Almost on FIRE

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Almost on FIRE

Post by LCMay »

Ok, so my big goal is to retire early! I’m 36 with a net worth of $975,000. My current yearly expenses are $40,000 and I save around $60,000 a year. In retirement, I would like to travel, have kids, and buy a house, so I’m planning on my expenses increasing to $60,000. I’m fine getting a part time job or doing freelance if I want/need to. So, according to the 4% rule, it seems I would need $1.5M. I’m close, but I’d love to find ways to make that happen faster and how I can fine tune my current investments.

My investments are a little all over the place and I’m invested in the same things in multiple accounts. This makes it hard for me to keep track of my asset allocation and any rebalancing. I also got talked into a Callable CD by the Credit Union affiliated with the company I work for, which I’m locked into until 2025 - and honestly still have no idea what it is exactly. I was told it’s typically “called early,” but that hasn’t happened yet and I’ve been invested in it since 2018.

Here is my info

Emergency Fund: Eek, ok so I have like 4 years of living expenses in cash! I do like having a large cash cushion, but maybe this is excessive since I’m not looking to make any large purchases soon.

Debt: None

Tax Filing Status: Single

Tax Rate: 24% Federal, 9.3% State

State of Residence: California

Age: 36

Desired Asset Allocation: 80 Stocks / 20 Bonds

Current Retirement Assets:
Total Portfolio Size: $975,000

401K:
Company Match= 50% of the first 4% of my pay
11% VANG INST 500 TRUST (Expense Ratio: 0.011%)
5% VANG INST TOTAL SK TR (Expense Ratio: .015%)
4% FRTR MFG GLB EQ IS (Expense Ratio: .85%)
4.7% VANG MD CP IDX IS PL (Expense Ratio: .03%)
1% BARON GROWTH UNITIZD (Expense Ratio: .89%)
5% VANG SM CP IDX IS PL (Expense Ratio: .03%)
4.7% FID DIVSFD INTL POOL (Expense Ratio: .58% )
4% BLKRK EAFE EQ IDX (Expense Ratio: .03% )
1% NTN GLB STNBLTY IDX (Expense Ratio: .2%)
.2% BR EMERG MKT IDX F (Expense Ratio: .08%)
2.7% VANG INST TOTL BD TR (Expense Ratio: .02%)

HSA:
3% VANG 500 IDX (VFIAX) (Expense Ratio: .04%)

Roth IRA:
7% VANG TOTAL STOCK (VTSAX) (Expense Ratio: .04%)

Callable CD:
10% - LPL Financial Callable CD – I wasn’t sure how to classify this because I really don’t understand what it is…

Brokerage Account:
21% VANG DIV GROWTH (VDIGX) (Expense Ratio: .27%)

Crypto/Fun Money:
1% - Bitcoin

Cash:
13% (CDs, Money Market Accounts, Bank Account)

Contributions:
$19,500 annually in 401k + company match 50% of the first 4% of my pay
$3,550 HSA
around $37,000 Savings (Money Market Account, Etrade Account)

Other Info:
Pension - $2,145/mo by 65 yrs old

Questions/Comments:
- Any recommendations on my portfolio asset allocation with the goal of reaching FI as soon as possible? Maybe getting that cash to work for me?
- Any recommendations for streamlining or simplifying my investments?
- Is there a way to still contribute to my Roth IRA even though my salary exceeds $139,000? And if I can, should I do it?
- Is it a bad move to have a dividend fund in my taxable brokerage account? Is there a better way to rearrange things to be more tax efficient?
- Instead of investing in Bonds, I decided to put that allocation in CDs. This seemed like a good plan since I was guaranteed a 3% return and Bonds haven’t been performing well. Was that a misinformed decision?

THANK YOU FOR ANY INFORMATION! I'm so appreciative of this amazing community.
hi_there
Posts: 1182
Joined: Sat Aug 29, 2020 7:00 pm

Re: Almost on FIRE

Post by hi_there »

I would rebalance the growth sector funds into normal stock weightings. This will probably improve risk adjusted returns, plus, value is pulling ahead as the economy normalizes apparently. You can also save a bit in expense ratios by moving to cheaper funds in some of those cases - saving cost is really the only thing that will guarantee that your investments grow "faster".

Also be wary that 4% rule is based on a 30y retirement. As an early retiree, you would probably want to be more conservative and assume somewhere around a 3% to 3.5% withdrawal rate.
flyingaway
Posts: 3908
Joined: Fri Jan 17, 2014 9:19 am

Re: Almost on FIRE

Post by flyingaway »

Find a like-minded person to get married, your combined money doubles and you can FIRE instantly.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

flyingaway wrote: Sun Apr 18, 2021 10:43 pm Find a like-minded person to get married, your combined money doubles and you can FIRE instantly.
Hahahaha! That's a great idea!
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

hi_there wrote: Sun Apr 18, 2021 10:31 pm I would rebalance the growth sector funds into normal stock weightings. This will probably improve risk adjusted returns, plus, value is pulling ahead as the economy normalizes apparently. You can also save a bit in expense ratios by moving to cheaper funds in some of those cases - saving cost is really the only thing that will guarantee that your investments grow "faster".

Also be wary that 4% rule is based on a 30y retirement. As an early retiree, you would probably want to be more conservative and assume somewhere around a 3% to 3.5% withdrawal rate.
Thanks for the note about 4% rule!
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

Re: Almost on FIRE

Post by aristotelian »

Wait until after the married and kids part before making any assumptions about spending. You say you want to travel but vacations alone for family of 4 can eat up $10k.

Re callable CD, why do you have 10% of your allocation in something you admittedly don't understand?
z3r0c00l
Posts: 3807
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Almost on FIRE

Post by z3r0c00l »

Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?

Can I ask about the pension: is that calculation assuming early retirement or if you keep working for a decent stretch?
70% Global Stocks / 30% Bonds
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Almost on FIRE

Post by HomeStretch »

LCMay wrote: Sun Apr 18, 2021 10:25 pm Is there a way to still contribute to my Roth IRA even though my salary exceeds $139,000? And if I can, should I do it?
For retirement savings, prioritize Roth contributions over Taxable as Roth accounts grow tax free. If you can utilize the Roth options, below, it’s worthwhile funding them to the maximum limits annually. It’s a good way to get retirement savings in your Taxable account moved into Roth.

