Financial Independence How to stop playing after you've won the game? |
- How to stop playing after you've won the game?
- FIRE path from High School to Army/Air Force/Marines/Navy or coast Guard.
- The Father of Index Funds Sounds a Warning on Index Funds
- I got divorced. I had a prenup, so my FI/RE goals weren't affected much.
- Daily FI discussion thread - November 29, 2018
- What withdrawal rate would you use for theoretical infinite amount of time?
- Have you ever tried the FIRE lifestyle?
- Struggling with spending money
- Odd question about maximizing adoption tax credit?
- Does FIRE mean sacrificing your 20s?
| How to stop playing after you've won the game? Posted: 29 Nov 2018 01:05 PM PST Have not FIREd yet, mostly due to a nagging worry that a 3% SWR is not enough for potentially a 40-60 (max) year retirement. That seems silly, yet I have a hard time being completely comfortable with the idea. I guess it's like bungee jumping. You know very likely you will be fine, but taking that step off the edge is hard! Sooner or later I will be mistreated at work (happens to most if not all) - and maybe that will be the push I need! My question for those that are FIREd: did reaching a particular SWR trigger you setting your FIRE date, or a bad work situation, or something else? [link] [comments]  |
| FIRE path from High School to Army/Air Force/Marines/Navy or coast Guard. Posted: 29 Nov 2018 11:21 AM PST Not sure if this is relevant but I imagine many of you have kids potentially thinking of serving. While the pay is not great, there are a lot of things not commonly known. I responded to another post with this only to find out the poster wasn't thinking of going into a U.S. branch of service. Not a great writer but here it is. ------------ There are camouflage million(s) that many who enlist after high school to serve never see because they don't think about it up front, you are doing that. First of all if you join up and do 20 years you will have a pension for life (that starts the day you retire) and almost free healthcare (its totally free while serving). Assuming you only make it to E7 (versus E8 or E9) you will walk away getting (in today's dollars) 40% of $5,237.41 so roughly 2000 bucks a month for life indexed to inflation. Take that grand and assume 25% in taxes (it is taxed federally and potentially by the state depending on your state) and its 1500 bucks a month or 18 grand a year after taxes. Now lets factor in health care. I am retired and pay $600 a year (wife and I) for health care and it is great healthcare (we use doctors we choose). I'm not sure what others that are not on tricare (military healthcare) pay but i imagine its near 10 times that amount. I'm not up on how much 401k (TSP in military speak but its a 401K) matching the military does now (its new and also why you get 40% now versus 50% of your pay at retirement). But up front if you did 10% of your income and then put half of your annual raises I think you could conservatively amass over 500 grand. Speaking of raise, you get them often and they are not performance based, they are based on time. Every year I got a cost of living raise, my first 5 years i also got an annual raise (after that it was every 2 years), plus you get raises when you get promoted and you will (assuming you don't get in trouble) get promoted, those are set periodically too. And as mentioned the pay isn't great (at first, its competitive after 5 years) so you likely would amass all of that in a Roth 401K so tax free withdrawals. Now with all that said you are 37 or 38 years old when all this goes down. A pension of 18 grand a year (today's dollars), healthcare for life for ~600 bucks a year and a half million in a tax free account. Now at that young age you do what you want to. Add in the fact that most enlisted service members get "at least" a bachelors degree for free while serving. I would say that pension package, health care and 401K is worth more than a million dollars and your under 40 years old and in great shape. The pay is better than most think. what they see in the military pay tables is based on one living in the barracks free and using the army dining halls (also free meals). If you live off post you get a tax free housing allowance based on the location and you get a stipend for not using the dining halls (you still can but would pay for each meal). Let's also talk your health. while you are serving you will stay in good shape, you will go to the doctor for checkups periodically and you will see the dentist periodically, all free. so when/if you do retire or get out, your in good health. Many by the age of 37-38 are already in less than average health condition, you won't be. My advice to you is to talk to all of the services (Army, Navy, Marines, Air force and coast Guard) about the opportunities they have. Please do this you never know what they will offer (sometimes bonuses for enlisting). It's fine to want to be one of the elite marines but if your potentially going to make the military a career you may want to go into a specialty that translates to