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    Financial Independence Daily FI discussion thread - October 02, 2019

    October 02, 2019

    Financial Independence Daily FI discussion thread - October 02, 2019

    Daily FI discussion thread - October 02, 2019

    Posted: 02 Oct 2019 01:07 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.

    submitted by /u/AutoModerator
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    I can’t tell anyone I actually know, so you guys get the fun

    Posted: 01 Oct 2019 10:14 PM PDT

    TL;DR: high salary worker with no debt saves a lot of money, feels good about self.

    Greetings all. I think this is actually my first post in this subreddit, though I've been lurking for about a year now.

    I'm a 27yr male, birthday was on the 30th. I bring up the birthday because it was also the same day that my invested / saved net worth crossed the $100,000 mark!

    I'm no drug addled mom, though her story was pretty kickass. In fact I got pretty lucky in life with college and afterwards. I was able to graduate debt free and I stumbled into a job with a Fortune 50 company working in Information Technology.

    Salary: 108,000 Stock: 25,000/year on average

    I max out my 401K, HSA, IRA every year. I've got 25,000 saved up as an emergency fund, though I've been debating dropping that down to 10,000. I save around ~60,000 a year between all of tax advantaged and standard brokerage accounts. I know this doesn't make me some special butterfly— higher salary lets you save more, who knew. Some of that is being diverted this year into a 529 account to cover my master's in 2 years and to help cover my new-ish Nephew's college in 15 years.

    As I said, my story doesn't make me some special case. I didn't have some great adversity to overcome in life. I was raised middle class, I managed to graduate with no debt from college, and my first real job out of college was with a Fortune 50. I got lucky in life.

    But I also saw what I didn't want to have happen to me. My mom worked her whole life until me and sister were born, and then became a full time mom. Her and my dad, despite being married and still are, always kept their finances separated. Dad made good money, mom did not. Mom isn't going to retire with much, if she ever does retire.

    My sister became a teacher, bless her heart. She wanted to empower the youth of our future and I thank her every day for it. But that is not a financially safe career in the US. She and her husband struggle a bit— not living paycheck to paycheck, but there are things that they can't afford that they really wish they could.

    I don't help them out directly, because I don't want to give them a handout, but I do want to help. I've been fortunate enough in life to have some extra, and so I've begun socking money away for my Nephew's college. Even if there's not enough saved up for him to get out debt free, if I can remove a sizeable portion of his debt then that will better empower him. I know the advantages of not having student loans.

    I honestly don't know if I will ever retire. I like working and keeping busy. A part of me really wants to setup a grant or foundation before I die so that I can empower others through my good fortune. Just save up as much as I can through life, get that "fuck you money" and then coast. Share the rest with people who need it.

    submitted by /u/Flakmaster92
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    Community Survey: Top-Level Posts

    Posted: 02 Oct 2019 07:29 AM PDT

    Hello ladies, gentlemen, and FIRE bloggers!

     

    The mod team has heard you! We've been discussing an addition to the FAQ to clarify what kinds of posts are appropriate and what kinds of posts are inappropriate for top-level posts in this community, and we want your input!

    Below is a list of "good posts" and a list of "bad posts." The bad posts are the primary impetus for this survey, as it includes frequently-encountered topics that are heavily reported and/or removed by mods just for being too "basic personal finance" or too tangentially related to FIRE to suffice as a top-level post. Many users have expressed frustration over posts like these being removed, because these posts are often well-intentioned advice or solicitations for advice that do, in some way, relate to FIRE. It can seem, to a poster who has a post removed, like we're performing a strict gatekeeping function to prevent posts from people who aren't FI, people who have their personal finance situation together but are confused about one aspect of common FIRE plans like a Roth conversion ladder, or people who disagree that VTSAX is the be-all-end-all of personal finance.

    We want to be clear: That's not the intention at all! We just want to keep this massive and growing sub alive, and knowing what we, the community want to see will aid us tremendously in doing that!

    So help us out. Take a look at the lists below and let us know what you think should NOT be on the lists or, alternatively, what SHOULD be on the lists.

    It is, of course, impossible to create an exhaustive list of "bad posts" and "good posts." (I mean, if we could do that, what's the point of a sub? We're done! We solved FI!) But our hope is that a general list in the FAQ can help newcomers understand where best to post their thoughts/questions.