Yes, even if your MAGI exceeds the income limit for direct Roth contributions, there is a way you can contribute to a Roth IRA. As you do not have any pretax IRA balances (Traditional, Rollover, SEP or SIMPLE) listed in your portfolio, you can use a two-step process called a “backdoor Roth”. This involves making a non-deductible traditional IRA contribution (step 1) that is converted to a Roth IRA (step 2). The < age 50 2021 contribution limit is $6k and you have until 5/17/21 to make a non-deductible traditional IRA contribution for 2020 of $6k. Invest the Roth IRA in 100% equity for highest expected growth. Link to BH wiki about a backdoor Roth (note the Form 8606 required to be filed with your Form 1040):
https://www.bogleheads.org/wiki/Backdoor_Roth

If offered by your 401k plan, another way to get money into a Roth account is a “mega backdoor”. This involves making an employee after-tax (non Roth) contribution that is either rolled over in-plan to Roth 401k or distributed in-service to a Roth IRA. The 2021 IRS limit is $58k (= employee elective deferral $19.5k + employer match + employee after-tax contributions). Link to BH wiki page about mega backdoor:
https://www.bogleheads.org/wiki/After-tax_401(k)

Edit - if you plan to buy a house in retirement, if you plan to apply for a mortgage you will qualify much more easily while working full time at a long term well paying job. It’s harder to get a mortgage or to qualify for the best rate if you have no/low income or short employment length.
Last edited by HomeStretch on Mon Apr 19, 2021 11:35 am, edited 1 time in total.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

z3r0c00l wrote: Mon Apr 19, 2021 8:17 am Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?

Can I ask about the pension: is that calculation assuming early retirement or if you keep working for a decent stretch?
Pension is assuming I stopped working today. If I worked longer, it would be a higher number. This is great feedback. I don't think I would quit my job and never work again, I just would pick a job that's part time or less money/less stress compared to my current job and move out of Los Angeles. So, I'm not looking for a strict FIRE lifestyle.
z3r0c00l
Posts: 3807
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Almost on FIRE

Post by z3r0c00l »

LCMay wrote: Mon Apr 19, 2021 9:57 am
z3r0c00l wrote: Mon Apr 19, 2021 8:17 am Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?

Can I ask about the pension: is that calculation assuming early retirement or if you keep working for a decent stretch?
Pension is assuming I stopped working today. If I worked longer, it would be a higher number. This is great feedback. I don't think I would quit my job and never work again, I just would pick a job that's part time or less money/less stress compared to my current job and move out of Los Angeles. So, I'm not looking for a strict FIRE lifestyle.
Thanks, that is a solid pension for quitting early! I am aiming for a similar if less firey path: early retirement at 55 with full pension then picking and choosing jobs and other activities at leisure.
70% Global Stocks / 30% Bonds
User avatar
BolderBoy
Posts: 6753
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Almost on FIRE

Post by BolderBoy »

LCMay wrote: Sun Apr 18, 2021 10:25 pm Desired Asset Allocation: 80 Stocks / 20 Bonds

401K:
Company Match= 50% of the first 4% of my pay
11% VANG INST 500 TRUST (Expense Ratio: 0.011%)
5% VANG INST TOTAL SK TR (Expense Ratio: .015%)
4% FRTR MFG GLB EQ IS (Expense Ratio: .85%)
4.7% VANG MD CP IDX IS PL (Expense Ratio: .03%)
1% BARON GROWTH UNITIZD (Expense Ratio: .89%)
5% VANG SM CP IDX IS PL (Expense Ratio: .03%)
4.7% FID DIVSFD INTL POOL (Expense Ratio: .58% )
4% BLKRK EAFE EQ IDX (Expense Ratio: .03% )
1% NTN GLB STNBLTY IDX (Expense Ratio: .2%)
.2% BR EMERG MKT IDX F (Expense Ratio: .08%)
2.7% VANG INST TOTL BD TR (Expense Ratio: .02%)
Your 401k is too complicated. Sell everything except the VANG INST TOTAL Stock and VANG INST TOTAL BD and use the proceeds to buy total stock and total bond in your desired AA.
Callable CD:
10% - LPL Financial Callable CD – I wasn’t sure how to classify this because I really don’t understand what it is…
Consider this part of your fixed-income in your portfolio (fixed-income = bonds, cash, CDs, MMFs, etc)
Brokerage Account:
21% VANG DIV GROWTH (VDIGX) (Expense Ratio: .27%)
Is this a taxable account? That holding is NOT tax efficient! Consider selling it to buy VTSAX.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Snuffycuts99
Posts: 207
Joined: Thu Apr 02, 2015 11:09 pm

Re: Almost on FIRE

Post by Snuffycuts99 »

Buying a house once you FIRE seems counterintuitive to me but to each their own. I plan on having the house paid off when I FIRE, which will help to actually make it a possibility. Agree with an above poster in thinking that your planned expenses seem quite low when adding a spouse, children, home, traveling.
Keenobserver
Posts: 1043
Joined: Thu Aug 13, 2015 1:05 pm

Re: Almost on FIRE

Post by Keenobserver »

By what age do you plan to FIRE? You mentioned you might do some consult work, which means it wont be FIRE but may COAST.
il0kin
Posts: 465
Joined: Mon Feb 26, 2018 7:19 pm

Re: Almost on FIRE

Post by il0kin »

Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
BlueCable
Posts: 465
Joined: Fri Jun 17, 2016 9:20 am

Re: Almost on FIRE

Post by BlueCable »

Our expenses nearly doubled when we had children, although half of that was daycare. Our kids are still young enough that we aren't in activities yet so we are expecting further increases to come.
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: Almost on FIRE

Post by wolf359 »

il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
If you can see that there is a brick wall in the road that you're going to hit 20 years from now, don't you think you're going to slow down or drive around it?

