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    Financial Independence Daily FI discussion thread - Tuesday, January 26, 2021

    January 26, 2021

    Financial Independence Daily FI discussion thread - Tuesday, January 26, 2021

    Daily FI discussion thread - Tuesday, January 26, 2021

    Posted: 26 Jan 2021 02:00 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.

    submitted by /u/AutoModerator
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    Don’t know my next step

    Posted: 26 Jan 2021 04:20 PM PST

    Tl:dr I am 22, graduated university last year and am working full time now making 60k annually. Still living with parents so I am able to save majority of my paycheque.

    I have a total of $100k in stocks and $20k in student debt making my net worth $80k.

    I am seriously considering moving out because I have a very bad relationship with my parents. My main concern is how it would affect my ability to save and well as the huge impact to my standard of living. My current monthly expenses at home are rent ($200), car insurance ($250), phone plan ($60) and personal training ($300). Total of $810 per month.

    If I were to move out, I wouldn't have a car nor continue the personal training. I have calculated that expense to be $1500 per month (rent, food and subway pass). (This amount could also be very understated due to hidden costs I'm not aware of).

    I feel that moving out would be very helpful to my mental health. My family is part of a cult which I recently left which is the root to all our family issues. If I moved out, I would be able to do the mental work on myself which in turn would allow me to have the capacity to start a business (my ultimate goal). I originally wanted to start the business at home because of the safety net I would have.

    I'm so worried that moving out will be detrimental to my future success in the fire movement. So many people my age are quick to move out and not worry about the expense. I know freedom has its cost but I want to do my due diligence to ensure this step would be beneficial to me. I am in a very good position financially now I feel where I could potentially make some big money moves, moving out would definitely lower my risk appetite.

    submitted by /u/TailorIntrepid
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    How does FIRE work w End of Life and Health Expenses?

    Posted: 25 Jan 2021 07:58 PM PST

    tl/dr: how can you fire at anything less than 60k/yr w health care costs being what they are?

    Since healthcare is, typically, an ever-increasing cost in USA, the older you get, how is this calculated into typical I need $XXK/year FIRE formula?

    Before Medicare even kicks in, if you're now FIRED and no longer on an employer's insurance plan I'm guessing you're now buying an individual plan?

    Let's say your annual premium as a 50 y.o. is 6K/year with a $6K deductible; before anything gets covered by health insurance. (And, God forbid, you get diagnosed with a serious illness in October then, of course, your deductible gets set right back to $0 in January.)

    And if you get dementia, etc., when you're older than 50, say when your 75, Medicare will not pay for long-term health care. Long-term health insurance is incredibly expensive if a policy will even be written out for you and if it even covers beyond five years. Let's assume $3500/year/long-term health care premium, starting at age 65, for one person only. And say that policy coverage is only good for 5 years, which is typical, afterwards you could easily be spending$3-6K/month on care, out of pocket.

    Is my thinking wildly off-base? I don't see how one is financially independent with a potential $6-12K/annual cost of health care and then the added possibility or overlap of long-term health care at, say, a FIRE of <60K/year.

    Help me understand. Are you planning on cashing out of your home and living in a senior community 1bedroom when your >50?

    submitted by /u/rapid-cycler
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    Interpreting Guyton-Klinger SWR

    Posted: 25 Jan 2021 05:39 PM PST

    Hi, FIRE. I've been trying to wrap my head around the Guyton-Klinger rules for withdrawals in retirement. For anyone not familiar, Guyton-Klinger is a method for adjusting your withdrawals in retirement according to the behavior of the market. It seems like a lot of people aim for the 4% rule in retirement but plan to cut back their spending during bear markets. Guyton-Klinger will systematize that strategy and also tell you the maximum you can safely spend every year while delivering a higher probability that your portfolio will outlive you than the 4% rule can deliver.

    Specifically, this passage has been giving me trouble:

    "The portfolio management rule (PMR) determines the source(s) of each year's withdrawal.

    • Following years where an asset class has a positive return that produced a weighting exceeding its target allocation, the excess allocation is sold and the proceeds invested in cash to meet future withdrawal requirements.
    • Portfolio withdrawals are funded in the following order: (1) overweighting in equity asset classes from the prior year-end, (2) overweighting in fixed income from the prior year-end, (3) cash, (4) withdrawals from remaining fixed-income assets, (5) withdrawals from remaining equity assets in order of the prior year's performance.
    • No withdrawals are taken from any equity following a year with a negative return if cash or fixed income assets are sufficient to fund the required withdrawal."

    Some of this seems redundant unless I'm misunderstanding something. Is it just poorly written? My interpretation is this:

    • Always sell excess weighting of stocks/bonds if there was also a positive return. Use resulting cash for current and future withdrawals as needed.
    • If sales from overweighting of stocks/bonds and cash reserve are insufficient to meet requirement for current withdrawal, sell bonds first and then stocks in order of best to worst-performing until requirement for withdrawal is met.

    I'm trying to automate Guyton-Klinger in a spreadsheet and I think if I can get the Portfolio Management Rules (PMR) nice and clear I'll be able to finish it shortly. Help me out and I'd be happy to share the finished spreadsheet.

    Source for Guyton-Klinger method: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.534.3545&rep=rep1&type=pdf

    submitted by /u/veridis_quo
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    FIRE & Health-insurance across state lines

    Posted: 26 Jan 2021 07:22 AM PST

    Similar to this thread, but more specific https://www.reddit.com/r/financialindependence/comments/l55nmf/how_does_fire_work_w_end_of_life_and_health/

    I have a great set of doctors (primary & specialists) in a city that is known for great healthcare & medical research.

    Even though I've moved for work long ago, I've kept those doctors, and my workplace EPO & PPO plans cover them as all big insurances (Blue Cross, Aetna, UNH, Cigna) have nationwide networks.

    However, ACA plans don't have nationwide access.

    Are you maintaining primary residence in the States where their doctors are, for the sake of getting ACA coverage there?

    Or are you buying insurance in private market from one of the big companies and forgoing ACA? Which would also mean no-subsidy if you'd otherwise qualify

    submitted by /u/stothel
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