Author Topic: Freshly FIREd  (Read 5675 times)

Roger

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Freshly FIREd
« on: August 06, 2019, 07:59:11 AM »
After many years of getting financially in shape (i.e. financially independent), the moment came that I just couldn't take it any more in my job. I have handed in my notice and I'm now on my last weeks of work. Originally, I was planning to retire when I turn 45 (one more year), but I just couldn't take it and felt like it makes me sick, physically and mentally.

Now comes the time for me that I will no longer save money (and I have been somewhat obsessive about it), but live of my stash. I'm struggling somewhat emotionally with that. I know the 4% rule and I should be fine also with maybe 3 or even 2.5%, but the volatility is high these days and I look at my bank account way too often. I don't really know how my life will look like going forward and what I will be doing, so I don't know how much money I will spend either. I have always been around 100% in equity (I don't like bonds) and decided to increase the ETF portion and decrease individual stocks.
How are you dealing with the uncertainty and the volatility in the markets, I mean emotionally? Just complete faith in the 4% rule? I'd appreciate if you could share your experiences if you have gone through this already.

Thanks!

iluvzbeach

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Re: Freshly FIREd
« Reply #1 on: August 06, 2019, 08:05:43 AM »
I am PTF. Pretty much in the same position, except I wonít be giving notice until late next month. Am interested in how others respond to your post.

ysette9

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Re: Freshly FIREd
« Reply #2 on: August 06, 2019, 09:12:59 AM »
Why donít you like bonds?

Have you read Living Off Your Money by McClung? I highly recommend that tome for data-based strategies for making the most of your portfolio while avoiding unnecessary  risk.

Rdy2Fire

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Re: Freshly FIREd
« Reply #3 on: August 06, 2019, 09:22:41 AM »
Roger

I am going through exactly what you are RIGHT NOW! I left my job a few months ago and am in the exact same situation.

I find myself looking at my numbers and accounts and I was pretty comfortable but not entirely as this job opportunity showed up. So I was/am considering it (waiting for the offer) but leaning more away or maybe towards it for 6-12 months to see how it goes, uncertain obviously. Now in the last few days with the markets the way they are (I have no bonds) have lost a lot and questioning the numbers again and the job.

I'll be following this thread but know you're not alone

MoneyizHere

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Re: Freshly FIREd
« Reply #4 on: August 06, 2019, 12:54:29 PM »
Since the volatility bothers you consider transition of your stash into income producing instead of just subject to capital gain/losses.

Real estate investing could generate stable income for you if you have the knack for that.  Otherwise - bonds / dividends will generate your income.
Then - the volatility won't really matter anymore to you since it would not be such an impact. 
Strategic lending (I don't trust the peer to peer sites) - but rather to people you know will pay you back (ie family? to help them consolidate their debt?)

just some ideas - but congrats on being done with the rat race

xbdb

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Re: Freshly FIREd
« Reply #5 on: August 06, 2019, 02:04:35 PM »
The 4% withdrawal rate accounts for the volatility of the market, so you shouldn't stress too much about it. If you are fine at 2.5% or 3% then you shouldn't even worry about it at all. The market ALWAYS goes up. If you can't help but be stressed, keep some cash reserves. I just FIRED a few days ago, so I am still adjusting to the new reality of not having to work anymore (yay). When the market dipped on Monday, my first reaction was to buy the dip before catching myself. Heh. Switching from the savings phase to the withdrawal phase sort of forces you to acknowledge your mortality. This is it! The rat race phase of your life is over and now you're in the final half of your life. I could try and tell you how good it'll feel on your last day on the job, but you wouldn't believe me. No more toxic BS. No more of the pit of the stomach feeling Sunday evenings. You are going to live life on your terms and you will love it.

 

bognish

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Re: Freshly FIREd
« Reply #6 on: August 06, 2019, 03:45:05 PM »
44 & FIREd last November. Also 100% equity. I sell quarterly to cover estimated expenses. When I was working I was checking the market, my balances & spending daily. 9 monthly after FIRE I look at the market maybe once a week, but don't really spend much time in front of a computer or following the news. My wife & I agreed to look at FIRE as a sabbatical, so there is a possibility of going back to work if things aren't going well. We re-evaluate the situation each season so we can make plans for vacations or kid & family obligations. We just decided to stay FIREd for the fall, so I am getting put on the car pool roster and school volunteer schedules. We will reassess our situation around Thanksgiving to decide if I need to look for some sort of paycheck. But the market would have to be really bad for me to take a job at the beginning of ski season. Now I am setting up fall goals or projects and going to focus on that for the next 3 months and not worry about jobs or finances.