the civilian world. You still will be doing all of the basic war fighter skills, but will learn a craft that pays $$$ when you depart. For example cyber warfare, supply/logistics, aircraft mechanic, load master for cargo planes, communications etc. All of those specialties are in high demand once you depart. We need young men and women to get into the "lets be on the front lines" for our country but that skill set (other than leadership) doesn't translate the best when you get out (especially if you do not do the whole 20 years and leave only with your 401K). Typed this fast but feel free to be in touch. And after all that typing I see your in England i think and i have no clue how there system works but have served with many brits and they are fine war fighters. [link] [comments]  |
| The Father of Index Funds Sounds a Warning on Index Funds Posted: 29 Nov 2018 03:06 PM PST TL/DR: Due to the significant growth of index fund use, voting rights and control of public companies are held by an ever shrinking group of index fund managers (Vanguard, Blackrock, Fidelity, State Street) https://www.wsj.com/articles/bogle-sounds-a-warning-on-index-funds-1543504551 There no longer can be any doubt that the creation of the first index mutual fund was the most successful innovation—especially for investors—in modern financial history. The question we need to ask ourselves now is: What happens if it becomes too successful for its own good? The First Index Investment Trust, which tracks the returns of the S&P 500 and is now known as the Vanguard 500 Index Fund, was founded on December 31, 1975. It was the first "product," as it were, of a new mutual fund manager, The Vanguard Group, the company I had founded only one year earlier. The fund's August 1976 initial public offering may have been the worst underwriting in Wall Street history. Despite the leadership of the Street's four largest retail brokers, the IPO fell far short of its original $250 million target. The initial assets of 500 Index Fund totaled but $11.3 million—falling a mere 95% short of its goal. The fund's struggle for the attention (and dollars) of investors was epic. Known as "Bogle's folly," the fund's novel strategy of simply tracking a broad market index was almost totally rejected by Wall Street. The head of Fidelity, then by far the fund industry's largest firm, put the kiss of death on his tiny rival: "I can't believe that the great mass of investors are [sic] going to be satisfied with just receiving average returns. The name of the game is to be the best." Almost a decade passed before a second S&P 500 index fund was formed, by Wells Fargo in 1984. During that period, Vanguard's index fund attracted cash inflow averaging only $16 million per year. Now let's advance the clock to 2018. What a difference 42 years makes! Equity index fund assets now total some $4.6 trillion, while total index fund assets have surpassed $6 trillion. Of this total, about 70% is invested in broad market index funds modeled on the original Vanguard fund. Yes, U.S. index mutual funds have grown to huge size, with their holdings doubling from 4.5% of total U.S. stock-market value in 2002 to 9% in 2009, and then almost doubling again to more than 17% in 2018. Even that penetration understates the role of mutual fund managers, as they also offer actively managed funds, and their combined assets amount to more than 35% of the shares of U.S. corporations. If historical trends continue, a handful of giant institutional investors will one day hold voting control of virtually every large U.S. corporation. Public policy cannot ignore this growing dominance, and consider its impact on the financial markets, corporate governance, and regulation. These will be major issues in the coming era. Three index fund managers dominate the field with a collective 81% share of index fund assets: Vanguard has a 51% share; BlackRock, 21%; and State Street Global, 9%. Such domination exists primarily because the indexing field attracts few new major entrants. Why? Partly because of two high barriers to entry: the huge scale enjoyed by the big indexers would be difficult to replicate by new entrants; and index fund prices (their expense ratios, or fees) have been driven to commodity-like levels, even to zero. If Fidelity's 2018 offering of two zero-cost index funds has established a new "price point" for index funds, the enthusiasm of additional firms to create new index funds will diminish even further. So we can't rely on new competitors to reduce today's concentration. Most observers expect that the share of corporate ownership by index funds will continue to grow over the next decade. It seems only a matter of time until index mutual funds cross the 50% mark. If that were to happen, the "Big Three" might own 30% or more of the U.S. stock market—effective control. I do not believe that such concentration would serve the national interest. My concerns are shared by many academic observers. In a draft paper released in September, Prof. John C. Coates of Harvard Law School wrote that indexing is reshaping