Author Topic: At what point would you trust these numbers?  (Read 1229 times)

cannotWAIT

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At what point would you trust these numbers?
« on: August 24, 2021, 05:04:47 PM »
I am currently FI at $595K but am hanging on (by an increasingly thin thread) until I get to $625K. But at what point would trust that amount to be reasonably solidified? I have no idea how to think about this. It seems crazy to hand in your notice the very day it first hits your number, especially in this market, but on the other hand, where do you draw the line?

Morning Glory

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Re: At what point would you trust these numbers?
« Reply #1 on: August 24, 2021, 05:10:37 PM »
It's really personal. I guess it depends on how burned out you are, and how easy you predict it to be to find work later if the need arises.

solon

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Re: At what point would you trust these numbers?
« Reply #2 on: August 24, 2021, 05:20:07 PM »
The math says if your annual expenses are $23,800 or less, $595k will cover it.

Can you tell us a little more about what you mean by "reasonably solidified"?

dougules

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Re: At what point would you trust these numbers?
« Reply #3 on: August 24, 2021, 05:33:41 PM »
We need more to go on.  You should probably do a case study.

The other part of it is how to you feel about your job?

cannotWAIT

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Re: At what point would you trust these numbers?
« Reply #4 on: August 24, 2021, 05:40:46 PM »
Ha, well if I could quantify it I wouldn't be asking the question! :) My concern is that the increase in my LNW has been so incredibly swift due to this crazy market that I wonder if it's foolhardy to quit a good ("good") job in reliance on it. It would be easy to pick up  hourly work at about $100/hr if I have to, I'm 55 so pretty close to SS too, and my expenses are stable at $18K, more like $22K with the addition of ACA insurance in RE. Maybe I'm just looking for reassurance. If you were in my situation, would you bounce the second it hit 625?

boarder42

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Re: At what point would you trust these numbers?
« Reply #5 on: August 24, 2021, 05:41:58 PM »
Uh yeah you can go ahead and quit.

cannotWAIT

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Re: At what point would you trust these numbers?
« Reply #6 on: August 24, 2021, 05:42:39 PM »
How I feel about my job: Desperate to get out, but I am stuck until the end of the semester anyway.

secondcor521

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Re: At what point would you trust these numbers?
« Reply #7 on: August 24, 2021, 06:02:52 PM »
I had the same thought/concern when I retired.

I decided that FIREcalc and cFIREsim took that situation into account:  there is always a possibility of a drop, and there's always a possibility it might happen right after you retire.  More likely not to happen, but still a possibility.

Probably more important that the math is your emotions.  Would you be able to calmly carry on and execute your plan if the market dropped 20% immediately after you turned in your notice, or would you freak out and go back to work (and possibly sell at the bottom)?  I figured I was more in the former camp, so I went ahead and pulled the trigger, but YMMV.

boarder42

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Re: At what point would you trust these numbers?
« Reply #8 on: August 24, 2021, 06:04:56 PM »
How I feel about my job: Desperate to get out, but I am stuck until the end of the semester anyway.

I'm about to return to my job for 4 months after a 3 month break. I am dreading it. I have huge end of year ties keeping me but just about nothing will keep me past early Jan.

If you're desperate to get out you should leave. I loved my job while I was doing it. Getting out for 3 months made me realize I don't need it. And I'm 35 and stretching to a 4.5% swr. You're already below 4%   you're going to be fine.

Tester

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Re: At what point would you trust these numbers?
« Reply #9 on: August 24, 2021, 06:22:55 PM »
Let me tell you how I feel:
I don't know our expenses - and I am not yet at the point where I can have a normal discussion about that.
We are at 570k net worth, out of which only 270k invested, rest house equity.
We got here after 6 years from 0 net worth, luckily I am really well paid and I am enjoying my work (except that lately I want to spend more time with my kids before they get too old to play with me).
I am working on getting expenses down and I have a goal I set to myself to take 3/4 months sabbatical in 3 or 4 years.

If I would have your expenses for those years I would sell my house and retire.


And then I would focus on what I love the most, help people get better.

bacchi

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Re: At what point would you trust these numbers?
« Reply #10 on: August 24, 2021, 06:42:20 PM »
With old age pension that close? Hell yeah I'd bounce.

cannotWAIT

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Re: At what point would you trust these numbers?
« Reply #11 on: August 24, 2021, 08:57:09 PM »

Probably more important that the math is your emotions.  Would you be able to calmly carry on and execute your plan if the market dropped 20% immediately after you turned in your notice, or would you freak out and go back to work (and possibly sell at the bottom)?  I figured I was more in the former camp, so I went ahead and pulled the trigger, but YMMV.

