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asur posted:The bolded isn't correct. The 4% rule assumes 6%-7% gains with inflation at 2%-3% for a real return of 4%, swings in the market should not be that relevant as investments should be moved to less risky and volatile assets as you grow older. This isn't quite accurate either. From the Trinity study, and from everyone's favorite direct application thereof (https://www.firecalc.com), you will see that there is generally a strong negative impact in moving your money to less risky and volatile aspects over the course of a retirement, assuming that the goal is not to draw down principal over a long enough timespan.
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Oct 18, 2015 00:17
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T. J. Eckleburg posted:Partnership is awesome but if I we broke up I don't think he would know how to feed himself and I'd probably never have a clean bathroom again so there's that downside. What's up I-cook-and-they-clean buddy? It works well for me and my wife. She does make her own lunches of crackers and cheese and similar things on that level, but I cook all the actual meals. I hate cleaning above any other chore, so she basically does all of that and I just help move furniture as needed. She does laundry too (I'm happy to but I don't do it right apparently), and I do 90% of the outside work and all the "poo poo is falling apart" maintenance work.
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Apr 9, 2016 00:45
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Rick Rickshaw posted:Yea I can't think of anything worse off hand. The answer is always horses.
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Sep 21, 2016 11:51
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silvergoose posted:7200/12 is what, 600 a month? Maybe he lives with roommates? You can still get $600 studios and even one bedrooms in major cities too, as long as you aren't picky about location.
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Sep 21, 2016 15:34
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Agile Sumo posted:This depends on the city, good luck finding anything close to that in Seattle. I pay $1300 for a 1 bedroom and that's a good deal too. The average for a 1 bedroom is $1980. Chicago has them, they're just in really sketchy or inconvenient neighborhoods in the city boundaries.
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Sep 22, 2016 03:18
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Blinky2099 posted:Withdrawing 4% of your balance each year was mentioned in I think the long-term investing thread; doesn't this mean that someone could hypothetically retire at any age as long as they have, say, $500,000 in their savings account, and can live happily off of $20k for the rest of their lives? another probably better/more realistic example would be $1,000,000 and living off of $40k. your balance will go up and down but if your average rate of returns are 4-7% then you are basically living off of gains forever right That's the basic idea. Even if market volatility drops your principal below your starting point, a 4% rate of withdrawal historically leads to success (but not by keeping in savings accounts most certainly). Check out http://firecalc.com/
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Oct 5, 2016 18:47
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Rick Rickshaw posted:It's 4% of your original balance (when you started to draw down), plus inflation, right? Not 4% of your balance every year. Most people mean the former, giving income stability at increased risk. The latter gives income volatility in exchange for essentially no risk. There was a recent post in the long term thread: http://forums.somethingawful.com/showthread.php?threadid=2892928&userid=0&perpage=40&pagenumber=403#post464924976
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Oct 5, 2016 19:03
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Ralith posted:As I emphasized, the 0% tax strategy only works if you have significant after-tax investments that you can draw down. If for whatever reason the sum total of your net worth is in Traditional IRAs and 401(k)s, then yes, it won't be as useful a strategy, but if you do have enough post-tax savings to live on for a while, then every single year you can do such a conversion saves you thousands of dollars in taxes. This was made clear both in the article and in the posts you replied to. It also only works as long as there's a 0% LTCG rate, which could be going away as soon as next year if the house republicans get their way.
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Dec 8, 2016 22:12
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Thinking of pulling the trigger on FI again, but I don't really want all the hassle of starting my own business (I'm in big-data software at the moment). When I get bored, I tend to do silly and non-productive things, but maybe that would change if I didn't have a job? Anyone out there who has pulled the trigger who can talk about how their priorities changed and such? My wife and I are looking at our first kid sometime next year, so continuing to have 100% subsidized insurance through work is a nice to have if things go badly, but unless our expenses skyrocket (as they easily could if a kid were to be born hosed up enough), we're good to go financially. My wife is 100% stopping work when she gets pregnant, just my employment is in question.