     

    "Bad" posts:

    • "Should I rent or buy a home to achieve FIRE faster?" This would be removed as a r/personalfinance or Daily Thread topic.

    • "Should I buy a new car or an old clunker to achieve FIRE faster?" or "People are too concerned with the cost of a new car." This would be removed as a r/personalfinance or Daily Thread topic.

    • "Here's my frugal grocery list!" or "How do you feed a family of four on $400/month?" or "Look how much money I saved by cooking all my meals!" This would be removed as a r/EatCheapAndHealthy or Daily Thread topic.

    • "Here's my expansive, complicated, and well-researched take on the 4% Rule." or "The 4% Rule no longer works." or "Would this technology/political change/world event break the 4% Rule for good?" This would likely be removed as part of our FAQ, part of ERN's already extensive work, or a Daily Thread topic unless it garnered a lot of attention from the community quickly.

    • "Update on my early retirement!" This may be removed as spam, depending on frequency; some are popular, recurring monthly or yearly check-ins, and those are fine. Usually, if there's a lot of detail and an unusual life story, people love it. Often, it's just "I'm still retired, it's still great, and my portfolio is $X." That will be removed.

    • "Update on my path to FIRE!" The same as above.

    • "Why stocks instead of rentals? My buddy has rentals and he does great!" or "I think the 4% Rule is wrong because this year stocks went down." An exceptionally poorly-written or poorly-researched version of any post may be taken down as low-effort. Some of the genuine questions/concerns will be kept, but if it's so low effort that it is obviously addressed in the FAQ, it will be removed.

    • "Some Blogger said that kids don't cost that much today. Do you agree?" or "Another Blogger said the 4% Rule is going to work into eternity – here's why he's wrong!" or "Blogger Extraordinaire said this today, and here's why he's a pathetic, overcompensating douche nozzle." Any discussion of any blogger's latest blog post with a quick recap or contrarian view would likely be removed as low effort/possible self-promotion unless there is some unusual angle taken by the blogger or the poster that engages the community very quickly. We're not here for self-promotion or for promotion of our friends.

    • "Giant TV Personality said this today and I'm scared." or "FIRE has gone mainstream – look at this article in the Times!" Same as above. But also, these articles come out every day and very rarely say anything new.

    • Any straight crosspost from another sub will likely to be removed as low effort or irrelevant/barely relevant to FIRE.

    • "Should I take this new job across the country?" or "What should I major in?" or "Which is better to live/work in: Butte, Montana, or New York City? For FIRE, of course." This would be removed as a r/personalfinance, other subreddit, or Daily Thread topic.

    • "Take my poll!" or "Grade my spreadsheet!" or "How long did it take you to get to FI?" These will likely be removed as low effort, self promotion, or just kind of spammy. Again, overwhelmingly positive community response could change that, but it is rare.

    • "Poors are just lazy/stupid!" Obviously, this is going to be removed. Some posts that are commonly accused of this, like questioning why so many people seem to think that FIRE is an undesirable goal, may be welcome.

    Note that many of these "bad" topics would be completely appropriate for the Daily Thread. It's also impossible to guarantee that these posts are always inappropriate – sometimes, we will have posts with a genuinely new take on an issue, or addressing a change in law, or with some commentary on news of public interest that is so overwhelmingly positively received by the community that it should remain despite being something that seems like it would be on this list. Those edge cases are why we have mods!

     

    "Good" posts:

    • "My crazy unique life story that led to FIRE." or "My unique mistake that kept me from FIRE – don't be me!"

    • "How FIRE helped/hurt my family/my friendships/my mental health/my business/my passion for artisanal pet rocks."

    • "This was a huge unexpected benefit/detriment of being on the path to FIRE."

    • "There's massive legislation coming that is going to change your FIRE path dramatically."

    • "I reached my FI/RE number! Here's how I did it!" This post will generally be allowed if it has FIRE-diary levels of detail. A simple "I did it!" is probably going to be removed as low effort.