corporate governance, and warned that we are tipping toward a point where the voting power will be "controlled by a small number of individuals" who can exercise "practical power over the majority of U.S. public companies." Professor Coates does not like what he sees, and offers tentative policy options—some necessary, often painful to contemplate. His conclusion—"The issue is not likely to go away"—is unarguable. Solutions to resolve the issues connected with the concentration of corporate ownership are not self-evident, but a number of tentative possibilities have already been advanced: • More competition from new entrants to the index field. For the reasons noted above, this eventuality seems highly unlikely. • Force giant index funds to spin off their assets into a number of separate entities, each independently managed. Such a drastic step would—and should—face near-insurmountable obstacles, for it would create havoc for index investors and managers alike. • Require index funds to hold just one company in any industry. Leaving aside the dubious ability of either academia or federal bureaucrats to define precisely what constitutes a given industry, such a drastic change would lead to the destruction of today's S&P 500 index fund, by common agreement, the most beneficial innovation for investors of the modern age. • Timely and full public disclosure by index funds of their voting policies and public documentation of each engagement with corporate managers. This would take today's transparent and constructive governance practices several steps further. • Require index funds to retain an independent supervisory board with full responsibility for all decisions regarding corporate governance. The problem with this idea is that it is not clear how such a board could add to the present scrutiny of the fund's independent directors. • Limit the voting power of corporate shares held by index managers. But such a step would, in substance, transfer voting rights from corporate stock owners, who care about the long-term, to corporate stock renters, who do not... an absurd outcome. • Enact federal legislation making it clear that directors of index funds and other large money managers have a fiduciary duty to vote solely in the interest of the funds' shareholders. While I believe that such a fiduciary duty is implicit today, making it explicit, with appropriate penalties for violations, would be a constructive step. It is time for public officials to consider the pros and cons of these issues with indexers, the financial community, academia, and active managers alike—and develop national policies that support high standards of corporate governance. It will require their working together constructively and cooperatively. But one thing seems crystal clear. Even if present trends continue (sometimes they don't), the enormous value of index funds should not be ignored. First, index funds provide investors with the most effective stock-market strategy of all time: buy American business and hold it forever, and do so at rock-bottom cost. Second, index funds are among the few truly long-term owners of stocks—for all practical purposes, permanent owners of capital—an enormously valuable asset to society. The long-term focus of index funds is a much needed counterweight to the short-termism favored by so many market participants. Prof. Coates agrees that nothing should jeopardize the existence of today's index funds. "Indexing has created real and large social benefits in the form of lower expenses and greater long-term returns for millions of individuals investing directly or indirectly for retirement," he writes. "A ban on indexing would clearly not be a good idea." I can only say, "Amen" to those words. Mr. Bogle is founder of The Vanguard Group and creator of the first index mutual fund. This article is adapted from his new book, "Stay the Course: The Story of Vanguard and the Index Revolution," to be published by Wiley on Dec. 6. [link] [comments]  |
| I got divorced. I had a prenup, so my FI/RE goals weren't affected much. Posted: 28 Nov 2018 09:44 PM PST Just as a counterpoint... When I was planning to get married, I knew I had substantially higher earning potential and assets, and my spouse-to-be had parents with way more money than mine. We got a prenup at my instance a few months before the wedding, and we both had our own lawyers. I think I spent about $3000. While married, we kept mostly separate finances. Unfortunately, though we'd been together quite some time before getting married, things fell apart after two years. The divorce wasn't too painful - some cash exchanged hands for the assets that we'd agreed would be joint that couldn't be split, and legal bills stung a little, but all in all, my goals were set back a few months at most. Without the prenup, it would have probably been a five to ten year setback. Fortunately we didn't have any children. Hopefully nobody gets married expecting to get a divorce, but planning ahead for the possibility was well worth it for me. [link] [comments]  |