The failure rates in the Trinity Studies show what happens if you make certain assumptions at the end of 30 year testing time periods. They're simulations. In real life, it's not a rate of failure, but rather the chance that you're going to have to make an adjustment to the plan. And it doesn't take much -- either cut back on discretionary spending during bad market periods, or supplement your income.

If you're planning to retire early, then your retirement is voluntary. Make sure you have enough slack in your budget to cut back so you can live on a 2% SWR comfortably. But you don't need to actually do that except in bad market years.

If you budget for taking 3 cruises a year, in a bad year, maybe you skip one. Or fly coach instead of first class.

The 4% rule is a good benchmark for estimating how much you need for retirement, but to actually retire you should create a practical withdrawal plan detailing how you'd actually behave. I think 4% is relevant, but I wouldn't follow it blindly. The original study by Bengen that proposed the 4% rule explicitly mentioned being flexible.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

BolderBoy wrote: Mon Apr 19, 2021 10:25 am
LCMay wrote: Sun Apr 18, 2021 10:25 pm Desired Asset Allocation: 80 Stocks / 20 Bonds

401K:
Company Match= 50% of the first 4% of my pay
11% VANG INST 500 TRUST (Expense Ratio: 0.011%)
5% VANG INST TOTAL SK TR (Expense Ratio: .015%)
4% FRTR MFG GLB EQ IS (Expense Ratio: .85%)
4.7% VANG MD CP IDX IS PL (Expense Ratio: .03%)
1% BARON GROWTH UNITIZD (Expense Ratio: .89%)
5% VANG SM CP IDX IS PL (Expense Ratio: .03%)
4.7% FID DIVSFD INTL POOL (Expense Ratio: .58% )
4% BLKRK EAFE EQ IDX (Expense Ratio: .03% )
1% NTN GLB STNBLTY IDX (Expense Ratio: .2%)
.2% BR EMERG MKT IDX F (Expense Ratio: .08%)
2.7% VANG INST TOTL BD TR (Expense Ratio: .02%)
Your 401k is too complicated. Sell everything except the VANG INST TOTAL Stock and VANG INST TOTAL BD and use the proceeds to buy total stock and total bond in your desired AA.
Callable CD:
10% - LPL Financial Callable CD – I wasn’t sure how to classify this because I really don’t understand what it is…
Consider this part of your fixed-income in your portfolio (fixed-income = bonds, cash, CDs, MMFs, etc)
Brokerage Account:
21% VANG DIV GROWTH (VDIGX) (Expense Ratio: .27%)
Is this a taxable account? That holding is NOT tax efficient! Consider selling it to buy VTSAX.
I had a feeling this was the way to do it. Thanks for the advice!
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

Snuffycuts99 wrote: Mon Apr 19, 2021 10:34 am Buying a house once you FIRE seems counterintuitive to me but to each their own. I plan on having the house paid off when I FIRE, which will help to actually make it a possibility. Agree with an above poster in thinking that your planned expenses seem quite low when adding a spouse, children, home, traveling.
Great advice. I'm trying to figure out my plan and this is super helpful to hear.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

Keenobserver wrote: Mon Apr 19, 2021 10:42 am By what age do you plan to FIRE? You mentioned you might do some consult work, which means it wont be FIRE but may COAST.
While I daydream of retiring in my 40s. It's probably more like 50. Especially, based on the great feedback from the forum. I think I'm COAST not FIRE?
frugalecon
Posts: 671
Joined: Fri Dec 05, 2014 11:39 am

Re: Almost on FIRE

Post by frugalecon »

z3r0c00l wrote: Mon Apr 19, 2021 10:05 am
LCMay wrote: Mon Apr 19, 2021 9:57 am
z3r0c00l wrote: Mon Apr 19, 2021 8:17 am Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?

Can I ask about the pension: is that calculation assuming early retirement or if you keep working for a decent stretch?
Pension is assuming I stopped working today. If I worked longer, it would be a higher number. This is great feedback. I don't think I would quit my job and never work again, I just would pick a job that's part time or less money/less stress compared to my current job and move out of Los Angeles. So, I'm not looking for a strict FIRE lifestyle.
Thanks, that is a solid pension for quitting early! I am aiming for a similar if less firey path: early retirement at 55 with full pension then picking and choosing jobs and other activities at leisure.
The OP is apparently 36, and this pension starts paying out at age 65, so 29 years from now. Unless it will be inflation adjusted in the interim, the pension may look a lot less impressive when it comes time to pay out.
User avatar
Wiggums
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Re: Almost on FIRE

Post by Wiggums »

The taxes on your w2 income is close to $40k. So I assume that you are saving $60k and the rest (80k) is expenses. Does that sound right?

Will you have retiree medical through your employer?

Remember that you will owe taxes on tax deferred accounts.

Retirement at 55 is a reasonable high level goal and your savings rate is great. If you get married and have children, you can reevaluate and recalibrate your retirement goals.

Good luck to you.
"I started with nothing and I still have most of it left."
Mathew675
Posts: 50
Joined: Fri Mar 10, 2017 8:57 am

Re: Almost on FIRE

Post by Mathew675 »

I think it's a great start. My advice would be to simplify and fully understand all of your investments. This includes tax characteristics and where they should be held. This will guide your understanding of moving away from work and how to start efficiently pulling funds out of these accounts. I think I was in your boat a few years ago, was willing to live in a van down by the river and be a constant nomad, then I got married. And had kids. It's certainly more expensive and the impact of medical insurance for a family is crazy expensive. Also, they eat a lot. So we developed our budget based on several years worth of spending behavior and forecasted expenses. I usually go overly cautious now with the kids. Finally, we looked at what spending level is tax efficient and allowed those different brackets to drive some of our spending planning. So our plan is heavily focused on being tax efficient. There are likely some things that you will want to do to get ready for kids getting older, front load 529 plans etc, which I've binned differently than all of what I would consider to be my funds, so they are all segregated away and not included in my plan to live on.