If you are stressed about the market I would recommend pulling out a few months of cash. Don't worry about your decision to quit, looking for a new job or the stock market for a few months. Set a date to reassess the situations and make some goals (maybe October 1?) Enjoy life and don't worry until then. Repeat as necessary

BicycleB

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Re: Freshly FIREd
« Reply #7 on: August 06, 2019, 04:19:31 PM »
I know the 4% rule and I should be fine also with maybe 3 or even 2.5%...


You mean that your current stash is sufficient to cover your current expenses at 2.5% withdrawal rate, you're just uncertain whether your future expenses will be as low as your current ones? Or, you are at 4% withdrawal already, and you think you could cut to 2.5% without much pain? Or...

Not sure what "should be fine" means, any clarification will help determine which experiences will be most valuable to offer you.

How are you dealing with the uncertainty and the volatility in the markets, I mean emotionally? Just complete faith in the 4% rule? I'd appreciate if you could share your experiences if you have gone through this already.


Experienced 6 years since leaving job in late 40s, through a chaotic process where I didn't realize I was in FIRE at first. Main strategies to date:

PRACTICAL
1. Measure spending closely enough to make reasonable projections. (Simple summary, 20k to 22k current expenses, net of some complicated housing details.)
2. Studied the historical variance of my diversified portfolio, read about Sequence of Returns Risk (sorry, I'm not an identical case)...I didn't change a lot, just was already close to 50% real estate, 30% stock, 20% bonds/cash, much like today; sharing to avoid false impressions...I didn't diversify further, I studied the historical variances of my portfolio. I live in my house and rent out rooms, I'd rather do that than sell the house and rent while being 100% stock but that's a PERSONAL preference, not something that creates a significant safety difference.**
3. Define reasonable contingencies for spending, and develop contingency plans to meet them
4. Calculate FIRE using various methods to ensure stash is likely adequate, and recognize what spending level I can afford

EMOTIONAL
This varies, but favorites include:
5. Remembering that for now, I have plenty of money - there's no question about this year, only about the distant future
6. Remembering that in the long run, what matters isn't the price of stock this year, it's the price of stock year by year the rest of my life.*
7. See 4... I usually find reviewing the financials calming, even though my margin for error is narrower than many here
8. Noting that there's a 1% to 5% chance of needing to spend less than I planned, but 100% chance of living the life I choose, so savor life
9. Yep, enjoying daily things. Spent today planning/negotiating glorious family joint vacations now that other adult family members are in travel mode.
10. Reading "Top is In" thread for grins

*This point 6 is really important if you're 100% stock, or something close. The only reason stock prices matter this year is that they determine the % of shares I would sell this year to cover any gap between dividends and spending, even if I were at 100% stock portfolio.

So if my dividends are 2.5% of stash and 62.5% of spending (a 4% withdrawal rate), I would sell 1.5% of my stock this year. That would be a normal year for me at 100% stock. If dividends drop next year to 2% of current stash, and I keep spending at the original rate, I will sell enough to stock to cover 2%. If prices are down by 50% at that point, that means I'll be selling 4% of my stock instead of 1.5%. This would reduce apparent stash value to 48% of original value, but I would still own 96% of the original shares. It's only 2.5% different from my plan, even though I'm in the middle of a huge stock crash. Kind of comforting that even a huge crash only affects me by two or three percent a year.

**Note that I don't pick individual stocks, which adds a lot of uncertainty. I use broad indexes, diversified to maximize security rather than return. Both the index and diversification strategies reduce uncertainty. My main diversification axis is US vs international, but if I were all stock, I might also segment by factor and maintain factor percentages (large cap vs small cap) as well to smooth out the ride a little.
« Last Edit: August 06, 2019, 04:50:03 PM by BicycleB »

Roger

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Re: Freshly FIREd
« Reply #8 on: August 06, 2019, 07:22:10 PM »
I plan to re-design my lifestyle, so it is hard to predict how much money I will need in future. I currently live in a HCOL location, but want to move to a low cost location in the next few years. I plan to travel often, which I didn't do that much recently; Hard to say how much that will cost. So my COL of the last years is not a good benchmark for my future spending.

