Financial Independence Daily FI discussion thread - Wednesday, March 03, 2021 |
- Daily FI discussion thread - Wednesday, March 03, 2021
- The best time to start is NOW
- Don't be Discouraged
- Weekly Self-Promotion Thread - March 03, 2021
- Are there any studies/calculators on variable withdrawal rates?
- Mega-Backdoor and pitfall from overfunding the 401k?
- FIRE and Risk Aversion
| Daily FI discussion thread - Wednesday, March 03, 2021 Posted: 03 Mar 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. [link] [comments]  |
| Posted: 03 Mar 2021 07:10 AM PST I will write this partially for therapeutic reasons and also to hopefully help someone else who might read it, as I have benefited from reading other peoples posts. It is too easy to get caught up in what we see online and people posting huge balances or how much money they have made that it can entice us to try the "get rich quick" approach which should never be a goal. As someone who has lost a significant amount taking risky investments I am now 32 and starting over from scratch. I am fortunate that I own my own home (though no equity) and a decent paying job but in this situation I now feel like "If only i didn't lose that money and had just left it in the market I would have XXXX, maybe I should try to just make that back and then follow the plan" which is the dumbest approach ever. The reality is I will continue to lose as will most others and then have this same situation but now at age 40 or 50 with a lot less time to recover. Back to the title of the post it doesn't matter what happened in the past or what you could have done or should have done and instead the best time to get it together and start making the right choices is right now. Over time we will also develop the habit of being financially responsible which helps limit future self destructive decisions which is key since you can undo a lot with just one year of dumb decisions. For me I have taken the following actions that I would encourage others who might relate to this post to do the same. I closed any type of trading or margin account and moved my money completely into my company plan for retirement accounts, this way it is off my pay check each month and more difficult for me to close it or withdraw the money and I am limited to low cost index funds in that account. My other account is now through my bank, which has a boring website but psychologically better, and is a cash only account without ability to touch options in addition to no margin. Lastly, I accelerated my mortgage payments to rebuild equity in my home and force a certain level of limited spending on me. The reality is with 10-20K a year in various savings you can be financially set by retirement and gambling for some incremental increase in networth won't improve that future at all. I wish i made these decisions at any point before today but now is the best time available to start. If you want to get rich, do an extra job, improve some skill or try a side business but do not use the market as a casino as you will lose eventually with that approach and also develop bad habits that could destroy your finances later in life. Hope this didn't come off too much like a rant and maybe someone will read this and relate enough to start making the right decisions now instead of later. [link] [comments]  |
| Posted: 03 Mar 2021 08:11 AM PST My wife and I are in our mid 30's. We own our home (very little equity so far), both work full time, have two young children, own our two vehicles outright, and started a side business last year that took a $35K investment to get going. Our net worth sits at about $360K. Assets include $330K in retirement accounts, conservative home value of $290K, and about $22K cash we keep on hand. Liabilities are $270K mortgage balance, and $12K left on the business loan. Total average savings rate is about 20%. We were getting discouraged seeing how all of our peers around our age seem to have bigger, more extravagant houses, multiple 'toys' (offroad vehicles, camp trailers, snowmobiles, boats, etc.), take multiple vacations each year, and generally appear to be kicking ass at life. We often found ourselves in discussions about how you only live once, and that our friend with a bar in the basement sure has a nice house (our house is great too, but not extravagant if that makes sense.) This post is a reminder that you're doing great and to not compare yourself to your peers. 95% of our peers referenced above, it turns out, have net worth in the negative tens to hundreds of thousands of dollars. Some of our closer friends found out about our modest wealth through discussions on saving for retirement, and they have started asking us for advice. We became more aware of their situations as a result; between student loans, credit card debt, car loans, mortgage debt, and loans for all the toys they have, our peers average between negative $200,000 and negative $300,000 net worth. It turns out, most of them are pretty envious of our relatively good financial position. Their debt payments typically account for more than half of their family income each month while they put away very little for retirement. Don't be too hard on yourself! The sacrifices you are making now will pay off soon enough. Remind yourself that the big spenders you're surrounded by typically wish they had a fraction of your savings and discipline. You're doing great! Edit: Net Worth statement now includes 100% more home value! [link] [comments]  |
| Weekly Self-Promotion Thread - March 03, 2021 Posted: 03 Mar 2021 02:00 AM PST 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. [link] [comments]  |
| Are there any studies/calculators on variable withdrawal rates? Posted: 03 Mar 2021 03:10 PM PST Say you retire with $1m, with estimated expenses of $50,000. However, given the higher withdrawal rate, you will plan to withdraw 5% every year, regardless of portfolio size, rather than starting with $50,000 and increasing with inflation. I'm wondering if the willingness to be flexible during the years of below average returns - by spending less or grabbing a job for a short time - will allow for this higher withdrawal rate. Also worth noting - given you'd be withdrawing potentially more than $50,000 in some years, those could be used as a bit of a runway during the leaner years, to avoid adjusting spending right away. Curious if there's a good calculator out there for this. [link] [comments]  |
| Mega-Backdoor and pitfall from overfunding the 401k? Posted: 03 Mar 2021 08:58 AM PST As part of the FIRE exercise I think we all like to play the "what-if" scenarios to anticipate and plan for as many scenarios as possible. As one possible outcome, I was thinking about the situation where we age and need long term care (hopefully many years down the road!). The long term care facilities are super expensive(think of 300-500k entry fee + monthly care cost). Ideally, I'd want to put my assets in to a medicaid shielded trust and use medicaid so I can pass on the wealth. But 401k and IRA complicates things a bit. Depending on the state, all your assets including retirement accounts need to be near zero to get medicaid. What do people do in situations like this? How would you plan for this scenario? For more info on per-state treatment of 401K + IRA when it comes to getting medicaid help, see this page - https://www.medicaidplanningassistance.org/medicaid-eligibility-401k-ira/ Note that some states exempt 401K + IRA when computing medicaid elgibility. So one option is to move but is this the only option? [link] [comments]  |
| Posted: 03 Mar 2021 08:08 AM PST Would love to get your thoughts in this: There seems to be a lot of aversion to any risk. Investing in an index fund has its own risk. We should talk about measured risk. Investing in a 200k into a business or real estate property is risky. But that shouldn't be shunned as a way to reach because it has it's risks. The same could be said about single stocks. You can choose ones with high upside yet low downside risk. My point is that we as a community quickly suggest that anything except a VTSAX heavy profile is too risky and I think that oversimplified it. (I suppose for the passive investor or someone not willing to do their research, this could be true). What are your thoughts? [link] [comments]  |
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