I agree with the discussions about 4% being risky for longer retirements. I ended up settling on a 3.25% as my base but there are some additional safety nets in place which really puts it at closer to 3% if I'm honest.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

Mathew675 wrote: Tue Apr 20, 2021 1:24 pm I think it's a great start. My advice would be to simplify and fully understand all of your investments. This includes tax characteristics and where they should be held. This will guide your understanding of moving away from work and how to start efficiently pulling funds out of these accounts. I think I was in your boat a few years ago, was willing to live in a van down by the river and be a constant nomad, then I got married. And had kids. It's certainly more expensive and the impact of medical insurance for a family is crazy expensive. Also, they eat a lot. So we developed our budget based on several years worth of spending behavior and forecasted expenses. I usually go overly cautious now with the kids. Finally, we looked at what spending level is tax efficient and allowed those different brackets to drive some of our spending planning. So our plan is heavily focused on being tax efficient. There are likely some things that you will want to do to get ready for kids getting older, front load 529 plans etc, which I've binned differently than all of what I would consider to be my funds, so they are all segregated away and not included in my plan to live on.

I agree with the discussions about 4% being risky for longer retirements. I ended up settling on a 3.25% as my base but there are some additional safety nets in place which really puts it at closer to 3% if I'm honest.
Thank you!! This is so helpful and great advice.
Topic Author
LCMay
Posts: 11
Joined: Sun Jun 24, 2018 9:42 pm

Re: Almost on FIRE

Post by LCMay »

Wiggums wrote: Mon Apr 19, 2021 12:04 pm The taxes on your w2 income is close to $40k. So I assume that you are saving $60k and the rest (80k) is expenses. Does that sound right?

Will you have retiree medical through your employer?

Remember that you will owe taxes on tax deferred accounts.

Retirement at 55 is a reasonable high level goal and your savings rate is great. If you get married and have children, you can reevaluate and recalibrate your retirement goals.

Good luck to you.
Taxes are correct. My expenses are $40,000 and I save everything else. I will have no medical through my employer, so something that I would need to budget for.
retire57
Posts: 735
Joined: Fri Oct 28, 2016 3:03 pm

Re: Almost on FIRE

Post by retire57 »

As your life isn't really "settled" yet - single, no kids, no house - retiring so early would be quite risky.

There is too much that could happen to send you right back into the workplace. Divorce, sick kid(s), and who knows how much house maintenance, repairs, insurance, furnishings, and property taxes will cost you. And, as you said, another variable is health insurance.

You are doing great now, but the future could look very different.

Cheer up - you'll be 50 before you know it! :D
reln
Posts: 718
Joined: Fri Apr 19, 2019 4:01 pm

Re: Almost on FIRE

Post by reln »

LCMay wrote: Sun Apr 18, 2021 10:25 pm Ok, so my big goal is to retire early! I’m 36 with a net worth of $975,000. My current yearly expenses are $40,000 and I save around $60,000 a year. In retirement, I would like to travel, have kids, and buy a house, so I’m planning on my expenses increasing to $60,000. I’m fine getting a part time job or doing freelance if I want/need to. So, according to the 4% rule, it seems I would need $1.5M. I’m close, but I’d love to find ways to make that happen faster and how I can fine tune my current investments.

My investments are a little all over the place and I’m invested in the same things in multiple accounts. This makes it hard for me to keep track of my asset allocation and any rebalancing. I also got talked into a Callable CD by the Credit Union affiliated with the company I work for, which I’m locked into until 2025 - and honestly still have no idea what it is exactly. I was told it’s typically “called early,” but that hasn’t happened yet and I’ve been invested in it since 2018.

Here is my info

Emergency Fund: Eek, ok so I have like 4 years of living expenses in cash! I do like having a large cash cushion, but maybe this is excessive since I’m not looking to make any large purchases soon.

Debt: None

Tax Filing Status: Single

Tax Rate: 24% Federal, 9.3% State

State of Residence: California

Age: 36

Desired Asset Allocation: 80 Stocks / 20 Bonds

Current Retirement Assets:
Total Portfolio Size: $975,000

401K:
Company Match= 50% of the first 4% of my pay
11% VANG INST 500 TRUST (Expense Ratio: 0.011%)
5% VANG INST TOTAL SK TR (Expense Ratio: .015%)
4% FRTR MFG GLB EQ IS (Expense Ratio: .85%)
4.7% VANG MD CP IDX IS PL (Expense Ratio: .03%)
1% BARON GROWTH UNITIZD (Expense Ratio: .89%)
5% VANG SM CP IDX IS PL (Expense Ratio: .03%)
4.7% FID DIVSFD INTL POOL (Expense Ratio: .58% )
4% BLKRK EAFE EQ IDX (Expense Ratio: .03% )
1% NTN GLB STNBLTY IDX (Expense Ratio: .2%)
.2% BR EMERG MKT IDX F (Expense Ratio: .08%)
2.7% VANG INST TOTL BD TR (Expense Ratio: .02%)

HSA:
3% VANG 500 IDX (VFIAX) (Expense Ratio: .04%)

Roth IRA:
7% VANG TOTAL STOCK (VTSAX) (Expense Ratio: .04%)

Callable CD:
10% - LPL Financial Callable CD – I wasn’t sure how to classify this because I really don’t understand what it is…

Brokerage Account:
21% VANG DIV GROWTH (VDIGX) (Expense Ratio: .27%)

Crypto/Fun Money:
1% - Bitcoin

Cash:
13% (CDs, Money Market Accounts, Bank Account)

Contributions:
$19,500 annually in 401k + company match 50% of the first 4% of my pay
$3,550 HSA
around $37,000 Savings (Money Market Account, Etrade Account)

Other Info:
Pension - $2,145/mo by 65 yrs old

Questions/Comments:
- Any recommendations on my portfolio asset allocation with the goal of reaching FI as soon as possible? Maybe getting that cash to work for me?
- Any recommendations for streamlining or simplifying my investments?
- Is there a way to still contribute to my Roth IRA even though my salary exceeds $139,000? And if I can, should I do it?
- Is it a bad move to have a dividend fund in my taxable brokerage account? Is there a better way to rearrange things to be more tax efficient?
- Instead of investing in Bonds, I decided to put that allocation in CDs. This seemed like a good plan since I was guaranteed a 3% return and Bonds haven’t been performing well. Was that a misinformed decision?

