Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - March 08, 2021 |
- Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - March 08, 2021
- Daily FI discussion thread - Monday, March 08, 2021
- Obsessing over money won't make you happy
- Weekly FI Monday Milestone thread - March 08, 2021
- I don't understand how the 4% safe withdrawal rate (Bengen 1993) which had 40% in bonds could be relevant today when bond yields are close to 0?
- Bond tents / equity glidepaths and the memoryless market
- Risk and Reward in Short-Term Savings [Bogleheads Wiki Highlight]
- Did kids change your geo arbitrage FIRE plans?
- Daily FI discussion thread - Sunday, March 07, 2021
- Six Year Update - The Seven Figures Edition
- Mega Backdoor Roth, In-Plan Conversions
- Daily FI discussion thread - Saturday, March 06, 2021
| Posted: 08 Mar 2021 02:00 AM PST Need help applying broader FIRE principles to your own situation? We're here for you! Post your detailed personal "case study" and ask as many questions as you like, or help others who've done the same. Not sure if your questions pertain? Post them anyway…you might be surprised. It'll be helpful to use our suggested format. Simply copy/paste/fill in/etc. But since everybody's situation is different, feel free to tailor your layout to your needs. -Introduce yourself -Age / Industry / Location -General goals -Target FIRE Age / Amount / Withdrawal Rate / Location -Educational background and plans -Career situation and plans -Current and future income breakdown, including one-time events -Budget breakdown -Asset breakdown, including home, cars, etc. -Debt breakdown -Health concerns -Family: current situation / future plans / special needs / elderly parents -Other info -Questions? [link] [comments]  |
| Daily FI discussion thread - Monday, March 08, 2021 Posted: 08 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]  |
| Obsessing over money won't make you happy Posted: 08 Mar 2021 07:51 AM PST I have today had a sudden life realization upon being unemployed and quarantined. OBSESSING OVER MONEY WILL NOT MAKE YOU HAPPY! I've been subscribed to this whole philosophy for as long as high school. During that time I would completely shut myself away from the outside world if it wasn't related to studies. Studying would be all I ever did with the exception of Saturday nights in hope of good grades so I could attend a more competitive career thus more money. It would be a constant chase for the unobtainable to one day finally be financially independent. And I would even live in ghetto apartments to early adulthood to save more money regardless of income. I applied the same mentality of discipline after HS and to the professional life as well. All I did on the weekends were waking up, go to work, go home, eat sleep then repeat. All I did on weekends were trying to spend as little money as possible and meal prepping for the upcoming week. I would just wait out the weekends and prepare for upcoming work. I lived like this for over 10 years until I got unemployed and was forced into lockdown. I get an orgasm every time I check my portfolio but get depressed once I glance at all the things I missed out in life. My work is such a big part of my identity that once I lost it I have nothing to live for besides my money regardless of what work opportunities I have. In the pursuit of FIRE I realized I have missed out so many opportunities to bond with potential friends and a future partner during the process of FIRE. Lonlines and depression is starting to creep in. I also realized in the pursuit of FIRE that I have missed out so many opportunities to broaden my life experiences. I can't partake in most small talk that's not work related. I feel obligated to lie about myself to not appear shallow. Whenever someone talks about their love lives, traveling, dining out or whatever it may be I just shy out of ignorance. If your life is not fulfilling at the present you will not feel any difference once you're FIRE. Live for the moment but also for the future. Focus and live for the present before focusing on the future. I'd rather sacrifice some part of my net worth upon my death bed in order to not die without friends and family and dying with life experiences. Anyone else thinking they should have lived life more? Repost since I didn't had enough karma to post last time. [link] [comments]  |