No, Iíve managed to sit tight through every drop from 2008 on, so I know how I react. I drive everyone crazy with my anxiety-fueled speculation and bitter regrets, but I donít touch the money.

Trifele

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Re: At what point would you trust these numbers?
« Reply #12 on: August 25, 2021, 04:02:50 AM »
Dude.  Move enough into cash so that you can sleep at night and then retire.

Congrats!

ChpBstrd

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Re: At what point would you trust these numbers?
« Reply #13 on: August 25, 2021, 08:43:13 AM »
I too distrust the idea of walking out of one's job on a market peak that might prove temporary. One's 4% WR could become 4.5% the following month. One way around this is to say "I'll retire when my NW has been above my FIRE number for at least X consecutive months without dipping below."

cannotWAIT

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Re: At what point would you trust these numbers?
« Reply #14 on: August 25, 2021, 09:09:49 AM »
Right, thatís basically what I was asking here. What is X? Technically, yes, the 4% rule does account for a drop right out of the starting gate, but if you are looking to minimize the risk of that, what amount of time makes sense? Iím sure thereís no scientific answer to this question but Iím still interested in how others approach it.

Omy

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Re: At what point would you trust these numbers?
« Reply #15 on: August 25, 2021, 09:17:06 AM »
I waited until I had 4 times as much as I needed...don't be me!

markbike528CBX

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Re: At what point would you trust these numbers?
« Reply #16 on: August 25, 2021, 09:29:04 AM »
You definitely have FU money.  Dropout now. 
Or just look for a better-for-you job.
Pulling the plug does not have to be a permanent, final event.
@cannotWAIT said they could do 100/hour in the future, why not now?

Spartana took a sabbatical that morphed into FIRE.

boarder42

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Re: At what point would you trust these numbers?
« Reply #17 on: August 25, 2021, 12:36:02 PM »
You definitely have FU money.  Dropout now. 
Or just look for a better-for-you job.
Pulling the plug does not have to be a permanent, final event.
@cannotWAIT said they could do 100/hour in the future, why not now?

Spartana took a sabbatical that morphed into FIRE.

This is what people don't understand. Leaving isn't permanent it can always be undone.

caracarn

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Re: At what point would you trust these numbers?
« Reply #18 on: August 25, 2021, 01:03:47 PM »
You definitely have FU money.  Dropout now. 
Or just look for a better-for-you job.
Pulling the plug does not have to be a permanent, final event.
@cannotWAIT said they could do 100/hour in the future, why not now?

Spartana took a sabbatical that morphed into FIRE.

This is what people don't understand. Leaving isn't permanent it can always be undone.
Especially if that $100/hour is real and easy to get.  Even if the market goes down 25% and you need to make $7,500 to cover the gap can do that in 75 hours.  What's the worry?

Addressing another point and taking the risk of incurring the wrath of MMM forum members crying "market timing" or something, I'm not in the boat of any sort of irrational exuberance in this market of any significant magnitude. We are coming out of a pandemic.  Many companies learned a lot that will make them more efficient and lower expenses (read "we do not need to pay for all this office space as our people are just as effective at home").  The fundamentals of the gains for most companies are solid and so the market value should be up.  As an example we are up over 70% from the same quarter last year and bookings are flying and the quarter was a record of ANY time.  We are not the only company like that, so again at the risk of incurring crystal ball wrath, I would not be worried about stepping away now and things dropping.  Companies are doing better because how could you not?  We were basically shut down and now we are not.  Sales will be up.  Perhaps not at the specific levels I said but up nonetheless.  What then are the downward pressures other than the naysayers yelling "it's a bubble" without any facts about what makes up the bubble.  When the Dow passed 1,000 back in the day sure they all said it was too high, just as at 10 and 20K etc.   Sure it will not go up forever but it also is not very likely to drop 95%.

You have a decent safety net in what you shared and can sustain a 10-15% drop in the market without not meeting your expenses and honoring the 4% rule plus you can augment if needed with a couple weeks a year working at $100/hour.   Not sure how your situation could be better other than standing to inherit a few million dollars.

ChpBstrd

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Re: At what point would you trust these numbers?
« Reply #19 on: August 25, 2021, 02:13:27 PM »
Right, thatís basically what I was asking here. What is X? Technically, yes, the 4% rule does account for a drop right out of the starting gate, but if you are looking to minimize the risk of that, what amount of time makes sense? Iím sure thereís no scientific answer to this question but Iím still interested in how others approach it.
You're right, there's not really a scientific answer. Basically the lower your WR on your actual quit date, the better your odds.