THANK YOU FOR ANY INFORMATION! I'm so appreciative of this amazing community.
2 Thoughts:
1. The 4% rule doesn't apply to early retirement
2. Family with kids will only cost you an extra 20k per year is tight imo
Marseille07
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Re: Almost on FIRE

Post by Marseille07 »

I think you're probably looking at BaristaFIRE. Downshifting / moving part-time while getting medical insurance is probably the best approach, given what you're describing.
tj
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Re: Almost on FIRE

Post by tj »

il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
Well I just I ran a model on CFIRESIM starting in 2025 and lasting until 2080 has 100% success. Of course, the SS added at age 70 and micro-pension added at age 62 probably help...

2% withdrawal rate sounds ridiculous.
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kelway
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Re: Almost on FIRE

Post by kelway »

LCMay wrote: Sun Apr 18, 2021 10:25 pm Ok, so my big goal is to retire early! I’m 36 with a net worth of $975,000. My current yearly expenses are $40,000 and I save around $60,000 a year.
Ah, it's refreshing to read a Bogleheads post about "Almost" being able to FIRE and have it be with less than 5 million dollars. Perhaps just keep your hands off the Bitcoin and that'll take care of the rest. I live quite frugally with 2 kids, a paid-for house, and both college funds funded -- and I'm planning for about 68k income with 1000/month for pre-Medicare medical. If you plan to have kids and a mortgage, I think you'll find you have underestimated a bit (maybe not). Also, I've hit my number a few times and the number keeps moving up :-( I think at some point, a brave leap of faith has to be taken. Good luck!
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LCMay
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Re: Almost on FIRE

Post by LCMay »

Marseille07 wrote: Tue Apr 20, 2021 9:44 pm I think you're probably looking at BaristaFIRE. Downshifting / moving part-time while getting medical insurance is probably the best approach, given what you're describing.
I like the sound of that!
MBB_Boy
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Re: Almost on FIRE

Post by MBB_Boy »

il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
A lower withdrawal rate is a more reliable plan for any time period.

Didn't the work on the 4% rule show that at the end of the 30 year period, there was a non-trivial chance that you end up with MORE money than you started? And that based on a 50/50 ratio with NO adjustments to spending or flexibility at all?

To your broader point, yes it would be good to make sure everyone understands fully what the 4% rule entails - both to the upside and downside - so they can plan accordingly.
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zaboomafoozarg
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Re: Almost on FIRE

Post by zaboomafoozarg »

retire57 wrote: Tue Apr 20, 2021 8:45 pmAs your life isn't really "settled" yet - single, no kids, no house - retiring so early would be quite risky
For a lot of people looking for FIRE, that is the end state. Though I might end up with a cheap house eventually if the prices ever come down.
LateFire
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Re: Almost on FIRE

Post by LateFire »

I think you have too many funds in your portfolio. Why not simplify with a few VG index funds and maybe add a couple of alternative funds(REITs, alternatives) to replace your bond allocation? Also, 4 years of emergency funds looks like a overkill. Your expenses look reasonable. I would do a Backdoor ROTH if your income exceeds 139K. You seem to be doing great.
Dunning-Kruger cognitive test: People think they are more capable than they really are. Sufferers don't know how much they don't know, and the most ignorant are the most confident.
calwatch
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Re: Almost on FIRE

Post by calwatch »

z3r0c00l wrote: Mon Apr 19, 2021 8:17 am Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?
I disagree with this, even in California. In one of the other threads Ron Ronnerson discusses doing so on much less than $100,000. You can go on ACA insurance (California has a higher subsidy) and assuming you keep your financial aid net worth low (meaning that most of it is tied into home equity and/or retirement accounts) the Cal Grant will cover state university tuition and fees. Home prices in California are sky high but due to recent housing law changes it is likely that there will be a lot of townhouse and multi family inventory coming online in a few years, as well as the ability to turn almost any single family house on a 6,000 square foot or larger lot into a duplex or triplex for extra income by building accessory dwelling units. And of course there are plenty of lower cost areas in California, and the OP may choose to do their FIRE in one of the neighboring states which have lower costs of living.

Ultimately if you had kids, you might choose to go on a BaristaFIRE path anyway with health insurance and availability of the Earned Income Tax Credit. The limit on investment income is $10,000 a year, adjusted for inflation, so it may actually incentivize you to invest in a more general stock market ETF rather than a dividend ETF. Generally speaking, it isn't worth it for a single person to go down to such a low income to try to claim the single person EITC, but for a partially retired person who can manage their taxable income this can be a substantial benefit.

I agree with using the backdoor Roth.
tomsense76
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Re: Almost on FIRE

Post by tomsense76 »

LCMay wrote: Mon Apr 19, 2021 11:38 am
BolderBoy wrote: Mon Apr 19, 2021 10:25 am
LCMay wrote: Sun Apr 18, 2021 10:25 pm Desired Asset Allocation: 80 Stocks / 20 Bonds

401K:
Company Match= 50% of the first 4% of my pay
11% VANG INST 500 TRUST (Expense Ratio: 0.011%)
5% VANG INST TOTAL SK TR (Expense Ratio: .015%)
4% FRTR MFG GLB EQ IS (Expense Ratio: .85%)
4.7% VANG MD CP IDX IS PL (Expense Ratio: .03%)
1% BARON GROWTH UNITIZD (Expense Ratio: .89%)
5% VANG SM CP IDX IS PL (Expense Ratio: .03%)
4.7% FID DIVSFD INTL POOL (Expense Ratio: .58% )
4% BLKRK EAFE EQ IDX (Expense Ratio: .03% )
1% NTN GLB STNBLTY IDX (Expense Ratio: .2%)
.2% BR EMERG MKT IDX F (Expense Ratio: .08%)
2.7% VANG INST TOTL BD TR (Expense Ratio: .02%)
Your 401k is too complicated. Sell everything except the VANG INST TOTAL Stock and VANG INST TOTAL BD and use the proceeds to buy total stock and total bond in your desired AA.
Callable CD:
10% - LPL Financial Callable CD – I wasn’t sure how to classify this because I really don’t understand what it is…
Consider this part of your fixed-income in your portfolio (fixed-income = bonds, cash, CDs, MMFs, etc)
Brokerage Account:
21% VANG DIV GROWTH (VDIGX) (Expense Ratio: .27%)
Is this a taxable account? That holding is NOT tax efficient! Consider selling it to buy VTSAX.
I had a feeling this was the way to do it. Thanks for the advice!
This also will cutdown your expense ratios. These eat into that 4%. So keeping them low is important for that reason as well.

