Financial Independence Effective Altruism and FIRE |
- Effective Altruism and FIRE
- Daily FI discussion thread - January 09, 2020
- Another question on withdrawal rates
- Tips and tricks for a low income year (ex gap year)
| Posted: 09 Jan 2020 10:28 AM PST As usual, I'll start with a disclaimer of why I think this should be a top-level post. First, I believe it's a deep enough topic that multi-day discussion is worthwhile. Second, I believe that intersectional posts are relevant to /r/financialindependence, with a hypothetical top-level post about "how to get started in real estate investing as a path to FIRE" being an easy example. Last, I believe that FIRE is about more than the raw logistics of saving, investing, and withdrawing funds. This is covered in the first bullet point in the sidebar about what FIRE is about. The structure of this post is
To what extent is charitable giving, in its many forms, a part of your financial planning and life goals? Charitable giving can take many forms, but in general I'm discussing the wide range of financial behaviors that seek to improve someone else's wellbeing. This can be highly local, like planning to support your parents in their old age, or it can be totally distributed and anonymous, such as giving to highly rated charities through GiveWell. I'm interested in starting a discussion about this for two reasons. First, there's a wide spectrum of opinions about financial independence from pure self-sufficient "libertarianism" ("everyone should seek to support themselves, and I don't owe anything to anyone even my parents") to broad collectivism ("not only do I plan to support my immediate family and some relatives, I also seek to give aggressively to charity"). I'm interested in hearing a little about where the sub lies on this spectrum. Second, there's evidence that charitable giving is highly sensitive to social awareness. Which is to say: if you're a proponent of charitable giving and specifically of effective altruism, some of the best things you can do to increase the amount of charitable giving overall are to signal your giving in order to normalize the behavior and increase its adoption. So the second goal of the discussion is to create a public forum for giving so that persons who are perhaps persuadable or are on the fence can potentially learn more about the change if it's something they want to incorporate in their own financial planning and life goals. Our household has recently committed to giving around 5% of our pre-tax income to causes that save or improve other people's lives. This percentage amount will likely increase in the future as our income increases. This change has been recent and rather sudden. I always knew it was a good thing to do, but absent the concrete need (acquaintance or office GoFundMe, family member in need) I didn't think I could commit to ongoing financial giving to charities in general. Part of this was that knowing what I do about savings rates and spending rates, any ongoing financial commitment means a measurable change in how long it takes to reach FI and the size of the account needed. The first thing that changed my mind was hearing my spouse's openness to some small level of charitable giving. This took it out of the realm of an abstract thing that, if I wanted to do, I'd have to factor it into the budget, discuss it with my spouse, etc. to something that was much easier to get the ball rolling on. The second thing was this excellent interview with Peter Singer, who has been instrumental to the creation of the effective altruism movement. Specifically, the thought experiment posited at the beginning made it starkly clear that A) my personal charitable giving would do unambiguous good in the world and B) I was absolutely in a position to afford it given I was targeting an approach to my finances that meant I could be independent at a relatively young age. The short version of the thought experiment is imagining you've come across a young child flailing around in a shallow pond that you know well. The pond is shallow enough for you to wade in easily with no risk to you, but is too deep for the child. There is no one else around to help and the child will drown without your intervention. However, you are wearing new shoes and a nice suit, and you will be out several hundred dollars if you save the child. Is it an immoral act to walk away from the child, trading your few hundred dollars of inconvenience for their life? The natural consequence, and its real world application, is that there are people in the world who are dying from preventable causes, that by donating hundreds or thousands of dollars those lives can be saved, and choices to not donate and to instead consume at a higher level than is necessary have the same net effect as walking by the child drowning in the pond. The rest of the interview goes into the nuances and limitations of this thought experiment. Almost by definition, anyone pursuing FIRE either is or will eventually be in a position to donate and save lives. So to reiterate, what are your thoughts on charitable giving as it fits into your FIRE plans, and how did you come to that perspective? [link] [comments]  |
| Daily FI discussion thread - January 09, 2020 Posted: 09 Jan 2020 12:06 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]  |
| Another question on withdrawal rates Posted: 09 Jan 2020 06:40 AM PST I'm having some trouble understanding the withdrawal rates. Let's say, hypothetically, you retire with $2M and start drawing ~$80k per year. That amount is much more than you really need and inflation is minimal anyway, so you don't adjust it for inflation the way the Trinity studies normally have it. Three years later, even after withdrawals, you have $2.5M because the economy is doing great. Can you just mentally reset your clock, convert $500k to cash, and pretend you're now starting to retire with $2M again? Or is that a really bad idea? Trying to see where I can be more liberal with my money instead of stringently following the usual withdrawal rules. For example, I really want to buy an RV. [link] [comments]  |
| Tips and tricks for a low income year (ex gap year) Posted: 08 Jan 2020 02:47 PM PST I'm thinking about taking 6+ months off work in the nearly future to travel, and it got me thinking about strategies one should take if they'll have an anomalous low income year in their FI journey. I came up with a few considerations and was curious if anyone had others. IRA Contributions You can only contribute to your IRA with money you earned in that year. Try to make at least $6,000 in earned income so you can max out your IRA. Tax Gains Harvesting Long term capital gains are taxed at 0% up to $39,375 in 2019 for singles. If your income is X where X < $39,375, then it makes sense to sell and then immediately buy back investments with $39,375 - X in capital gains. This resets the cost basis at a higher price so that in the future if you sell when your income is higher, your cost basis will be higher. Wash sale rule does not apply to tax gains harvesting. You can also take advantage of the 15% bracket if your usual income puts you in the 20% bracket (>$434,550 for singles). Increase Cash / Bond Allocation I haven't thought through this one quite as much. The problem is that when you're working you essentially get to dollar cost average your investments against future market conditions. Downturns are fine on a long time horizon because you get to buy cheap equities. If you know you'll be out of work for an extended period of time, it might make sense to reduce your equity exposure like you would in retirement. That will prevent you potentially needing to "sell at the bottom" in the event of a downturn when you're living off your investments. How much to shift the allocation, I have no idea. Time Signing Bonuses for EoY Signing bonuses have the opportunity to significantly increase your income the year you start a new job. By timing your job search so any signing bonus lands during your low income year, you could save a lot on taxes. Anything else y'all can think of? Edit: Earned income, not taxable income for IRA contributions [link] [comments]  |
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