1987 started as a booming year for the stock market. If you had hit your FIRE number in early to mid 1987, you would have experienced a SORR-relevant event only 6-10 months later. Had you not already retired, this event would have probably persuaded you to work another ~2 years until your portfolio recovered back to the FIRE number. But had you already retired, your portfolio would have eventually recovered and you'd be fine. These outcomes represent a tradeoff of 2 years' labor in exchange for a lower WR that probably didn't matter in the end, but at the time it would seem like a "can I retire or not" question.

2000 was different. It was a bad time to retire on a stock portfolio, because the S&P500 was destined to lose 40+% and not recover to its old peaks for seven years, and then the 2007 peak ended with another -40+% recession that took until 2013 to recover from. Basically, a Y2K retiree would have spent 13 years of their retirement deeply underwater, with a WR in the 5-10% range. Their 30-year and 40-year odds might not be so good after all that depletion. There was only a brief window of time in 2000 when this retiree could have worked 3 or 6 extra months to ensure the recent gains stuck, and then made a probably-correct decision to keep working. In other words, the odds of a "let the gains stick X months" strategy saving a Y2K retiree were slim to none. Only a conservative AA could have saved them from a lot more working years.

As these examples illustrate, the "make sure the gains stick" strategy might or might not persuade you to work OMY whether you need to or not. Also these extreme examples are somewhat cherry-picked. Most of the time, stocks will be higher 3-6 months in the future, and one will have wasted 3-6 months working unnecessarily thanks to the strategy. These much-more-likely small mistakes are the flip side of the occasional risk of making a big "retired at the wrong time" mistake. If you've made the right AA and WR decisions, you'll be fine the vast majority of the time. 

Sandi_k

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Re: At what point would you trust these numbers?
« Reply #20 on: August 25, 2021, 02:55:28 PM »
Right, thatís basically what I was asking here. What is X? Technically, yes, the 4% rule does account for a drop right out of the starting gate, but if you are looking to minimize the risk of that, what amount of time makes sense? Iím sure thereís no scientific answer to this question but Iím still interested in how others approach it.

We're not FIRE'ing until late 2025, and I have been moving funds into Cash/GNMAE/TIPS each year. We are now at $200k+ in that pot.

My plan is that those funds will be available in case of a SOR crash, and then I can pull from that pot. I also have ramped up withdrawals in the plan.

Year 1: $30k withdrawals, est 3.5%
Year 2-5: $36k withdrawals, est 3.75%
Years 6-10: est. $40k withdrawals, ~ 4%

The $200k means we're fine for years 1-7 before we ever have to touch the investment side of the pot.

Freedomin5

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Re: At what point would you trust these numbers?
« Reply #21 on: August 25, 2021, 03:10:33 PM »
Dude.  Move enough into cash so that you can sleep at night and then retire.

Congrats!

This.

What youíre worried about is Sequence of Returns Risk. IIRC, most recessions recover within 1-3 years, so you just need to have enough in cash or cash-like investments to cover 3 years of expenses so that you donít need to sell equity funds when theyíre low.

There are many ways to achieve this.

Some people change their asset allocation to increase bonds (such as the reverse equity glide path).
Some people use dividend investing.
Some people use a CD ladder.
Some people hold 3 years of expenses in cash in a high interest savings account.
The folks at millennial revolution use what they call a yield shield.

There are many different ways to address SORR. Reading up on those ways and selecting one that works for you may help ease some of your anxiety.

If you havenít already done so, you may want to read through the Pre-FIRE checklist on the forum.

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/
« Last Edit: August 25, 2021, 03:14:19 PM by Freedomin5 »

yachi

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Re: At what point would you trust these numbers?
« Reply #22 on: August 26, 2021, 08:44:01 AM »
Ha, well if I could quantify it I wouldn't be asking the question! :) My concern is that the increase in my LNW has been so incredibly swift due to this crazy market that I wonder if it's foolhardy to quit a good ("good") job in reliance on it. It would be easy to pick up  hourly work at about $100/hr if I have to, I'm 55 so pretty close to SS too, and my expenses are stable at $18K, more like $22K with the addition of ACA insurance in RE. Maybe I'm just looking for reassurance. If you were in my situation, would you bounce the second it hit 625?

I don't get this.  At $100 per hour, you could cover your expenses by working less than 5 hours a week, but you're working 8 (EIGHT!) times that much.  At a job you don't enjoy.  Are you sure it's a "good" job?

cannotWAIT

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Re: At what point would you trust these numbers?
« Reply #23 on: August 26, 2021, 11:41:53 AM »
Youíre right. I left the private practice of law to take a lower-stress, lower-paid, law-adjacent job in a rural area. The issue is that I hate my current job a lot less than I hate lawyering, so although I *can* pick up hourly work, I really donít want to. Iím just so sick of everything. All I want to do is walk my dog.