IDK if you like investing internationally, but it may be worth seeing if there is a Vanguard International fund in there as well if that is of interest to you.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
LeeMKE
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Re: Almost on FIRE

Post by LeeMKE »

Congrats! You are doing great.
- Any recommendations on my portfolio asset allocation with the goal of reaching FI as soon as possible? Maybe getting that cash to work for me?
Since you like having a cash cushion (whatever helps you sleep at night is a good enough reason), how about 1 year of expenses instead of 4? The rest should be working harder to get you where you want to go.
- Any recommendations for streamlining or simplifying my investments?
Use a Boglehead 3 or 4 fund portfolio. Easy to manage, and lower cost so the portfolio is focused on FIRE.
- Is there a way to still contribute to my Roth IRA even though my salary exceeds $139,000? And if I can, should I do it?

No reason to do that today. Once you FIRE, you'll be able to convert IRA (your 401K will be rolled over to an IRA) to Roth, filling your lower tax bracket for years between FIRE and age 72. MUCH cheaper than doing it right now at your highest tax bracket. Double check by running the EXTENDED calculator at I-ORP.com. That calculator is the best way to know when to convert or backdoor to Roth.
- Is it a bad move to have a dividend fund in my taxable brokerage account? Is there a better way to rearrange things to be more tax efficient?
I don't have a good answer on this one. Someone else will be better able to answer this.
- Instead of investing in Bonds, I decided to put that allocation in CDs. This seemed like a good plan since I was guaranteed a 3% return and Bonds haven’t been performing well. Was that a misinformed decision?
That was a good decision. CDs serve the same purpose as bonds for you, ballast from market drops in stocks.
The mightiest Oak is just a nut who stayed the course.
AlwaysLearningMore
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Re: Almost on FIRE

Post by AlwaysLearningMore »

LCMay wrote: Sun Apr 18, 2021 10:25 pm My current yearly expenses are $40,000 and I save around $60,000 a year. In retirement, I would like to travel, have kids, and buy a house, so I’m planning on my expenses increasing to $60,000.
You may be significantly underestimating the cost of raising a family.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
junior
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Re: Almost on FIRE

Post by junior »

I know someone who says he wants to have kids but his career choices and other choices suggest otherwise.

While I'm not suggesting you can't FIRE and have kids, if the FIRE lifestyle eats up your focus and attention, it may make having kids less likely.
bog007
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Re: Almost on FIRE

Post by bog007 »

Don’t let anyone else ruin your portfolio. It’s your portfolio. Ruin it yourself!!!
MoonOrb
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Re: Almost on FIRE

Post by MoonOrb »

wolf359 wrote: Mon Apr 19, 2021 11:37 am
il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
If you can see that there is a brick wall in the road that you're going to hit 20 years from now, don't you think you're going to slow down or drive around it?

The failure rates in the Trinity Studies show what happens if you make certain assumptions at the end of 30 year testing time periods. They're simulations. In real life, it's not a rate of failure, but rather the chance that you're going to have to make an adjustment to the plan. And it doesn't take much -- either cut back on discretionary spending during bad market periods, or supplement your income.

If you're planning to retire early, then your retirement is voluntary. Make sure you have enough slack in your budget to cut back so you can live on a 2% SWR comfortably. But you don't need to actually do that except in bad market years.

If you budget for taking 3 cruises a year, in a bad year, maybe you skip one. Or fly coach instead of first class.

The 4% rule is a good benchmark for estimating how much you need for retirement, but to actually retire you should create a practical withdrawal plan detailing how you'd actually behave. I think 4% is relevant, but I wouldn't follow it blindly. The original study by Bengen that proposed the 4% rule explicitly mentioned being flexible.
I think the key here is the extent to which you can really cut back your spending. OP is budgeting $40k/year. That's possible, I guess? But that doesn't leave a lot of room for cutting if you see that brick wall approaching. So for that reason I don't think the advice here to not rely on the Trinity/4% isn't too far off-base. It's hard to reconcile "make sure you have enough slack..." with a $40k annual spend.
Dfree
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Re: Almost on FIRE

Post by Dfree »

I don’t know anybody with kids who would choose $60K/year household income. Not in a city.

It’s doable, of course. People do it all the time. But they don’t choose it.

Kids can understand when parents work hard and don’t have enough money for everything.

But good luck explaining that they can’t have their own bedrooms, or SAT tutors, or braces, or music lessons, or private college because …. Daddy is FIRE.

That’s right baby, daddy is FIRE! No sleep away camp for you!

If you want dogs instead of kids, $60K/year can be fantastic.
nigel_ht
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Re: Almost on FIRE

Post by nigel_ht »

calwatch wrote: Fri Apr 23, 2021 2:22 am
z3r0c00l wrote: Mon Apr 19, 2021 8:17 am Raising kids may be much more expensive than you think. 60K a year for husband/wife and 1 or more kids? Maybe if you live in a cabin in the woods and cover your own dentistry and if you plan to saddle the kids of 6 figure college debt. I would expect 100K a year easy to have kids, pay for their education, buy a house, and travel each year esp. if you stay in CA. Bonus if it comes in under that number. Really FIRE is such a limiting concept when applied strictly, why not plan to work at least until your 50's and then ease back if things go better than planned?
I disagree with this, even in California. In one of the other threads Ron Ronnerson discusses doing so on much less than $100,000. You can go on ACA insurance (California has a higher subsidy) and assuming you keep your financial aid net worth low (meaning that most of it is tied into home equity and/or retirement accounts) the Cal Grant will cover state university tuition and fees. Home prices in California are sky high but due to recent housing law changes it is likely that there will be a lot of townhouse and multi family inventory coming online in a few years, as well as the ability to turn almost any single family house on a 6,000 square foot or larger lot into a duplex or triplex for extra income by building accessory dwelling units. And of course there are plenty of lower cost areas in California, and the OP may choose to do their FIRE in one of the neighboring states which have lower costs of living.