| Weekly FI Monday Milestone thread - March 08, 2021 Posted: 08 Mar 2021 02:00 AM PST Please use this thread to post your milestones, humblebrags and status updates 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! 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: 07 Mar 2021 02:47 AM PST e.g. The only reason the 4% rate survived the great depression was because of the 40% bonds. If the portfolio was 80-100% stocks which many people today seem to go for, it would have been utterly destroyed with a 4% withdrawal Bond yields were very high historically, 2-4% REAL returns even with Government bonds, this is why the 4% rule worked so well. But if you have 40% in bonds yielding a measly 1-1.5% today (nominal!) with the additional risk that future rate rises will totally crush their value, I don't see how the 4% rule is relevant today. A 40% bond portfolio (with high quality gov and IG corporate bonds) would have wayy expected lower return these days, with well under inflation interest rates. Am I missing something? Did the 4% rule study actually test time periods where bond/interest rates were near 0 and stocks were at near record valuations like today? Even in the 2000 and 2008 crashes yields were way higher and could be dropped, now they have no room to drop. EDIT - I came back from work to find way more replies than I expected, I will try to respond to as many as possible but I didn't expect this number of comments [link] [comments]  |
| Bond tents / equity glidepaths and the memoryless market Posted: 07 Mar 2021 09:51 PM PST When reading Kitces about the bond tent, or Big ERN about the equity glidepath, I feel like there's a hidden assumption that people are retiring with "just enough", and need to guard against sequence of returns risk. Consider the following scenarios:
Tom is identical to Bob (after 10 years). The market doesn't know how they got there. If Bob can be 100% equities after 10 years, then Tom should be able to skip the glidepath and be 100% equities from the start. But I don't think I've ever seen that analysis. What is the SWR and retirement period combination that suggests that a person doesn't need to have an equity glidepath? Instead, it seems like the recommendation would be that Tom also set up a glidepath. But that can't be right, because that would suggest that Bob should still be in bonds after 10 years. The only way I can think to get a handle on this is to use cFireSim, adjusting the withdrawal rate for Tom until the success percentage matches the success percentage of Bob, who starts 10 years earlier with an equity glidepath. A related scenario is that Bob has an amazing 5 years, and hits $2m. Why not abort his glidepath and go 100% equities? Aside from the extra 5 years of longevity risk, it seems like the outcome is more or less the same. I suppose one could argue that CAPE is higher, and the market will "revert to the mean", but if we could all predict the market we'd be rich right? [link] [comments]  |
| Risk and Reward in Short-Term Savings [Bogleheads Wiki Highlight] Posted: 07 Mar 2021 08:00 AM PST The Bogleheads wiki is chock full of great information on a number of oft-discussed topics. In this subreddit, we're often concerned with the long-term return outlook of various asset classes because we're often looking at accumulation-decumulation timelines on the order of decades. But what should we do about spending goals in the much shorter term? Here I want to highlight a set of pages that are quite useful when considering asset location and allocation for the short term. The Bogleheads wiki has three sister pages on historical returns for 6-month, 1-year, and 5-year savings horizons. In each page, they list a multitude of ETFs and mutual funds that one might consider as an alternative to cash (in the articles, represented by the Vanguard Prime Money Market Fund [VMMXX]). They do this by demonstrating a few key statistics comparing that holding (e.g. VTSAX) vs VMMXX for all overlapping durations where they have comparative data (e.g. all 6-month overlapping periods. Statistics presented include (but are not limited to):
So if you're looking at a 6-month savings window, how would you do with VTSAX?
This highlights the common advice that a 100% equity fund is too risky for a 6-month time horizon. Your median risk premium in a 6-month window has been an extra $518, but one quarter of the time you'd lose compared to VMMXX and when you lost you'd have a median loss of $705. You also run the risk of a much higher loss of >$4,000. How about using VTSAX for a 5-year savings horizon?
