Financial Independence Daily FI discussion thread - August 25, 2019 |
- Daily FI discussion thread - August 25, 2019
- What is your stealth wealth story?
- Disability insurance and its potential role on the path to FI
- 4% SWR (or 3.x) has never been modeled with current interest rates
| Daily FI discussion thread - August 25, 2019 Posted: 25 Aug 2019 01:08 AM PDT 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 is your stealth wealth story? Posted: 25 Aug 2019 08:09 AM PDT Just curious what you may do or not do that leads people to believe you make less than you do. Or maybe spend more than you make. My husband is a firefighter, I work in the insurance industry. Years ago I was talking to my sister in law (my brothers wife)about something and somehow my husbands job came up. She thought my husband was like a volunteer firefighter and I was supporting our lifestyle. She's from a small town and had no idea firefighters were full time jobs. It made me laugh that she thought he drove 45 mins to make a couple hundred dollars just on the off chance a fire happened that day. [link] [comments]  |
| Disability insurance and its potential role on the path to FI Posted: 24 Aug 2019 04:24 PM PDT I know this is not quite as FI-specific as some posts, but I honestly do believe it is an aspect of FI planning that I haven't seen addressed much, so hopefully this won't be removed. Since most of us are working our way towards FI (or have already achieved it) by means of some sort of job or employment, the income from that job is really the keystone to our entire FI plan. As long as we can perform that job, then all we need to do is stay the course by living frugally and investing sensibly. Stock market fluctuations, the rate of raises and promotions, etc., can affect the speed at which we progress, but our course is fixed on the North Star, and sooner or later we will arrive at our destination. If we become unable to perform that job (or maybe even any job), however, we might never make it to FI at all, no matter how long we live. Those of us lucky enough to be highly paid could be hit most dramatically, going instantly from a short FI horizon to one infinitely far away. This is where disability insurance, especially "own-occupation" disability insurance that pays some percentage of your actual specialty's salary if you can no longer perform that specific work but can do other work, could really come in handy. For those of us on the FIRE journey, especially, I think it might be both unusually vital and unusually cheap. My thinking is as follows: As stated above, insuring your income against misfortunes is especially precious to the FI crowd, because a massive loss of income could easily render FI impossible. But it's also relatively inexpensive for FIRE-seekers, as compared to the general public, because if you're planning to retire in a short number of years, you can just pay the premium for that short length of time and then cancel the policy once you reach your FIRE number. You can get considerable coverage stretching far into the future (even up to age 65) even if you become disabled within a short time after buying the policy. I personally am trying to decide whether to get a five-year policy or a long policy that stretches to age 65. Both would guarantee that I'd get to my FI number at the end of five years as long as I lived through them, but the longer policy would add a massive windfall on top of that (assuming I were disabled that entire time). Since I only expect to be paying the premiums for a few years, unlike the average non-FI-seeking employee, I won't have to face many rate hikes and I won't have to pay a very large amount in total premiums. It seems like maybe I should get the long-term policy even though it's about twice as much in premiums, because I'd get far more than twice as much in potential benefit. I'm curious what you all think about the choice between those two options, and also to what extent you use or have thought about disability insurance in your FI(RE) journey. It's not something I'd seriously considered until recently, but now I'm thinking it should be something everyone on the road to FI should at least take a good hard look at. Have you done so? [link] [comments]  |
| 4% SWR (or 3.x) has never been modeled with current interest rates Posted: 24 Aug 2019 10:23 AM PDT All of the modeling for withdrawal rates has been done by taking into account higher interest rates. Now we're at all-time lows in yields after a 38-year bond bull market. For the 10 year treasury, let's call normal/average around 4-5%. Right now it's nearly 1.5% and could be headed below 50 basis points. All returns price from this risk free rate. This is not a thread on valuations or asset allocation. However, with this in mind, what does it mean for withdrawal rates? Especially if we have a Japan-like scenario where rates stay here 10+ years. Side node: I'm planning to FIRE next year. I've got enough capital for a 3.5% SWR with an 80/20 Asset Allocation. [link] [comments]  |
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