As for the withdrawal rate: I played around a lot with various calculator and simulators on the net. My conclusion is that it is not so much about 3% or 4%, but to what extend are you flexible to scale down when the markets are down. With high flexibility, you can increase your withdrawal significantly, if you believe more money buys you more happiness. I guess the fact that my stash will not grown any more (at least not so much) is something I have to get used to.


Montecarlo

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Re: Freshly FIREd
« Reply #9 on: August 06, 2019, 09:18:50 PM »
4% rule is based off of not running out of money in 30 years.  You should plan for 40-55 years.

Assuming you donít have a pension and wonít be drawing a big social security check, I would err towards frugal right now.  Market valuations and profit margins are well above historical averages.  Reversion to the mean of either of those will erode the stock market.  Both at the same time will be a big bear market.

I donít see any reason to reduce from 100% equity, but a 90%/10% or  80%/20% will be slightly less volatile and, historically speaking, performs about the same in long term returns as a 100% stock portfolio.

I think starting withdrawals at 2.5% for the next couple of years and maintaining high equity exposure is a good plan.  You can eliminate a lot of the SORR risk and still participate in any gains if the market makes them in the short term.

Mr. Green

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Re: Freshly FIREd
« Reply #10 on: August 08, 2019, 03:13:54 PM »
I believe you only need two things to be at peace with your FIRE plan. You need to believe in the soundness of your withdrawal rate. Remember that you chose it based on data that says it is as safe as one can reasonably hope for. If you can't take comfort in that you will struggle with volatility.

The second thing you need is flexibility. Withdrawal rates and portfolio failure have been studied so intensely that we know there are numerous warning signs of a potential failure many years before it actually happens. Understand what some of those signs are, and if you find yourself on the short end of the stick have the flexibility to reduce your spending or earn a little income. No one makes a plan and then refuses to deviate from it. In the worse case scenario, just a little corrective action can stave off a portfolio failure.

If you can do those two things you're golden.

bmjohnson35

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Re: Freshly FIREd
« Reply #11 on: August 09, 2019, 03:11:36 PM »

Without knowing your total NW, your annual costs and your income strategy, its difficult to give any specific feedback.  You can do easy searches of the historical "worst" periods of stock market loss over various lengths.  For example, 1 yr being around 40% loss, 3 yrs around 20% and less than 10% over a 5 yr period.  Of course, don't quote me on these, but you get the idea.  Losing account value over a relatively short period is mainly a loss on paper.  If your annual costs are low and your annual withdrawal rates are at 2.5 - 3% rate you mention, your actual losses are relatively small during these down periods. Of course, I am assuming your investments are index based and not in individual stocks. 

I always figure the worst is I have to go back to work........so failure is not the end of the world.

BJ

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Re: Freshly FIREd
« Reply #12 on: August 10, 2019, 10:24:46 AM »
After many years of getting financially in shape (i.e. financially independent), the moment came that I just couldn't take it any more in my job. I have handed in my notice and I'm now on my last weeks of work. Originally, I was planning to retire when I turn 45 (one more year), but I just couldn't take it and felt like it makes me sick, physically and mentally.

Now comes the time for me that I will no longer save money (and I have been somewhat obsessive about it), but live of my stash. I'm struggling somewhat emotionally with that. I know the 4% rule and I should be fine also with maybe 3 or even 2.5%, but the volatility is high these days and I look at my bank account way too often. I don't really know how my life will look like going forward and what I will be doing, so I don't know how much money I will spend either. I have always been around 100% in equity (I don't like bonds) and decided to increase the ETF portion and decrease individual stocks.
How are you dealing with the uncertainty and the volatility in the markets, I mean emotionally? Just complete faith in the 4% rule? I'd appreciate if you could share your experiences if you have gone through this already.

Thanks!

I handled it by having a very detailed plan - a detailed budget based on prior years' expenses, plans for each bucket of money (taxable, Roths, 401(k)s, etc.), estimates for S.S. and pension, creating a Donor Advised Fund to optimize taxes, doing thorough research on withdrawal rates and SoRR, using a rising equities glidepath, etc.  Once I had a detailed plan along with back-up plans (and triggers to put those plans into motion), I was able to relax and make the jump.  So far the December/January blip in the markets and the recent volatility haven't come close to making me sweat because they didn't approach any of the triggers we have set up. 

soccerluvof4

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Re: Freshly FIREd
« Reply #13 on: August 11, 2019, 04:14:55 AM »
I believe you only need two things to be at peace with your FIRE plan. You need to believe in the soundness of your withdrawal rate. Remember that you chose it based on data that says it is as safe as one can reasonably hope for. If you can't take comfort in that you will struggle with volatility.