This is a good example of the classic risk and reward of equities in a short/medium-term window. Interestingly, in the 5-year period your chances of underperforming a money market fund are not substantially different (in fact, just a smidge higher in the longer window), but when you do lose money it's proportionally less over the longer horizon (i.e. it's not 10x the median loss over a 10x longer horizon). It's also the case that if you do lose money, your maximum loss can still be quite deep. The reward, though, is a median return 10x higher than it was for the 6-month return window. So if you can stomach the idea of a potential 45% loss even after 5 years, you stand to gain quite a bit (50%) over what the money market fund would've given you. Lastly, if you are considering saving a substantial amount over a 6-60 month period and find an asset that's right for you, consider placing this cash- or conservative-fund in a tax-advantaged account. The idea is that you can hold tax-efficient stocks in your taxable brokerage while holding the safe asset in a 401k. When it comes time to make your purchase, you'd sell the tax-efficient stocks and take a smaller tax hit while also selling the safe asset in the 401k and buying stocks. Overall, it acts as if you held the safe asset in the taxable brokerage all along and after you make the relevant sales it's as if you never sold the stock. Major caveat: Your taxable portfolio in stocks needs to be large enough to weather a major downturn. If you're holding $30k in stocks for a down payment and the market tanks 50%, you now only have $15k available for a down payment even though you're holding $30k in safe assets in your tax-advantaged account. A decent rule of thumb is that your taxable account should be twice whatever the eventual spending need would be in order to maintain your ability to use the funds even after a major drop. All the above logic holds for something like an emergency fund as well. [link] [comments]  |
| Did kids change your geo arbitrage FIRE plans? Posted: 07 Mar 2021 01:30 PM PST Hey gang, I'm longtime lurker and commenter, first time poster. I have questions about a fairly specific set of circumstances and I'd love to see if there are relevant experiences the community can share, though hopefully this will be interesting even for folks who are on different tracks. I know there is ExpatFire for this kind of question as well, but hoping to cast a wider net here. Here's some setup: Age: Mid-thirties couple Family: We're expecting our first baby this year, and it's pretty likely we're going to stop at one. Location and income: We are fortunate to have high incomes, and as a tradeoff we live in a VHCOL area (SF Bay Area), which other than the cost, we generally quite like (weather, food, culture). Housing: ~$400K equity in a very affordable (for here) home which should be pretty comfortable for a family for 3. Edit: pretty comfortable until she's 3 and then we'd probably want a larger house with a proper yard. Savings outlook: We save about 75% of our gross income so NW is going up quickly. Should cross $2M by the end of this year, including the home equity. Maybe 3.5M by age 38. and 5M by age 40, which would be close to when the little one is school age. Now the question: We have had a dream (Plan A) for a while of moving when we FIRE, either to an EU country like Portugal/Spain or to somewhere else in the western US with lower cost of living and not a huge downgrade in weather and amenities (maybe San Diego or some parts of Colorado). That feels very doable with $3M saved and an earlier retirement date. The alternative (Plan B) would be to work for a few more years to save up more to FIRE where we are - I think we'd need at least $5M to feel comfortable here, possibly more. Right now I think Plan A is still very feasible even with the little one, but wondering if I'm being naive and whether I'll end up thinking Plan B makes more sense after they're born. For those who have had geo arbitrage FIRE plans, and then had a young child, did the kid change your plans and sensibilities? Did it make you want to save more for their future (i.e. generational wealth) than you otherwise would have, or stay somewhere more HCOL to give them better opportunities/keep them where you have roots? Interested in how you thought about the tradeoffs in this kind of scenario. [link] [comments]  |
| Daily FI discussion thread - Sunday, March 07, 2021 Posted: 07 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]  |
| Six Year Update - The Seven Figures Edition Posted: 06 Mar 2021 06:55 AM PST TLDR - Net Worth and Income charts. I've been posting my family's net worth updates annually on this subreddit for many years (see 2015, 2016, 2017, 2018, 2019, and 2020 updates); I find sharing my plans and progress to be helpful for giving myself a heading check, and hope this community finds my inputs to be helpful. Last year, my post happened right as the the apocalypse was kicking off, and our portfolio was suffering heavy losses. Let's see how that turned out over the past year. Current ages: 35 and 34. We have two kids who are now entering public school age. We still have to pay for after school care, but in general our childcare costs have been trending down over the past couple of years. Combined pre-tax income: About $206k (~5.1% increase). About a month after my last post, my wife took a 10% pay cut because of COVID. It wasn't a huge deal because of our large savings rate (also not like there was much to spend