Ultimately if you had kids, you might choose to go on a BaristaFIRE path anyway with health insurance and availability of the Earned Income Tax Credit. The limit on investment income is $10,000 a year, adjusted for inflation, so it may actually incentivize you to invest in a more general stock market ETF rather than a dividend ETF. Generally speaking, it isn't worth it for a single person to go down to such a low income to try to claim the single person EITC, but for a partially retired person who can manage their taxable income this can be a substantial benefit.

I agree with using the backdoor Roth.
I have the suspicion that BaristaFIRE looks much better on paper than in reality…
nigel_ht
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Re: Almost on FIRE

Post by nigel_ht »

wolf359 wrote: Mon Apr 19, 2021 11:37 am
The failure rates in the Trinity Studies show what happens if you make certain assumptions at the end of 30 year testing time periods. They're simulations. In real life, it's not a rate of failure, but rather the chance that you're going to have to make an adjustment to the plan. And it doesn't take much -- either cut back on discretionary spending during bad market periods, or supplement your income.
Anyone who is picking a 4% SWR for FIRE is likely embarking on a leanFIRE…and leanFIRE has a lot less ability to adjust.

If you can’t get to 33X from 25X by reasonably reducing X you don’t have enough discretionary to matter.
If you're planning to retire early, then your retirement is voluntary. Make sure you have enough slack in your budget to cut back so you can live on a 2% SWR comfortably. But you don't need to actually do that except in bad market years.

If you budget for taking 3 cruises a year, in a bad year, maybe you skip one. Or fly coach instead of first class.
Lol. You aren’t doing 3 cruises a year or flying first class on $60K gross annual budget…
The 4% rule is a good benchmark for estimating how much you need for retirement, but to actually retire you should create a practical withdrawal plan detailing how you'd actually behave. I think 4% is relevant, but I wouldn't follow it blindly. The original study by Bengen that proposed the 4% rule explicitly mentioned being flexible.
Yeah…be flexible for a 30 year retirement because it may not be as rosy as the numbers might make you think.

What do you think might happen over 50-60 years?

Hint: it ain’t 4% rule.
nigel_ht
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Re: Almost on FIRE

Post by nigel_ht »

Dfree wrote: Thu Jul 15, 2021 11:53 pm I don’t know anybody with kids who would choose $60K/year household income. Not in a city.

It’s doable, of course. People do it all the time. But they don’t choose it.

Kids can understand when parents work hard and don’t have enough money for everything.

But good luck explaining that they can’t have their own bedrooms, or SAT tutors, or braces, or music lessons, or private college because …. Daddy is FIRE.

That’s right baby, daddy is FIRE! No sleep away camp for you!

If you want dogs instead of kids, $60K/year can be fantastic.
Well, it might work in Thailand or Panama…

It might not too.
LeeMKE
Posts: 2233
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Re: Almost on FIRE

Post by LeeMKE »

Lol. You aren’t doing 3 cruises a year or flying first class on $60K gross annual budget…
The 4% rule is a good benchmark for estimating how much you need for retirement, but to actually retire you should create a practical withdrawal plan detailing how you'd actually behave. I think 4% is relevant, but I wouldn't follow it blindly. The original study by Bengen that proposed the 4% rule explicitly mentioned being flexible.
Yeah…be flexible for a 30 year retirement because it may not be as rosy as the numbers might make you think.

What do you think might happen over 50-60 years?

Hint: it ain’t 4% rule.
FIRE folks struggle to get a fair hearing, and this is one place they should be welcomed with open arms.

As for the 4% rule, it was applied to a shorter retirement period than OP. Remember the magic of compounding? Well, time added to the equation does the same for a FIRE portfolio. Early FIRE advocates used 3.5% and 4% and a decade later are doing WAY better than just barely getting by. Granted, these have been unusually robust times for returns. But the model run by tj proved the point: 100% success with the longer retirement period.

For goal setting, 4% is the right goal. When you get closer, you will sharpen your pencil, maybe add some slop or plan for your consulting gig, or something else will happen. Who could have imagined that GP services would be available with teleconferencing? And more is coming. And getting away from LA will instantly give you the breathing room on expenses that might be enough. And holding off buying a house until you retire is a brilliant move, as FIRE folks know already, but Bogleheads skew older and still cling to the notion that our homes are a store of wealth, rather than an expense.

Keep going!
The mightiest Oak is just a nut who stayed the course.
pasadena
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Location: PNW

Re: Almost on FIRE

Post by pasadena »

On top of the comments about 4% not being foolproof for a 50 or 60 years retirement, I'll add that your budget needs to take taxes and health care into account.

Taxes: you're going to have to pay them, and that comes on top of your expenses. Granted, you may manage to keep your taxes very low, especially if all your income comes from capital gains, but you still need to model that and add it on top of your expenses.

Health Care: get on the marketplace for your state (or the state you want to retire to) and check what it would cost you at today's prices (just change your date of birth to model the cost at the age you will retire, and then run the same for every 5 years after that). Of course, health care will only increase from now to your retirement date, so I'd add a % on top too. Don't forget to add out of pocket expenses. You may not have any now, but you sure will when you're older.
aristotelian
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Re: Almost on FIRE

Post by aristotelian »

il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
Your first paragraph is correct but undermined by the second. Yes, 4% has failed over longer periods but 3% has not. Going all the way down to 2% is overkill. That is fine if that suits your personality but you shouldn't imply that going that low has ever been necessary. OP is already 35 and still saving so I don't think they need to plan for 60 years.
sailaway
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Re: Almost on FIRE

Post by sailaway »

aristotelian wrote: Fri Jul 16, 2021 7:22 am
il0kin wrote: Mon Apr 19, 2021 10:52 am Someone really needs to tell the FIRE movement writ large (of which I am a participant) that the 4% rule predicts a reasonable chance of still having SOME assets at the end of a THIRTY year retirement period, not a 60+ year period.