The second thing you need is flexibility. Withdrawal rates and portfolio failure have been studied so intensely that we know there are numerous warning signs of a potential failure many years before it actually happens. Understand what some of those signs are, and if you find yourself on the short end of the stick have the flexibility to reduce your spending or earn a little income. No one makes a plan and then refuses to deviate from it. In the worse case scenario, just a little corrective action can stave off a portfolio failure.

If you can do those two things you're golden.




I was in a similar situation as you about 4.5 years ago where I just walked into my business and told everyone I had enough, was done and closing the door in 30 days. Was so stressed out and becoming unhealthy I just wanted out.

But I agree with Mr. Green that if you follow his two points you will be fine. Heck I look at Mint everyday its part of my daily /morning routine and the swings just dont bug me anymore. I would suggest a little extra cash then the typical in reserve but also keep in mind if need be I am sure you can find something to make some coin through a down turn as well if your worried about that. Recently I started doing some cash jobs to stash some extra money away and because after 4.5 years of being Fire'd I just wanted to do something. So there are alot of things you can do BUT as Mr. Green imo mentioned if you can do his two points and or/ figure a side gig when you want to withdrawal more not knowing your financials but based on what you said you will be fine.

Rdy2Fire

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Re: Freshly FIREd
« Reply #14 on: August 11, 2019, 08:29:55 AM »

I believe you only need two things to be at peace with your FIRE plan. You need to believe in the soundness of your withdrawal rate. Remember that you chose it based on data that says it is as safe as one can reasonably hope for. If you can't take comfort in that you will struggle with volatility.

The second thing you need is flexibility. Withdrawal rates and portfolio failure have been studied so intensely that we know there are numerous warning signs of a potential failure many years before it actually happens. Understand what some of those signs are, and if you find yourself on the short end of the stick have the flexibility to reduce your spending or earn a little income. No one makes a plan and then refuses to deviate from it. In the worse case scenario, just a little corrective action can stave off a portfolio failure.

If you can do those two things you're golden.

Still following this thread.. #1 has been a little bit of a struggle for me but that's because it's all new, not sure if I am truly FIRE'd and well I hadn't really planned to be yet. Of course the data says I'll be ok but I guess it's a matter of personal acceptance and the societal idea that people should work til they die which of course I disagree with. Anyway I'll keep following as I plan some travel :)

WalkaboutStache

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Re: Freshly FIREd
« Reply #15 on: October 10, 2019, 05:19:09 AM »
After many years of getting financially in shape (i.e. financially independent), the moment came that I just couldn't take it any more in my job. I have handed in my notice and I'm now on my last weeks of work. Originally, I was planning to retire when I turn 45 (one more year), but I just couldn't take it and felt like it makes me sick, physically and mentally.

Now comes the time for me that I will no longer save money (and I have been somewhat obsessive about it), but live of my stash. I'm struggling somewhat emotionally with that. I know the 4% rule and I should be fine also with maybe 3 or even 2.5%, but the volatility is high these days and I look at my bank account way too often. I don't really know how my life will look like going forward and what I will be doing, so I don't know how much money I will spend either. I have always been around 100% in equity (I don't like bonds) and decided to increase the ETF portion and decrease individual stocks.
How are you dealing with the uncertainty and the volatility in the markets, I mean emotionally? Just complete faith in the 4% rule? I'd appreciate if you could share your experiences if you have gone through this already.

Thanks!

I think you may be worried about the Sequence of Returns Risk.  Your best bet is to have your first year of projected expenses liquid (or whatever period makes you comfortable) and another year or two in bonds.  That way, if your portfolio tanks on the first year, it won't matter.  Same for the subsequent years.  A more sophisticated way to deal with it is to set up a Bond Tent.

For the natural anxiety of not working even though your escape plan is solid, I would recommend lots of naps, trees, salt water and sun.

smoghat

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Re: Freshly FIREd
« Reply #16 on: October 10, 2019, 06:15:18 AM »
I have a few dumb ideas.  Maybe they keep me from making as much as I could, but they have worked for three years.

First, low cost index funds and nothing but. Thatís the only thing to invest in.