money on during early lockdown anyways). We still made some budget cuts, and then her pay was restored about 6 months later, and we got raises on top of that - all of which is to say, our cash flow has increased dramatically lately. Assets: Cash/emergency fund: ~$80k (81.8% increase). Big increase in cash over the past year, for a few reasons. We did a cash out refi about a year ago to do a bunch of home repairs (furnace repair, backup generator, replacement windows, new water heaters, removing dead trees). Because lockdown reduced our spending, we were able to accomplish all that and still grow cash, which made us more comfortable considering there seemed to be an actual apocalypse going on. The next home upgrade we want to do is a new roof+solar project within the next year, which will bring our cash back down to normal. Tax advantaged Retirement/HSA accounts: ~$721k (49% increase). So uh, that happened. We're now maxing out both her 401k and my TSP, both Roth IRAs, and an HSA. Nobody could have predicted that the pandemic stock market lows would have happened as early as they did, or that the stock recovery would have happened so fast. I certainly didn't predict that - but I did continue to buy and hold index funds, as always, and was rewarded for it. 529 accounts: ~$46k (27.8% increase). We live in Florida, which has one of the few pre-paid tuition plans that actually make a lot of sense. So we've been moving over 529 money into the prepaid plans. Once those are fully paid off in a couple years, we'll go back to putting money into the 529s again (to pay for housing expenses, or if they want to go private or out of state or grad school). Our goal has long been to cover about ~75% of the total in state public college expenses, but now it looks like we might get closer to 100% just because of good fortune. Taxable investments: ~$20.5k (128% increase). This increased pretty dramatically because of efforts on two fronts. First, since we've now maxed out tax shelters, I've set up a new payroll deduction to send money directly to the taxable brokerage, and will move most future raises towards that. Second, since travel has been off the table for the past year, I've been running an Amex Gold + Platinum Schwab churning setup for most of our spending over the past year, which has made us several thousand dollars going straight to a taxable brokerage account. Vehicles: $31k KBB value of three cars (2% decrease). Same cars as last year, just depreciation. And not much of it this year, which weirds me out. Maybe because they barely got any miles? Maybe the used car market is being weird right now? I dunno, I'm just reporting the numbers. Home: Using Federal Reserve MSA home index, our home value is now ~$603k (4.5% increase), using Zillow estimate is currently $691k (5.8% increase). We use a range to estimate our home's value. It's kinda crazy to look back and realize the home appreciation over time; we got *very* lucky with being able to buy our house in 2012. Debts: Mortgage: $359k at 2.875% for 30 years (32% increase). We refinanced our mortgage, and used it to pay off our home equity loan, car loan, and to start building up cash. The interest rate is so low here that we don't see much point to even trying to pay it off early, and will be focused on building up assets instead. Home Equity Loan: $0 at 4.75% (100% decrease). Gone! Car Loan: $0 at 3.1% (100% decrease). Gone! Net Worth Estimate: $1.14M using MSA Home Index (~34.8% increase), $1.23M using Zillow (~33.4% increase). There it is. We became millionaires right in the middle of the "worst year ever." Without using crypto or Tesla or meme stonks. Just boring old index funds, mostly held in tax advantaged retirement accounts. Current plans going forward: We hit a lot of goals over the past year. It feels like we're approaching the end of the "boring middle", and are now racing to quickly build up significant assets and achieve financial independence. Our goal is to be able to FIRE if we want to by ~2030 with ~$100k income. [link] [comments]  |
| Mega Backdoor Roth, In-Plan Conversions Posted: 06 Mar 2021 01:41 PM PST This might be old news for a lot of you, but I just learned it and wanted to share in case anyone else wasn't aware. I just learned another way of doing this is if your provider allows for in-plan conversions! This lets you contribute to the after-tax bucket, then convert it to a Roth 401k instead. Giving you the same tax sheltered access you'd get in a Roth IRA. I called my provider about this (Fidelity) and they not only knew exactly what i was talking about, they were excited about it and even set it up to automatically convert, so there is no chance for gains complicating the process. It was one phone call, that I never have to think about again. The downsides are of course being tied to your employer's 401k options, and the regular 401k penalties if you need to withdraw. I just wanted to share this because there is always such an emphasis on in-service distributions, which are rare, that I thought the Mega Backdoor Roth wasn't an option at all for me. If there's any important details I missed please let me know. This is new info to me that I just wanted to get the word out about but by no means am I an expert. EDIT: Thank you to u/rkpandey20 for the award! It's my first ever! 🤗 [link] [comments]  |
| Daily FI discussion thread - Saturday, March 06, 2021 Posted: 06 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]  |
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