A 2% withdrawal rate for 60+ years is much more reliable pln. You are going to run out of money, you need to work longer.
Your first paragraph is correct but undermined by the second. Yes, 4% has failed over longer periods but 3% has not. Going all the way down to 2% is overkill. That is fine if that suits your personality but you shouldn't imply that going that low has ever been necessary. OP is already 35 and still saving so I don't think they need to plan for 60 years.
We don't really have tools available to plan for 60 years, but I definitely plan for the younger of us to live to mid to late 90s.

OP, we are in a similar situation to you, right down to knowing we can live comfortably on $40k, but choosing to save to allow for $60k+. As stated above, we did not feel comfortable pulling the trigger based on the 4% rule, but we are fine with ~3.5%, plus some flexibility going forward. If your future includes a partner, kids and a desire to have a lifestyle that costs more than $60k, you will have options. It isn't like $60k HHI is the equivalent to child abuse, as often depicted here.

Have you checked to see if your 401k plan allows for the after tax contributions that you can convert to Roth (colloquially known as the mega backdoor Roth)? This will help you save on taxes for the remainder of your accumulation phase, as well as give you more tax flexibility once you start withdrawing. This would be on top of the backdoor Roth, assuming you don't currently have tIRA or can roll tIRA into your 401k.
wolf359
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Re: Almost on FIRE

Post by wolf359 »

nigel_ht wrote: Fri Jul 16, 2021 12:23 am
Lol. You aren’t doing 3 cruises a year or flying first class on $60K gross annual budget…
Current average cost of a 7-day cruise is $2,000 per person. OP budgeted $20,000 above normal living expenses of $40,000.

Given his stated numbers, there's room for slack.
nigel_ht
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Re: Almost on FIRE

Post by nigel_ht »

LeeMKE wrote: Fri Jul 16, 2021 12:52 am
Lol. You aren’t doing 3 cruises a year or flying first class on $60K gross annual budget.



The original study by Bengen that proposed the 4% rule explicitly mentioned being flexible.
Yeah…be flexible for a 30 year retirement because it may not be as rosy as the numbers might make you think.

What do you think might happen over 50-60 years?

Hint: it ain’t 4% rule.
FIRE folks struggle to get a fair hearing, and this is one place they should be welcomed with open arms.
This is one place they should get reasonable advice. I’m a big FIRE proponent but there’s a lot of snake oil out there.

Telling someone an unpleasant truth isn’t “not giving them a fair hearing” but giving them a fair assessment.
As for the 4% rule, it was applied to a shorter retirement period than OP. Remember the magic of compounding?
It works differently in retirement than accumulation because you aren’t adding to the portfolio but removing from the portfolio.

SORR is the retirement plans killer. The magic of compounding is a double edged sword.
Well, time added to the equation does the same for a FIRE portfolio. Early FIRE advocates used 3.5% and 4% and a decade later are doing WAY better than just barely getting by. Granted, these have been unusually robust times for returns. But the model run by tj proved the point: 100% success with the longer retirement period.
He’s $625K short of his target of $1.5M. The SS payout is unknown but at 36 he’s probably past the first knee but TJ is guessing the amount. TJ also added in the pension at 62 rather than 65. He does start in 4 years (2025) so at least it’s only 25 years until pension.

Early FIRE advocates were lucky. And even then some, like MMM, failed to disclose the extent of their side hustle income. And more importantly we’re able to live a very frugal leanFIRE.

3.5% works. 4% requires luck.

Image

Whether you agree with ERN or not, before you FIRE you should read all the articles and decide for yourself if you agree with the analysis or not. Then run some numbers yourself to verify his data.
And holding off buying a house until you retire is a brilliant move, as FIRE folks know already, but Bogleheads skew older and still cling to the notion that our homes are a store of wealth, rather than an expense.
Buying or not buying property is dependent on locale and goals. If the plan is to FIRE and geoarbitage then never buying a house is one path. If the plan is to travel afterwards there’s no real reason to buy a house ever. This is my recommendation to my kids.

On the other hand if the cap rate is right then buying a place to rent out is possible. Right now my expectation is to make around $8K net on a $210K for a 3.8% cap rate. It’s kind of a terrible rate as the normal suggested range is 4-7% but it rents quickly and the tenants tend to be stable. If you can get 7-10% cap rate it makes more sense.

So it depends.

The big warning sign is if someone believes that 4% works for >30 years they are reading the overly rosy FIRE sites that can claim success because in the last decade almost everything worked…except for some folks it still didn’t.

https://livingafi.com/2021/03/17/the-20 ... nt-update/

Money quote:

“If you are yourself working on becoming FI and you have any specific takeaway from this post, let it be this: You are making future plans based on what your current life looks like. Your current job, your current income, your current partner, your current percentage of savings, your expected market return, your housing costs, your location and so-on. You’re assuming large parts of your life will remain static over the next X years, where, for many early-retiree hopefuls, X is 30+ years, perhaps even fifty.

They may not be static. It might be a mistake to think that things will be as smooth as you believe they will be. ”

He didn’t have a FI failure. As he said his stache is bigger than when he retired.

BUT…no kids. Estimating expenses for kids, or worse, kids with a health issue, before you actually have kids is hard unless you just pick some randomly huge numbers.

The error bars are larger than his $20K estimate for having a family.

The real danger case isn’t like the livingafi guy who suffered a problem 4 years in and could find a job at 40 but someone who suffers a problem 14 years in and needs to go back to work at 50 to support a family of 4.

So, not raining on his parade but he has to realistically consider future life goals (marriage, kids) against how soon he retires early and with how much safety margin.

Going part time and freelancing is great. Factor that in…but not until you’re sure you can get those gigs. Pension is great but it’s not till 65.
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