Author Topic: Sanity Check - Am I ready for FIRE  (Read 2688 times)

Fortuna

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Sanity Check - Am I ready for FIRE
« on: September 17, 2015, 09:16:00 PM »
I think in a lot of ways DW and I are close to FIRE (for me at least) but I still stress probably far too much about money so I think I need some second opinions.  Here is our situation - Canadian example here:

Target income for retirement: $60k on the high side, $50k for a more modest retirement - we are planning on the $60k.  We live in the Toronto area so costs are based on that.  Relocation might be an option but family issues may dictate that.

Investments: RRSPs, $550K TFSA $85k, Taxable Accounts $123k, Emergency Funds & Cash $40k

Pensions: Me nothing, wife eligible in 7 years and will collect about $23k till 65 then it drops to $16k, OMERS pension so indexed

Government Pension: We will both collect CPP and OAS if still around I would guesstimate that we will both get the average CPP income based on wages and fact that I hope to go early so will have a lot of drop out years.

DW will work for 7 years till her pension ready and I plan to work till end of 2017 hoping to put away more money over the next two years.  Without my salary over the next 7 years we would probably need to take about $15-20K from our investments to supplement my wife's salary and would no longer be able to add to the stash.  Mortgage free at the moment.  I guess I should add we are both 48 yrs old.

Am I working for nothing?  If our shoes would you go now?  Don't like work it is stressful and I dream of getting away.  Don't get me wrong I know we are in a very good situation and are lucky to be here.  Just looking to see what others would suggest.  How close are we?
« Last Edit: September 17, 2015, 09:18:09 PM by Fortuna »

MDM

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Re: Sanity Check - Am I ready for FIRE
« Reply #1 on: September 17, 2015, 10:21:07 PM »
Not familiar with all the acronyms so...what do you get if you take expected annual expenses, subtract expected annual guaranteed income, then divide by expected investment balance?

For all those "expected" numbers, use whatever you deem reasonable for inflation, investment returns, etc. between now and the retirement date you pick, and do the calculation as of that retirement date.

If you can assume expenses and guaranteed income both increase at the same inflation rate, their difference will also increase at exactly that rate - and that is what the "4% SWR" analysis assumes.  You can compare your division result to that 4% and get some idea of how safe or risky that retirement date would be.

If expenses and guaranteed income will not increase at the same rate, you are getting outside the bounds assumed by simple methods, and may need to use www.cfiresim.com or other retirement analysis package.

patrickza

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Re: Sanity Check - Am I ready for FIRE
« Reply #2 on: September 18, 2015, 02:38:52 AM »
All your investments add up to $798k, and if you plan on taking $20 a year out that works out to 2.5% withdrawal. Most likely, if you plot that withdrawal rate into cfiresim, it'll give you a pretty decent number at the end of the 7 years.

Then of course you need to be able to live on whatever that number can throw off, plus $24k from then on, and hope it grows to absorb another $7k from age 65.

My gut says you'll be just fine, but if it was me, I'd have a backup plan handy to either earn a little more money, or to cut some spending if needed. I imagine being from Canada you don't really have to worry about large medical bills in future.

Retire-Canada

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Re: Sanity Check - Am I ready for FIRE
« Reply #3 on: September 18, 2015, 08:18:01 AM »
Go to cFIREsim and model your scenario. It allows for quite a few inputs so you'll see how robust your situation is against historical data.

http://www.cfiresim.com/

Fortuna

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Re: Sanity Check - Am I ready for FIRE
« Reply #4 on: November 21, 2017, 12:32:46 PM »
As I mull over my numbers (which I do far too much) I realize I posted this question just over 2 years ago and even though we have made great progress I do not feel like I am ready to give up having an income, as much as I would like to!

From my original post our investments now sit at a total of $1.1 Million.  Why am I not feeling free?  Comes down to a few things I have to get past in my head:

1) I don't have a plan for my post work life for the next 4-5 years till my wife is eligible for retirement.  I think I might need to free myself of work and then I can focus on build that but is is the unknown.

2) We have been in a bull market for so long I worry about leaving and having my first few years be when markets drop and valuations are high, but this is irrational as we are diversified so I may just be working for safety margin I don't need.

3) I have parents who's future needs are uncertain, father is in long term care and my mother is still in the house but not sure she can stay alone for too much longer so I "feel" like I should keep my income to be ready to help.  Of course if I was not working I would have time to help which is lacking now.

Anybody else in the state where the numbers say you are ready but you cannot pull the trigger?  What is holding you back?  What do you think you need to do to get around it?

LadyDividend

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Re: Sanity Check - Am I ready for FIRE
« Reply #5 on: November 21, 2017, 12:50:41 PM »
I really enjoyed the Financial Samurai's post on this:

https://www.financialsamurai.com/overcoming-the-one-more-year-syndrome/

Maybe you'll read something inspiring there!

robartsd

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Re: Sanity Check - Am I ready for FIRE
« Reply #6 on: November 21, 2017, 02:24:44 PM »
From my original post our investments now sit at a total of $1.1 Million.  Why am I not feeling free?

Expenses: $60k/yr
Investements: $1.1M * 4% = $44k/yr
Wife's Pension: $16k/yr

You have enough money if your budget has not changed since your first post.

1) Change is scary, but I bet you'll like it once you get used to it.

2) You only need $16k of your wife's income/pension; but it won't drop to that until she is 65. The markets will go up and down a time or two before that. You have the safety factor you need already (without even factoring in CPP and OAS - I'm in USA, I don't know what these are but I'll guess it's similar to our Social Security).

3) Your time is probably more valuable help to your mother than your money would be.

Can you downshift to part time? You don't need the money, but it sounds like outright quiting is too big of a change for you right now. You could even use your mother needing more help as an reason that you can sell to a boss if you want to keep your FI situtation to yourself.

Fortuna

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Re: Sanity Check - Am I ready for FIRE
« Reply #7 on: November 21, 2017, 05:31:27 PM »
I really enjoyed the Financial Samurai's post on this:

https://www.financialsamurai.com/overcoming-the-one-more-year-syndrome/

Maybe you'll read something inspiring there!

Thanks, I have read his stuff I will check it out.  You call it OMYS and partly free of going into the change alone.

Fortuna

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Re: Sanity Check - Am I ready for FIRE
« Reply #8 on: November 21, 2017, 05:39:47 PM »
From my original post our investments now sit at a total of $1.1 Million.  Why am I not feeling free?

Expenses: $60k/yr
Investements: $1.1M * 4% = $44k/yr
Wife's Pension: $16k/yr

You have enough money if your budget has not changed since your first post.

1) Change is scary, but I bet you'll like it once you get used to it.



Expenses are pretty much the same - if we spend above the $60k it would be for more flexible budget for travel.  When we each get to 65 in about 14 years then we should expect to collect about $12k each from CPP/OAS.  CPP is a Canada pension funded by your contributions and not head by the government so it is safe.   OAS is a benefit that comes from tax revenues like US Social Security.  People speculate that it could be reduced or eliminated if the governments revenues cannot sustain it with all the baby boomers.  But the government that did that would be lynched so we should not worry about it completely disappearing.

So you are right the math says we are ready.  The change part is not having something to go to next - I cannot see working part time in my role.  I would rather step away and do something completely new where I would not care what the money was.

It would be good to hear stories from people who have crossed this issue and how they moved into their next phase.