Posted: 29 Apr 2021 02:00 AM PDT

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Apparently I’ve arrived

Posted: 28 Apr 2021 06:29 PM PDT

Had a planning session with my financial advisor over the weekend and he confirmed what I thought: working is now optional.

It's a weird feeling. Exhilarating and satisfying and scary too. I went into the Monday morning workday with a different outlook. My SO says I have to act like a secret agent now.

I'm not ready to give notice. I have to figure out health insurance (and SO can start Medicare in January...he's about 8 years older than I am...so may as well push it close to the end of the year). Plus we want to buy a house and I don't know if it's harder to do that as a retiree, even with assets. Plus I have projects at work that extend into the summer I wouldn't feel good about bailing on.

But, boy, it's a good feeling. I can leave whenever I want. Or stay. I can negotiate. Maybe when I say I'm leaving they'll ask if I would be willing to work part time, or as a contractor. These are the things I'm thinking through.

Ironically, I've hit my stride this past year. I've gotten high visibility projects, opportunities to lead, company leadership loves my work, my manager is talking about a promotion. AND I DO NOT GIVE A FLYING FUCK. It's a good feeling. But it is hard to walk around with this secret.

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My Journey to $1M NW at 26 years old

Posted: 29 Apr 2021 06:48 AM PDT

Yesterday my net worth hit $1M NW for the first time! I know, I know, since so much of it is invested, the stock market could dip and I'd be sub $1M, but 1) let me have my moment and 2) you'll see with my investments that this is not a transitory number. My goal was to write a celebratory post since I don't really have anyone to share this (single, no kids), so I'm sharing the details with Reddit.

Background

I'm a 26F Software Engineer in a US HCOL. My immigrant parents instilled frugalness in me from a young age. Thus, I live with housemates, drive a beater car, and rarely buy things. My yearly expenses are 25k and I save roughly 80% of my post tax income per month.

Assets

I learned about investing from like-minded peers and reading. I'm a fan of index funds and low expense ratios. Every year I leverage my company's 401k match (50% up to pre-tax limit), the backdoor Roth (trad IRA - > Roth IRA) and the mega backdoor Roth (after-tax 401k -> Roth 401k) with front-loading (as opposed to dollar-cost averaging). I do not have a financial advisor or tax accountant, so everything here is DIY.

Account	Balance	Comments
Pre-tax & Roth 401k	420k	Invested across 4 Vanguard mutual funds
Roth IRA	39k	Invested in 1 Vanguard ETF
HSA	24k	Invested in 3 Fidelity mutual funds
Stocks	257k	Vested company stock
HYSA	250k	Down payment for house in HCOL area
Savings Account	5k	Emergency fund
Checking Account	11k	Taking suggestions on what to do
Total	1.06M

Salary Progression

I'll describe my income in terms of how much I made pre-tax, not in terms of offer letters. Bonus numbers reflect yearly bonuses as well as unanticipated bonuses from launches and oncall. Equity reflects granted, not vested price. I've been at the same company since graduating from college and do not have a side hustle.

Year	Comments	Salary	Bonus	Equity	Total
2021	Equity is projected due to market fluctuations	168k	32k	105k	305k
2020	Changed teams within company	161k	35k	96k	292k
2019	Lots of oncall	144k	41k	69k	254k
2018	Got promoted	125k	16k	67k	208k
2017	Got promoted	101k	30k	0	131k
2016	Started working mid year	42k	8k	0	50k

Net Worth Progression

I didn't get into FIRE until 2020, but looking back I've always been frugal and saved most of my income. I don't have a specific FIRE goal, but it would be nice to be FI. I enjoy my work enough to not RE immediately. My immediate goal is home ownership.

Year	Net Worth
2021	1.06M
2020	785k
2019	515k
2018	254k
2017	137k
2016	36k

Reflection

I know I have a lot of privilege: my parents paid for my education so I never had to take out student loans. They helped me financially as I lived with them (paying subsidized rent) for the first 3 years of my working life. But I do think I did a number of things to help get me to where I am today that I'd like to share:

Negotiate. Every year my company updates everyone's compensation, and every year I negotiate for more money. I make it clear that while I enjoy the work, I know my worth and would like to be paid accordingly. To me, a few hours of research and awkward conversation is a reasonable price to pay for the positive impact on my compensation.
Find frugal ways to entertain yourself. Instead of paying for a gym membership, I use a fitness app that I pay the monthly subscription for using survey credits. Between borrowing from the library and expensing it for work, I haven't bought a single book since I started working. During the pandemic I've learned even more ways I can keep busy without spending money.
Maintain work-life balance. I do not work more than 40hr/wk. I've seen too many people burn out physically and mentally and their company not care for them that I know I need to take care of myself and set my own boundaries. At the end of the day, my company's goal is to make money, not take care of me, so I need to take care of me.
Keep it simple and DIY. Like I said, I don't pay for a financial advisor or a tax accountant. That's b/c I make my investments as simple as possible so I can manage them myself. No one you pay will be as attentive as yourself, so if you can, do it yourself.
Educate yourself. I'm a first-generation college student, so I'm used to and good at learning things myself. I taught myself how to budget, negotiate, invest, and do my taxes through talking to like-minded peers and reading a bunch. Learning helps yourself and keeps you entertained, so it's a double-whammy.

I'm happy to share my story and knowledge with you! Feel free to ask me anything in the comments or DM, and I'll try to answer w/o deanoning. I'm also taking advice on how to improve my financial situation even further and suggestions on how to CELEBRATE!!!

submitted by /u/Top-Cheesecake6188
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What Allowing the Portfolio to Go To 0 by Death Does

Posted: 29 Apr 2021 02:56 PM PDT

TL;DR; Being willing to allow your portfolio to go all the way to 0 by death only provides a modest reduction in work time (generally less than a year). Most of the reason for lower withdrawal rates with stock/bond portfolio's is due to sequence of return risk - not due to maintaining the portfolio, especially for longer retirements

Cross-Posted on r/Fire

Background

Have seen a few folks insistent on wanting their portfolio to completely deplete by their death. At first blush, this sounds like it will significantly reduce working time - after all wouldn't you need significantly more money to maintain a portfolio than to only have exactly as much as you need. However, due to compound growth and the length of retirements for early retirees, there actually isn't as much of a benefit as one would think. The below hypothetical explores this.

Hypothetical:

Susie is a retiree that retirees at age 40 and magically knows she will die in exactly 50 years. Assuming Susie had retired in the given 'Retirement Year', the table below shows exactly how much Susie could withdrawal from her portfolio to:

Completely deplete her portfolio at death
Maintain her initial portfolio's value (on an inflation adjusted basis) on death

Additionally, the final column of the table shows how long on an expected basis Susie would have to let her portfolio grow before retirement to go from depleting her portfolio to effectively maintaining her portfolio. As you can see, even without any extra contributions, Susie would need typically less than one year of Coast FIRE to go from depleting her portfolio to maintaining her portfolio.

Conclusion

For a stock/bond based retirement - there is relatively minimal cost associated with your portfolio continuing to grow (or maintaining your wealth). Almost the entirety of the withdrawal consideration for younger retirees should be on their risk tolerance from a sequence of returns perspective.

As you can see from the chart, there is very little difference between the portfolio preservation and portfolio depletion withdrawal rates, but there is significant difference in the withdrawal rate depending on the particular year one retirees in.

Retirement Year	Death In	Withdrawal % so that retiree dies at $0.	Withdrawal % so retiree maintains their initial portfolio (inflation adjusted)	How many months Susie would have to wait to maintain her money
1880	1930	5.5%	5.2%	11
1885	1935	7.6%	7.3%	7
1890	1940	5.5%	5.1%	13
1895	1945	6.2%	5.9%	9
1900	1950	4.6%	4.3%	14
1905	1955	4.2%	4.0%	8
1910	1960	3.8%	3.7%	8
1915	1965	5.5%	5.3%	4
1920	1970	7.4%	7.2%	4
1925	1975	7.7%	7.5%	7
1930	1980	4.1%	3.8%	15
1935	1985	7.2%	6.9%	8
1940	1990	6.2%	5.9%	9
1945	1995	7.7%	7.5%	6
1950	2000	10.2%	10.1%	3
1955	2005	6.5%	6.3%	8
1960	2010	4.8%	4.4%	15
1965	2015	3.7%	3.4%	16
1969	2019	3.5%	3.3%	11