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Dec 27, 2016 15:27
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Droo posted:4% withdrawal rate and $2000 per month both seem incredibly optimistic to me. Health insurance alone is probably going to cost you an average of $500-$1000 per month until you get to medicare, if it's even there anymore. A 4% withdrawal rate is based on the idea that at some arbitrary point you decide you are "retired" and take 4% of your portfolio out for expenses, and every subsequent year, you take out 4% of your original portfolio at retirement, adjust for inflation, and withdraw it. You never contribute anything new, you never reduce withdrawals. Historically, following this exact protocol, a blended 75/25 stocks/bonds portfolio has a success rate of 95% over 30 years and 82% over 50 years. That's pretty darn safe considering the givens applied aren't very given at all. Blinky2099 posted:oh god dammit, I'm not taking into account income tax during withdrawals so i really need to add like 25% or something to those numbers right No, not really. It's complicated, but basically your taxes paid on LTCG are either 0% or 15% of the gains, until you're making over $400k or so a year. Not only that, but not all of your withdrawals will be LTCG, some will be non-taxed principle, and some will be tax sheltered (see roth ira ladder et al.). Then there's your standard deduction among others that reduces the gross taxable amount. As a married couple, you can clear almost 90k in income, in your pocket, tax-free, in an optimal scenario comprising mostly LTCG.
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Jan 7, 2017 03:24
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Droo posted:The origin of the "4% rule" was based on a high likelihood of not completely running out of money within 30 years when looking at a portfolio of US investments. I consider it optimistic for a 25 year old because 30 years is not long enough, and in my opinion it is unrealistic to expect global returns over the next 200 years to look like they did over the last 200 years in the United States. Yeah, I strongly disagree with this. Early retirement people typically seem pretty risk adverse, but isn't it interesting that the super stars of this world tend more towards risk-taking? You can play it as safe as you want, but if your budget has flexibility and you're planning on working even a little bit, the 4% rule becomes a bit conservative unless you assume economic ruin on a scale never seen before in the US.
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Jan 7, 2017 03:36
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Droo posted:You said yourself that the 4% rule failed 18% of the time in the backtesting over a 50 year period.. so I'm not sure why you think it's never happened before. Because the 4% rule is based on you acting like a lemming and never adjusting spending or finding a source of income. Retirement isn't video games and smoking pot 24/7, people who are driven to save this way typically don't go for that sort of thing.
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Jan 7, 2017 03:40
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Droo posted:I think you should really read some early retirement boards.. I'm not sure the average person who does it is fits this profile you seem to have in your mind. And most of them are realistic enough to know that it is going to be very hard to find a job as a 60 year old who hasn't had a job in 10 years, and they want to make sure they don't end up in that situation due to events beyond their control. Well, I'm FI and have cut back hours and am about to "retire" while doing various things I feel like doing for very modest income. I guess we don't read the same boards, because I've seen that poo poo on ERE and perhaps a touch of it here and there elsewhere, but most of what I'm reading is far more optimistic. If you "retire" and gently caress off and don't keep working for 20 years and don't keep monitoring your poo poo, yeah, you might have some problems. If you "retire" and work part-time in various ways, perhaps start your own business, your investments do better than the worst possible case scenario, etc. well, it's a different story. Your point is taken though on someone planning on doing this on $2k a month, that's going to take a special level of dedication to maintain for someone with earning power.
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Jan 7, 2017 04:05
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Droo posted:Here is a poll and discussion. I put their data into excel and came up with an overall average of 3.7% as the highest SWR people were comfortable with. The average age over there is a lot higher than 25 though.. probably closer to 50/60. One thing I wonder if we're not connecting on is the meaning of SWR? If your SWR is based on desired/ideal income, you would have a very different outcome than if your SWR is based on bare-bones income (I'm using the former).
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Jan 7, 2017 04:19
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Droo posted:I think we aren't connecting because your definition of retirement seems to include continuing to work for additional income. "Retirement" is in quotes in my comments so often because this is the "Financial Independence" thread. Being FI is much more about having sufficient assets that you can walk away from bad life situations with an overwhelming safety net, not necessarily that you could in 100% of scenarios always be able to never have to generate any income ever again.
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Jan 7, 2017 04:25
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Cast_No_Shadow posted:Has anyone (in this thread) looked in detail at the failure cases? If I remember correctly are most of them not based around terrible market conditions in the first few years? Ie the time it is easiest for you to mitigate by contined earning of an income. Yes, sequence of returns risk, as it is known, is hugely prevalent with failure modes.
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Jan 7, 2017 15:04
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Pryor on Fire posted:It's kind of weird, the only advice that doesn't get shouted down is "buy index funds" and "think longer term". Essentially any other advice is bad or even the dreaded "timing the market" (gasp!) I've seen it often means getting into more fun discussions about asset allocations, which aren't talked about enough on SA. There's all sorts of pedantic arguments we can do over them, even while all 100% indexed (when available for the asset class). Edit: Here's my AA, let's get this party rolling! 5% P2P Lending 5% Venture Capital/Debt, individual MLPs, other wackiness like individual stocks 15% US REIT 50% US Equity, (4 : 3 : 3 Market Cap weighting L/M/S cap, Growth/Value even split) 5% Emerging Markets 20% International Developed Equity baquerd fucked around with this message at 13:22 on Jan 9, 2017 |
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Jan 9, 2017 13:19
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Cast_No_Shadow posted:So why would I believe I can pick individual economies better than the market? Fair enough, except when it comes to tax efficient placement.
