig you love will let you live comfortably. And more importantly give you purpose and pride.
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Jul 29, 2018 04:52
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Animal posted:It seems that most people who achieve financial independence don’t just sit on their rear end withdrawing 4%. The financial freedom allows them to take on or discover part time gigs or hobbies that they totally enjoy. Something like working for a non profit, agriculture, teaching, bartending at your favorite bar, arts, stuff that in on itself would not generate enough money. But when you are already withdrawing $30,000 then that extra $20,000 from the gig you love will let you live comfortably. And more importantly give you purpose and pride. But the peace of mind that would come with not having to worry about working for profit ever again is pretty inticing, and makes the prospect of grinding out a few more years to hit fat fire bearable. That's especially the case given that the things that I truly enjoy doing aren't likely to generate any kind of reliable income. I'm also pretty well aware of the limitations that come with disability, and I wouldn't want to have to rely on a potential side gig that I might not be able to work 20-30 years out. Better to ensure freedom first and then decide later whether I'm actually going to want to work for money later, assuming that I'm able to. Time is the enemy, and to my mind the entire point of "retiring" early is to be able get as much meaning and enjoyment out of life as you can, while you're still able to appreciate it. We're all dead in the long run, after all. So, having said all that, I think that it's absolutely worthwhile to imagine scenarios in which you are simply unable to earn money through work, and to do what you can to prepare for them in advance. The 4% rule is a useful thing to have in mind, for that purpose. Ersatz fucked around with this message at 06:36 on Jul 29, 2018 |
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Jul 29, 2018 06:28
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| # ? May 19, 2024 05:30 |
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Ersatz posted:So, $1 million earning 7% on average gets you the equivalent of $40k of retirement income year after year, in today's dollars (after adjusting for 3% inflation). I strongly recommend actually reading the research you're planning your life based on rather than relying on internet hearsay.
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Jul 29, 2018 06:53
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