The Slog:Of the FI/RE population, I definitely fall into the "Hates Their Job" and "Could Think of a Million Better Ways to Spend Time" and "Anti-Authoritarian" demographics. It is a miracle that I've made it as a corporate cog for as long as I have. For the last 6 months though, it's been really hard to slog it through the work day. I need to fix my attitude as my performance has been middling at best. I'm barely doing the minimum. I used to be a highly-rated cog.
One More YearI've been saving since I was a teenager. First with savings bonds, then with 401k/Vanguard taxable accounts. I was partway along the journey already when I discovered the FI/RE community three years ago. Then I was finally able to do the math and set a #, initially $1mm in index funds. I realize now I was building a certain amount of OMY into that target.
One Less YearMy actual expenses are quite low that number would have allowed for a lot of fluff. Upon this realization, I started doing some more careful budget analysis, and I came up with a lower number as a feasible RE target with a little bit of room to grow/shrink. I OLY'd a few years off the schedule.
Am I There Yet?But today, as I'm faced with yet another spreadsheet, and yet another set of PowerPoint slides summarizing that spreadsheet, and a business trip to present said slides, for some people I really don't like spending time with, I'm procrastinating again and wondering if I can't just cut the cord now. It is so tempting.
Withdrawal StrategiesBut the rational part of me wants to model this out and have a quantitative analysis. I started thinking about accumulation in context of draw-down. This line of thought led me to withdrawal strategies. I found that few posts/blogs seem to follow the 4% rule during the withdrawal phase, and that few RE'ers are getting their income purely from a stock/bond portfolio. Most seem to be highly variable in their withdrawals, and/or have diverse sources of income.
To really answer the question at hand, I need to understand my current portfolio and what strategy I would use for withdrawal. So is this really possible? I know I've been FI for a little while but could I really RE now without being rash or restricting my RE lifestyle too greatly?
My current Assets represent 33x my basic budgeted expenses (rent, subsidized ACA, food, clothing, phone, internet, car maintenance/insurance) so there is a bit of wiggle room for variable withdrawals or fun stuff / travel. I could pay those expenses with a 3% WR. I would not be able to live in a high-COL area unless I scored some serious market returns. This would be a comfortable, albeit lower middle-class budget in many parts of the US, and comfortable to extravagant in many parts of the world for a frugal person.
Assets: 33x basic expenses
* 401(k) - 43%
* Roth IRA - 7%
* Taxable - 49%
* Cash - 1%
Allocation:
* 401k - VBMPX - 19%
* 401k - S&P500 - 20%
* 401k - VGSNX - 9%
* Roth IRA - VTSAX - 2.3%
* Taxable - VTSAX - 42%
* Taxable - VTIAX - 5%
Stuff:
* I own a 15 yo car that I'll happily keep driving. No house or property.
SimulationsThere seems to be a number of
withdrawal strategies that don't get much discussion. I turned to cfiresim and ran some numbers. After a brief review, I settled on Inflation Adjusted and Variable Spending strategies.
* 3.6% inflation-adjusted withdrawal, no social security, gives a 93% success rate.
* 4% inflation-adjusted withdrawal, 2/3 of expected social security, gives a 96% success rate.
* 3-5% (3.6% target) variable spending, no social security, gives a 81% success rate
* 3-5% (3.6% target) variable spending, 2/3 of expected social security, gives a 100% success rate
By the numbers, it sure seems I could cut the cord and start filling a Roth ladder using a variable withdrawal rate as long as SS comes along. I believe it will.
But I'm still working.
Why Am I Still Here?This budget is modest and doesn't leave a whole lot of room for travel, hobbies, etc. I've been testing the budget for the last 6 months though, and it is doable.
Post-FIRE, I have been considering a small RE partnership. I might need W-2 income to appear credit-worthy.
General apprehension. What if I want to do something that costs more than my budget allows? Continuing education, travel, underwater basket-weaving hobby, etc.
General apprehension. What if I were to become financially responsible for ailing parents?
I'm not sure what my next step is going to be. Right now I'm trying to talk myself into sticking it out through the end of the year and getting one more back-door ROTH in.
But I don't know if I can make it that long. Can I RE today? Maybe if I give myself permission to end it at any day, I'll make 6 more months.