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Jan 9, 2017 14:20
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Devian666 posted:I like how two of them referred to it as gently caress you money. It's interesting that more people are starting to see that there's more to life than clocking up money like a high score. Your net worth isn't a video game. It will be interesting to see the interplay between highly skilled engineers peacing out and engineering salaries. A money spiral?
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Feb 15, 2017 00:29
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Jeffrey of YOSPOS posted:I found that but I didn't think it was all that great a visual representation - particularly it doesn't seem to take debt into account. It also is a log-log scale with base 10 and 10,000 to 100,000 is a pretty big bucket as far as incomes go. It certainly looks like there's a huge amount of wealth variance for people in that range, but it's hard to tell the density at any point. It certainly appears at a glance to indicate that people in the middle of that bucket, making ~31,000/year have mostly have wealth varying from $1000 to ~$300,000, which is a pretty huge range. (All I can really do here is eyeball standard deviation, sorry.) I imagine that disparity would have a decently large impact on satisfaction. Separating it further by age sounds interesting for sure. If it's net worth, surely that takes debt into account? Otherwise, they would just be labeled "assets" I'd think.
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Mar 21, 2017 21:20
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GoGoGadgetChris posted:The best thing about this process is watching people's reactions when you tell them what your plan for the future is. As soon as you tell people you want to retire early, they roll their eyes, try to hide a smile, and depict your future with all of its horrible sitting in a chair and experiencing various medical and financial emergencies. My favorite is the slightly aware but BWM people who are like "well, you'd need at least 25x expenses to make that happen", and you just say "yep, that's right".
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Apr 19, 2017 00:39
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poopinmymouth posted:The only big downsides are the weather. I'm in a personal rut with my social circle, but I think it's more related to me and my family's current situation (first gay couple to have a child through surrogacy here, we don't exactly fit into many groups in a nation of 320k). As my son gets older I expect it to improve. Weather wise it's just almost always cold, rainy, or snowy. Right now we've had about 5 days in a row of sunny warm weather and my brain is so high on endorphin from the lack of it previously I would definitely love more sun. That's great and all, but other than health/child care, I don't see how any of that helps you FI more quickly than a massive US salary. Poking around at salaries, it looks like making over $150k is very rare in Iceland. Do you see people retired in their 30's/40's in Iceland?
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May 23, 2017 11:52
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Droo posted:There are about as many 25-44 year olds as there are 45-64 year olds in the US. Have you worked with a relatively equal group of software engineers > 45 and < 45 over the years? No, primarily because many engineers don't stay engineers their entire career, they branch into product, management, architecture, etc.
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May 26, 2017 15:40
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Here's what my YTD expenditures look like, including all taxes except sales tax (which is included in the purchase category and is actually quite high at 10.25%). Definitely an interesting view, I added my taxes manually into Mint.
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Jun 4, 2017 17:12
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MiddleOne posted:Looks pretty normal if you're counting payroll tax in that tax estimate....? I'm in the US, seemed pretty extreme to me. Edit: here it is with my savings rate as "Financial" 
baquerd fucked around with this message at 17:41 on Jun 4, 2017 |
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Jun 4, 2017 17:32
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Anyone planning on taking any action based on the current CAPE of 31? I'm at least feeling better to be spending on semi-optional home improvement projects right now instead of boosting my savings rate, but otherwise continuing to invest as normal. I'm early on post-FI and would be very subject to sequence of returns risk except I'm still working.
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Oct 20, 2017 00:41
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Super Dan posted:Can someone explain the CAPE based withdrawal formula to me? CAEY = 1 /30 = 0.033 a + b * CAEY = .01 + 0.5 * 0.033 = .01 + 0.0165 = 0.0265 = ~2.7%
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Oct 20, 2017 22:19
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Ralith posted:1% is .01, not 1. Setting your withdrawal rate above 100% may have negative consequences.
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Oct 21, 2017 01:25
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Anyone ever try taking an indulgence year where you spend everything you earn? Post FI, I'm dicking around with real estate and vaguely trying to find something that doesn't require a commute, but I actually love my job. I'm wondering if I did limo service and other extravagances every day that would make things even more awesome.
