Financial Independence (Charts!) 2020: a good year for people who retired in 2000! |
- (Charts!) 2020: a good year for people who retired in 2000!
- Daily FI discussion thread - Sunday, January 03, 2021
- Fulfillment Advice After Early Retirement
- In defense of OMY Syndrome
| (Charts!) 2020: a good year for people who retired in 2000! Posted: 03 Jan 2021 09:15 AM PST Data
Background When I first became interested in FIRE around 2010, I imagined that 2000 would go down as the worst time ever to retire. So, I decided to start tracking their portfolio performance. Since I was invested entirely in stocks, I looked at how they would do if they were 100% in stocks. These days I have FIRE'd, and my portfolio looks very different. But, I keep updating this analysis each year for fun! Whenever I post this people ask about other asset allocations. That's more work than I feel like doing. But, I've added a line for someone 100% invested in 10-year treasuries at a 4% withdrawal rate. Comparing that with the stock performance can give you some idea of how a blended portfolio will do. Results If you retired in 2000 with 100% S&P500 and stuck to a fixed 4% SWR, you were scared out of your mind only 9 years later with 23% of your portfolio remaining. But if you were super irrational and stayed the course, the next decade+ of returns were so good that you still have exactly 23% of your portfolio remaining as of 3 days ago! Still, you would need historically good returns over the next decade to not run out of money before a 30 year retirement horizon is up. And given the historically high CAPE ratios and low interest rates, I'm not optimistic about stock returns in the intermediate term. If you were looking for a longer retirement window than 30 years, or if you wanted to preserve a significant portion of your portfolio value, it looks like the year-2000 retiree (who is 100% stocks) would have needed a much lower WR of 2.5-3%. But there are 2 pieces of good new. First, incorporating just a bit of bonds into your portfolio would have greatly offset the poor performance of stocks, leaving you pretty comfortable with a 3.5-4% SWR. Secondly, retiring just a few years before or after the worst retirement year in generations would mean you've actually seen your portfolio grow! Though, people do disproportionately retire at the worst possible times:( Source ERN's data that I used: https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/ . You can use this to look at different asset allocations and to adjust other assumptions. If you don't want to work with the raw data directly, he has some tools in the spreadsheet that will do the analysis for you when you adjust assumptions. Here is the extra sheet I added to ERN's workbook, in case you want to play around with it: https://docs.google.com/spreadsheets/d/1JcSRDrGv9YxQmR8E8dAmLELRgtqiCFtw8lcdSRUyAVc/edit?usp=sharing Edits
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| Daily FI discussion thread - Sunday, January 03, 2021 Posted: 03 Jan 2021 04:00 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]  |
| Fulfillment Advice After Early Retirement Posted: 03 Jan 2021 02:42 PM PST Question: For those of you who have fully executed financial independence / retired early, how were your feelings of contentment and fulfillment later on in life? Seeking advice from any who have experienced this, as well as anyone in general who has given some thought to this. After reading my story and bullets below, would appreciate comments/guidance/advice on the following: - Did you have any regrets? - Did it ever get awkward when introducing yourself or catching up with distant family / old friends? What do you say to other people when they ask about what you do? - Did you continue to grow your portfolio? If so, by much? - What did you do for fun and fulfillment? (I have my own plans, described further below, asking out of curiosity) - What was your biggest surprise post achieving FI/RE? (Good or bad) My situation: 33 year old in NYC. I have been blessed through my work experience and via a series of lucky investments. My net worth in liquid assets is $2.5M, and illiquid assets (real estate) around $600K. Majority of gains were from early crypto adoption (and lucky sells during the peaks), securities trading (TSLA, AMZN, etc.), and 11 years of saving and working in the Big 4 consulting industry where I lived on an expense account and thus did not spend my 6-figure salary. I have no debt of any sort, and paid off my mortgage in 2017. The Math: My current passive income from a mix of high dividend yield stocks/ETFs, annuities, microlending, REITs/rental income is around $60,000. I do have a sizeable amount of cash and crypto still remaining but theoretically if I invested those I would be bringing in $100K-$120K passive income each year. This does not include my emergency fund, Roth IRA, 401K, or other random "fun" investments I've undertaken, such as art investments via Masterworks. Minimum expenses = $25K/year or $2K/month (property tax, HOA fees, insurances, basic groceries). These are the minimum expenses for my household, which is my partner + myself. Planned expenses in reality = $40K/year or $4K/month. I performed a look-back at my past 24 months of expenses and it averaged out to $38K/year. Includes restaurants, entertainment, travel. If the market were to ever crash, I can always feasibly cut down to $30K/year without any major sacrifices, (due to additional point #2 below). Additional points I could feasibly quit right now and live off my investments but there are a few considerations I'd like to raise as additional clarifying points:
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| Posted: 03 Jan 2021 10:15 AM PST After another instance of looking in the mirror and asking myself where the heck another year went, the idea that we are always 'in the present' - and its relation to FIRE - occurred to me. If we assume that, whenever we retire, the only thing that matters is how we feel in the present, we can make a stronger case for making that moment as comfortable as possible. I would definitely rather fly first class and have six vacations a year, as opposed to coach / two. I would rather eat extravagantly than not. Giving your money one more chance to rise by 50%, say another 4-5 years, would likely drastically change your comfort level for all your future "present"s. It's a similar concept as going through all the work to graduate college. I have little memory these days of the pain of sleepless nights writing papers, but I'm sure glad, now, I put in the time to do it. I don't remember the struggle, but my present self reaps the gains every day. I feel this is different than the standard reasoning behind OMY, which is generally tied to wanting a bit of a cushion or concerns about current market conditions (ie, sequence of returns risk). We can never predict how long we have on this earth, so I fully recognize the above can jeopardize some of that precious time. But I do feel strongly that the past is always just a memory, and my present self is almost always happy with prior sacrifices I've made. I am really struggling with how much longer to put in at work, so would love to hear some thoughts on this. [link] [comments]  |
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