Second, you can diversify a little within equities using low cost index funds. For example, a consumer staples fund (things people canít live without like potato chips, cigarettes, and toothpaste) like VDC. These do better when the market goes down, but in the long run do about as well as a total market-based index fund like VTI. For the first three years I had VDC, it barely made any money, now itís off like a rocket while VDC is up and down much more wildly. I also invested some in VEIRX, which is a high dividend fund. Since they hold more banks, it went up well for a long time, but itís a drag now. It will come back.

Third, I have a really stupid rule (which wonít work when the market crashes) to deal with day to day volatility. I sell a little bit, maybe $10,000 or $20,000 to cover the bills when the market reaches a new high. Since the market isnít doing too well under Trump, thatís not every day, but it lets me keep a buffer within my emergency fund (a couple of hundred thousand) to cover the coming dark days. 

Much Fishing to Do

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Re: Freshly FIREd
« Reply #17 on: October 10, 2019, 06:30:47 AM »
After many years of getting financially in shape (i.e. financially independent), the moment came that I just couldn't take it any more in my job. I have handed in my notice and I'm now on my last weeks of work. Originally, I was planning to retire when I turn 45 (one more year), but I just couldn't take it and felt like it makes me sick, physically and mentally.

Now comes the time for me that I will no longer save money (and I have been somewhat obsessive about it), but live of my stash. I'm struggling somewhat emotionally with that. I know the 4% rule and I should be fine also with maybe 3 or even 2.5%, but the volatility is high these days and I look at my bank account way too often. I don't really know how my life will look like going forward and what I will be doing, so I don't know how much money I will spend either. I have always been around 100% in equity (I don't like bonds) and decided to increase the ETF portion and decrease individual stocks.
How are you dealing with the uncertainty and the volatility in the markets, I mean emotionally? Just complete faith in the 4% rule? I'd appreciate if you could share your experiences if you have gone through this already.

Thanks!

I think you may be worried about the Sequence of Returns Risk.  Your best bet is to have your first year of projected expenses liquid (or whatever period makes you comfortable) and another year or two in bonds.  That way, if your portfolio tanks on the first year, it won't matter.  Same for the subsequent years.  A more sophisticated way to deal with it is to set up a Bond Tent.

For the natural anxiety of not working even though your escape plan is solid, I would recommend lots of naps, trees, salt water and sun.

Second this and maybe even more.  If you think you could get by on 2.5%-3% WR, you obviously don;t need to be maximizing risk to get the returns you need, so maybe just having 10% (i.e. over 3 years of spending) in a MM (currently making 2% so at least keeping up with inflation for now) would make you feel a lot more comfortable without having that much of a drag on your portfolio.  I guess I'm also not a big fan of bonds right now either as my FIRE plan (which I'm transitioning to now) is 80/10/10 stocks/bonds/Cash.

In the end as others have suggested I think flexibility is the key.  After running numbers for years I'm completely comfortable with a 4% withdraw start, knowing that's certainly more than I 'need' (not my barebones number), and then adjusting as necessary.

blue_green_sparks

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Re: Freshly FIREd
« Reply #18 on: October 10, 2019, 11:31:12 AM »
I took a voluntary separation package 7 months ago. After watching our cash flow closely....our rental income plus a 7 figure spread of CD's bought before the rate cuts (~3.0 to 3.5% APY) carries our expenses handily. Only have about 20% in the market. When (If) my entitlements (Pension + SS) kick in, I will once again contribute to monthly index funds. The thought of returning to a cubicle is unthinkable right now. I really enjoy being FIRE'd.

Financial.Velociraptor

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Re: Freshly FIREd
« Reply #19 on: October 12, 2019, 01:58:11 PM »
Some bond like alternatives are REIT, BDC, MLP, and CEF (Closed End Funds) that pay steady income and have "low" volatility.  You might read: https://www.amazon.com/How-Retire-Dividends-Principal-Intact-ebook/dp/B07W7346P3

But the money thing is ultimately the most trivial part of your retirement.  I just dinged my 7 year Fireversary.  After about six months it tends to become real and you settle into a deep contentment.  But that first six months is a little nerve wracking. Trust the process.

blue_green_sparks

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Re: Freshly FIREd
« Reply #20 on: October 13, 2019, 05:17:03 AM »
Some bond like alternatives are....
Thanks F.V, looks interesting; not the usual advice.

With my freed up time I have been having fun day trading $30K with index ETFs based on big news and large futures swings. Usually once a week or so. If I am wrong on the morning's trend...I just hold and wait. Volatility= some party money gained while
wearing PJs or stepping out for a jog.