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Nov 11, 2017 00:32
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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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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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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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Grumpwagon posted:This is probably in the long term investment thread already, but Fidelity just hugely lowered their expense ratios on a bunch of index funds (forgive the press release style source): Zero expense ratios and no fees. I wonder how long that will last.
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Aug 3, 2018 18:40
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Ersatz posted:I'm wrestling with a financial decision at the moment and I thought it might be beneficial to get some opinions and resources from the thread. Read this (and the entire series): https://earlyretirementnow.com/2017/10/11/the-ultimate-guide-to-safe-withdrawal-rates-part-21-mortgage-in-retirement/ Other than setting realistic expectations and not realizing what are big losses only on paper by selling, sequence of returns risk is abso-loving-lutely the principal concern for FIRE people.
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Oct 12, 2018 21:39
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GoGoGadgetChris posted:Explain how! I disagree emphatically. Read my link above!
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Oct 12, 2018 21:50
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GoGoGadgetChris posted:Yeah that link is not good, lol. If you're caught in the exceptionally rare tail event of a down market on day 1 of retirement, the less costly option is to defer retirement for even one year. If you want to go into early retirement betting on the median/happy path use case, you're absolutely right. If you're 100% confident with your ability to procure a job again after retirement, you're also right. If you don't have anyone to take care of but yourself, go for it! I'm going to guess you haven't read the whole series though. Check this one out: https://earlyretirementnow.com/2018/05/09/the-ultimate-guide-to-safe-withdrawal-rates-part-24-flexibility-myths-vs-reality/ Edit: One important point is that you do not need a black swan to gently caress over your early retirement, a simple matter of middling to poor returns in your first decade can gently caress you over. baquerd fucked around with this message at 22:06 on Oct 12, 2018 |
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Oct 12, 2018 22:03
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GoGoGadgetChris posted:That's a big part of my point. Sequence of return risk is deadlier the closer it is to your Day-you-stopped-working. Fair enough, and I have a lot of sympathy towards your position and am emotionally inclined to believe that I can also find work after pulling the trigger in the near-term of the next 5 years or so post-retirement. Albeit having a 90% equity allocation and claiming conservatism on investments seems strange, once you have something to protect, it's important to me that I take care of my loved ones regardless of the market. GoGoGadgetChris posted:This is interesting to me! Do you feel like home ownership is mandatory for FIRE? Not directed towards me, but full home ownership is a strong protection against sequence of returns risk as previously stated. baquerd fucked around with this message at 22:20 on Oct 12, 2018 |
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Oct 12, 2018 22:18
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GoGoGadgetChris posted:How relevant is the size/health of your family to your investment strategy? I think we're all sharing the same goal of "never run out of money", regardless of whether it's servicing our BMWs or paying for Junior's insulin. Right? In some ways, it's all a spectrum of how willing you are to downsize to meet your potential portfolio issues. There is a lively market in contesting property taxes though, so I'm going to have to contest your second statement. I also raise my rents based on tax increases (and make sure to spell it out to my renters about the increase).
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Oct 12, 2018 22:31
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Jeffrey of YOSPOS posted:Even if there's only one time in your life where you feel compelled to leave, closing costs on selling your house are brutal and often involve paying 6% of the place's value to middlemen, way more than hiring movers to cart your stuff to a new rental unit. Yeah, gently caress the cartel. Realtors are pieces of legacy garbage that need to be removed from society. They can still exist for the tiny few buyers that don't want to educate themselves to save thousands though I guess. GoGoGadgetChris posted:Exactly! You've got the freedom to change price points, neighborhoods, cities, states, anything you want. If you do that with a house, you're either going to sell it (and take a haircut from broker's fees) or rent it out, and suddenly you're a landlord to one of the worst investment vessels you could make. You probably don't have kids. This would mean a likely major disruption in their life. Even without kids, you and your partner's commute and quality of life can be really hosed with by a move if you want to still be playing the "maybe I'll just go back to work" card. baquerd fucked around with this message at 22:52 on Oct 12, 2018 |
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Oct 12, 2018 22:50
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GoGoGadgetChris posted:Nah, you're trying to hard to complicate ER. My kids have loved moving. Who wouldn't want to get a new bedroom in a really tall tower? And then a big house?? You can move houses without changing school districts, too. I'm not going to say your approach is wrong, certainly, to each their own. I hope everything works out for you, but I'm pursuing a more conservative approach.
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Oct 12, 2018 23:11
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