    • "I just experienced this unusual life event. It's setting me back/propelling me forward. Here's what I did./What should I do?" These are a tough area to describe, but some of these posts are highly valued as encouragement for others or opportunities to help someone in need. The more detail we get, the more likely it is to engage the community: the relation to your FIRE goals; how you're handling it financially, emotionally, physically; how is it unusual, or how is it more likely than people seem to think.

    • "My significant other is (or parents/children are) on board/not on board. What can I do to gently explain my desire? What can I do to protect my assets? Is this too big a difference for us?"

    • "Do you talk about finances with your friends/coworkers/parents/children/neighbor's dogs' groomer, and are they jealous/proud/upset?" These posts have historically been welcomed by the community when they appear to originate from genuine, immediate concerns with interpersonal relationships.

    • Edit by popular demand: "Best Brokerage is now offering free trades and commission-free ETFs!"

    Note that several of these "good" topics could end up set aside by mods because we feel it's a topic that has been broached several times. If you're unsure whether your post has been raised many times in recent history, using the search function will help. And if you disagree with a mod decision, you can always send modmail to argue your position – we've been wrong before, and we will be again!

     

    As you help form these lists, please keep in mind the goal that I think most of us have in common: We want to ensure that the sub is useful to everyone who can benefit from it, but also not overwhelmed with the same basic or tangentially-related posts again and again. The latter would cause the great resource we have here to be depleted, as regular posters and FIRE devotees who choose to spend their time here, having interesting conversations on this sub, would flee for other grounds less saturated by the same-old, same-old. (Put yourself in their shoes: Why would you stay here all day and tell each of thousands of new posters how to allocate their money efficiently, when you could just direct them to the FAQ or the r/personalfinance Prime Directive?) There's a fine line we have to walk. Basically, our choice is finding a comfortable middle ground somewhere between two opposing views:

    1. "Open the floodgates!" We'll have our front page made up entirely of posts asking whether to pay down a mortgage or contribute to a pre-tax investment account.

    2. "My way or the highway!" We'll curate the hell out of the sub, and no newcomers will ever find the information they need to set themselves on the path they want to be on. The sub stagnates.

    So, let us know where you want to draw that line and why!

     

        -Your Mod Team

    submitted by /u/ivigilanteblog
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    Professional endowment manager picks 6% as SWR.

    Posted: 01 Oct 2019 08:03 PM PDT

    A friend sent me this link to a post by a professional endowment manager answering a question that essentially translates to "what is a SWR?".

    He claims a reasonable SWR can be 5%, without including the ER drawdown which can approach another 1% on top of that. Thus the total SWR according to his post would be close to 6%.

    Keep in mind that endowments are by no means shining beacons of investment success, so it's not their extraordinary returns affording them such a high SWR. On the contrary, all ivy league endowments have underperformed a braindead 60-40 portfolio over the past 10 years, and a cookiecutter three-fund portfolio beat 95% of all endowments over 10 years.

    (It's hilarious to me that the single phrase "60% VTI, 40% BND" gives you all you need to beat ivy league wealth managers and their sophisticated multi-asset strategies. I should print that on a t-shirt.)

    If you followed any of my past posts, you know I account for a conservative 3.25% SWR, and even 4% seems rather high to me, let alone close to 6%.

    Still interesting to hear a different opinion of someone who manages wealth professionally for institutions that do have drawdowns, and likely put quite a bit of thought into SWR.

    One last cool angle in the post: apparently there are legal standards of safe withdrawal and the way to manage wealth for sustained drawdown. SWR in the US is legally defined to be 4-7%. Notice how the bottom range is what many folks here (myself included) already consider too high. Apparently you can actually get sued for drawing down less than that. Similarly, you can get prosecuted for being too cautious if you don't invest heavily in stocks, as that is considered mandatory for long-term maintenance of wealth under the above drawdown requirements.

    EDIT: to those claiming the author in the post I linked is strictly speaking of endowments and not suggesting an SWR of 5-6% - please read the post. He definitely does. To quote (emphasis in original):

    Let us say 5% or 1/20. That means the corpus must be 20 times that.

    To withdraw your $1000/month or $12,000/year, you need 20x that, or $240,000 of initial investment in the fund.