Assumptions

Susie invests 100% in a broad based US stock market index (I'm specifically using the series used by FI Portfolio Doctor) - which I believe is the Shiller version of the S&P 500 index.
Susie withdraws all her money for that particular year at the start of the year. Her initial portfolio is defined as the amount immediately when she retires, of which she has her first year's withdrawal as cash (earning no interest), and the remainder 100% in the stock market.
Susie's withdrawals are inflation adjusted and fixed relative to her initial portfolio.
The maintain portfolio version is specifically only maintains at death. Her portfolio may dip below her initial portfolio (but never below 0) at various points during her 50 year retirement.
The time in months to reach portfolio preservation is assuming a 7% real stock market return over the specified period, with no additional contributions from the point her portfolio would have been able to be used for capital depletion

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5 year milestone: $0 -> $500k NW

Posted: 28 Apr 2021 04:47 PM PDT

Background

I (28, USA HCOL) hit the $500k net worth milestone and got married recently so I figured it was a good time to reflect on my financial journey.

Net worth history. Mint didn't track my investment account properly for a while. Just imagine a smooth line from mid 2016 to where it jumps up in mid 2018.

Approximate breakdown:

$305k Taxable investments in mutual funds
$135k Tax advantaged retirement investments (401k, IRA, FSA) in mutual funds
$20k Speculative trading
$15k Crypto
$60k Cash

My investments roughly follows the Core Four portfolio with an 85/15 split but weighted towards US small cap value and international markets.

I'm holding a lot more cash than I intend to. I slowed down my automatic recurring investments in 2019 so I'd have cash to buy in during the next market downturn (mistimed that), buy a car (still might need to do that), and get married (done). I'll probably invest that extra cash in alternate assets that are underrepresented in my current allocation (e.g. crypto, commodities, etc).

Family

I'm married with no plans for kids. My spouse and I have technically hit the $1M milestone together but this post concentrates on my own pre-marriage path to $500k.

Career

I'm from an upper-middle class family and my parents gave me a "small loan" of fully paying my undergraduate college fees. Months after graduation with a degree in CS, I received a job offer from a startup in San Jose that paid $68k and some options. That's low for this region but it was the only job offer I'd received in months so I accepted it. I'm a pretty mediocre software engineer but lucked into getting a job offer from a FAANG company a year later. My income now is ~$230k/year. I feel overpaid but $230k is on the lower end for my role and years of experience and I expect my compensation will increase to $300k in the next 2 years.

Spending

My average spending is about $1500/month, which is low for my HCOL area but I feel like I live a full and fulfilling lifestyle. I know someone who is on the hardcore FIRE path and I'm practically a spendthrift compared to them. I think I attribute my low monthly spending to a few main factors:

I didn't own a car.
I have relatively inexpensive hobbies (cooking, painting, fitness).
My spouse and I aren't very materialistic.
I've been healthy and have avoided expensive healthcare bills.

As a result, my spending is basically limited to essentials, rent, food, and travel.

Future Goals & Retirement

If the market continues it's current bull run, my spouse and I are on track to being able to FIRE comfortably in our 30s with $3-4M. If we enter a recession, our FI date will come later but we'll probably make it out okay. Knowing we're so close to reaching financial independence is making me less risk averse and I'll start transitioning to a less aggressive portfolio as I get closer to our FIRE target.

We could potentially retire earlier or with more spending power if we moved to a LCOL country. We're both immigrants in the USA so our roots aren't too deep and we're considering this option but that's still years away.

In the meantime, my spouse and I will focus on maintaining our current career path and financial habits while continuing to build a happy and meaningful life together.

Takeaways

I've been very fortunate and I wouldn't have reached this milestone so quickly without the help of others and a lot of luck. Specifically:

A spouse with a similar financial background and goals.
Parents who financially supported me all the way through college.
Discovering programming in college and getting a FAANG SWE job.
An unprecedented bull market.

If I could go back 5 years and give myself some general financial advice (i.e. no cheating and telling myself what's going to moon), I'd probably say:

Don't try to time the market. Instead, stick with automatic recurring investments. Similarly, don't stop automatic recurring crypto purchases just because the price crashes.
Make full use of all available tax advantaged accounts as soon as possible. I didn't start maxing out my HSA and 401k until 2018.
Speculation is fun but you're a crappy trader so allocate most of your investing to a boring /r/personalfinance diversified portfolio and keep /r/wallstreetbets YOLOs to a smaller fun money account that you're okay with losing.

Good luck to everybody on their own FI journey!

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Thursday, April 29, 2021

Financial Independence Daily FI discussion thread - Thursday, April 29, 2021

Financial Independence Daily FI discussion thread - Thursday, April 29, 2021

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