| Daily FI discussion thread - November 29, 2018 Posted: 29 Nov 2018 03:07 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| What withdrawal rate would you use for theoretical infinite amount of time? Posted: 29 Nov 2018 03:27 PM PST I know everyone quotes the studies on 30 years success rate of 4% and all that whatnot...but.. what if you retire in your 20s or 30s, hope to live well into your 100s*, and want to also leave the remainder in a trust which the gains will be divided among your descendants for years and years to come. What is a good withdrawal rate for that? 2%? 1%? *Combination of excellent genes + amazing healthcare by the time you reach that age [link] [comments]  |
| Have you ever tried the FIRE lifestyle? Posted: 29 Nov 2018 07:17 AM PST I inherited a lot of money. 2 years ago I quit my job due to burnout and a desire to travel. It was fun at first, I worked part time in some simple jobs (barista etc) for fun and spent a few months relaxing, catching up on all the films I'd never watched, listening to music, reading books and just enjoying life. I got bored so I jumped on a plane and traveled to Europe, Asia, South America and Africa for just over a year. It was incredible, I was staying in hostels so I made friends with a ton of interesting and cool people, I loved seeing the planet, tasting the local food, experiencing the culture, music, people, everything was a lot of fun. I became a qualified skipper, scuba diver, did some bungee jumps, partied with locals, took strange drugs, fell in love, fell out of love and learned Spanish. But I became extremely tired of the travel lifestyle after a year. Constant travel is emotionally and physically exhausting and I craved routine, stability and community. I went home, started a business out of boredom which is becoming fairly successful but after 2 years I've found myself coming full circle and craving a job again. So my question to you is, have you ever tried the FIRE lifestyle for a long period of time? How do you know it's something you would enjoy for the long term? [link] [comments]  |
| Struggling with spending money Posted: 29 Nov 2018 01:03 AM PST This is going to sound like the first world problem of first world problems. But I could really use some help justifying to myself that it's okay to save less. Background: My wife and I work really hard. Late 20s, 300k net worth, no debt. Each year we max out all possible tax-advantaged space, and in addition save 2.5k a month in a taxable brokerage account. We're well ahead of the trajectory I had planned for our FI journey. We are happy with our lifestyle in every area except travel. Traveling to exotic places is our jam, and we definitely enjoy the pricier luxuries of travel. We've recently been dreaming about the places we want to visit in the next fives years, and had the crazy idea to price out what it would cost to do all of them in a single year. And to do that every year going forward. Bottom line, it would cost about 18k a year, and it would be amazing. This would require us to drop our taxable saving to 1k/month. On one hand, we'd still be saving a crapload of FIcoin *and* getting to pursue all the travel adventures of our dreams. We'd still be on track to FI by the date we want to retire. But I can't get past the voice inside my head that's screaming that "you're not saving enough" and "you could buy a brand new car every year for that money". I feel like part of this "not enoughness" is coming from my upbringing and always hearing my parents argue about the possibility of foreclosure and not affording bills. For people who came from that background, how did you get past the "feeling" of not having enough and feeling comfortable spending significant sums of money on things that bring you joy? Also, buy SWTSX ya'll. [link] [comments]  |
| Odd question about maximizing adoption tax credit? Posted: 28 Nov 2018 09:38 PM PST Next year I am going to adopt a teenager. Given their circumstance it would qualify my family for the full amount of the nonrefundable adoption credit for $13,500. At my current workplace I have the option to contribute towards either a traditional 401k or a Roth 401k as well as an HSA. In the past I have been contributing 15,000 to the traditional 3,400 to the HSA to lower my taxable income. Do you think it would be wise for me to switch over these to the Roth so I increase my tax liability up to credit amount? What are your thoughts on how I should allocate? [link] [comments]  |
| Does FIRE mean sacrificing your 20s? Posted: 29 Nov 2018 02:43 PM PST I'm 22 and I've just received a 50% pay rise which means I can now save 33% (I couldn't save before this rise). However I'm not enjoying my finance job and I'm wanting to pursue as a start up photographer. However based on some quick maths, my saving rate will take years to get back up to 33% and obviously the photography route has a higher risk of failure. I'm new to FIRE - Is it just a simple trade off between enjoying my 20s in photography and RI at mid 30s? Or am I missing the point? [link] [comments]  |
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