    You may disagree with the SWR he suggests, but he clearly is suggesting one, and in the exact same sense we use it here.

    submitted by /u/CautiousInvestor
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    “Theoretically people can save on their own but . . . about a quarter of retired Americans live mainly on social security.”

    Posted: 02 Oct 2019 07:58 AM PDT

    I heard this piece on the way to work this morning and thought it may foster some interesting discussion.

    Main takeaways:

    This comes across as an anti-401k, anti-investing, anti-stock market piece intended to mourn the loss (and suggest the superiority) of defined benefit plans. To back up the positions, the journalist relies heavily on highlighting one couple's dream retirement enabled by their defined benefit plans and juxtaposing it with an elderly woman's Great Recession retirement fund losses (later stating she "got out of the stock market a few years ago, opting to put her money in more conservative savings.")

    Navigating the New Realities of Work and Retirement (6:48)

    submitted by /u/YANKLEADER
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    What's your favorite and least favorite FIREism? Why?

    Posted: 02 Oct 2019 10:08 AM PDT

    Words, phrases, maxims? Examples include, but are not limited to:

    time in the market beats timing the market

    the first $1m is the hardest

    mang

    baristaFI

    side hustle

    there's always money in the banana stand

    submitted by /u/ellsworth92
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    What kind of work would you do after reaching financial independence?

    Posted: 02 Oct 2019 03:12 AM PDT

    I have personally found, I can't just be sitting around all day. I need to feel productive. But I don't like doing some kind of repetitive task. That's why I keep on taking Software Engineering.

    I don't like red tape and inefficiently, and I want my work to feel like it"s actually making a difference, so I prefer working for smaller companies.

    I don't like working more than standard hours, so I avoid startups, and other companies with that kind of culture.

    More recently, I started to think, whether I should broaden my horizon. If money doesn't matter, why not for example become a tutor? Or maybe flip houses? I wouldn't want to be an entrepreneur, as I want to avoid working more than 40 hours a week.

    I'm interested in other people's perspectives, what your dream job would be after financial independence. Just trying to get some ideas.

    submitted by /u/van2z
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    Weekly Self-Promotion Thread - October 02, 2019

    Posted: 02 Oct 2019 01:07 AM PDT

    Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread.

    Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely.

    Link-only posts will be removed. Put some effort into it.

    submitted by /u/AutoModerator
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    Investment income benchmarks

    Posted: 02 Oct 2019 04:09 AM PDT

    We all use benchmarks to stay motivated. I like to convert expected investment gains into hourly wage equivalents. It feels pretty amazing to shoot for and hit these benchmarks, knowing you get a respectable income through basically no work. Great motivation at least for me to keep going.

    It's nice to also include personal ones, such as your first job. Or state / national averages if you're not from the US, or for the country you want to retire to. Feel free to suggest others!

    1. Median household income worldwide ($4.68/hr)
    2. Federal minimum wage ($7.25/hr)
    3. Proposed minimum wage ($10.10/hr)
    4. "Living wage" ($15/hr)
    5. Mean personal income US ($23.15/hr)
    6. Median household income US ($28.38/hr)
    7. Income after which raises no longer improve subjective happiness ($36.06/hr)
    8. Top 10% personal income US ($56.93/hr)

    If your investments are nearly all stocks, I think 7% of your total should be a good estimate of yearly income. Then divide by 2080 to get the hourly income.

    Standard disclaimer: Investing in the stock market does NOT guarantee an income of 7% per year and you may lose a substantial amount of money.

    submitted by /u/philleski
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    "Too small to care" threshold?

    Posted: 02 Oct 2019 09:32 AM PDT

    Is there any generally accepted wisdom for what amounts are too small to care about? Like obviously for some people a dollar for the parking meter won't move the needle, and for other people it's a $5 coffee, and for other people a $100 dinner doesn't matter.

    I saw an LPT post yesterday that suggested 0.01% of savings, but if you do that every day you're spending 3.65% of your nest egg, which is pretty much your entire SWR.

    Perhaps 0.01% of your yearly income (per day) would be a better limit? It works whether you're retired or still earning. So if you earn $100k you can spend $10 a day on unbudgeted junk (parking, coffee) and it will only add up to $4k a year.

    What do folks here use?

    submitted by /u/bismuth17
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