Author Topic: Is there anything you do differently the last year or two before you FIRE?  (Read 6063 times)

Giro

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So, basically I'm carving out my next two years here at work.  I am "signing up" to run a two year contract, so that means in May 2018 it would be an ideal time to FIRE.  I haven't been very frugal with my expenses, so I'm going to start looking at those and cutting out some spending there. 

Is there anything that you guys do to prepare 2 years out? 

I need that drop dead date in my life.  I want that as a shiny beacon of hope in my often times stressful career. 

My list
- Cut out excess spending
- Decide on retirement location
- Decide on leaving the DH behind for a couple of years or waiting on him and then relocate
- House ready to sell...so make repairs/upgrades as needed


What else?

Cassie

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #1 on: February 05, 2016, 12:34:33 PM »
Downsized so we could pay off the home and sold the other home.

Catbert

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #2 on: February 05, 2016, 12:40:49 PM »
Quit buying work.

lhamo

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #3 on: February 05, 2016, 12:59:05 PM »
Confirm retirement income projections pan out with a satisfactory level of risk on different calculators (I personally use FIRECALC and the Fidelity Retirement Income Planner)

Figure out cash flow plan for any years between retirement date and when you can access traditional retirement accounts.  Plan Roth conversion ladders, etc.

Estimate social security earnings given stop work date and different ss start dates (great worksheet in MDM's case study template makes this really easy to tinker with)

Finalize estate planning documents (will, advanced directive/POLST, any trust documents you may need)

Research health insurance options/costs in both current and projected new location

Understand tax ramifications of possible move to another state (what is the tax structure, what types of retirement income, etc are taxable)

If you currently have life insurance through work, decide whether you will buy your own policies to replace and research costs (if you have minor children keep in mind the social security survivor benefits for minor kids and caretaking spouse, which can eliminate or greatly reduce the need for supplemental life insurance)

If you like to travel, do as much travel rewards/credit card churning as you can in the next 12-18 months to generate points, cash bonuses etc. while you have a steady income to cite on the card applications.  Cut back on that 6-12 months ahead of time if you anticipate applying for a mortgage for your new home.

Declutter to prepare for eventual move.

soccerluvof4

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #4 on: February 05, 2016, 01:12:25 PM »
We downsized with still a family of 6 to half the space

Sold our vacation home we didnt use along with all the toys ( a gross amount of toys)

Really started tracking what we could live on and make changes slowly to kids life so wasnt extreme.

Educated and still educating ourselves on the different aspects of investing.

Personally i tried to and talked with alot of retired people usually older but still learned alot from them .




Giro

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #5 on: February 05, 2016, 01:52:26 PM »

If you currently have life insurance through work, decide whether you will buy your own policies to replace and research costs (if you have minor children keep in mind the social security survivor benefits for minor kids and caretaking spouse, which can eliminate or greatly reduce the need for supplemental life insurance)

I did NOT think of this.  Thank you!!

lhamo

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #6 on: February 05, 2016, 01:55:42 PM »

If you currently have life insurance through work, decide whether you will buy your own policies to replace and research costs (if you have minor children keep in mind the social security survivor benefits for minor kids and caretaking spouse, which can eliminate or greatly reduce the need for supplemental life insurance)

I did NOT think of this.  Thank you!!

You're welcome.  My dad died when I was 15 and the social security survivor benefits my mom and I received made it possible for me to accept a scholarship to finish high school overseas (we had to pay about $2k/year of the cost, which came out of social security) and then finish my undergrad degree debt free (I also had scholarships and worked).  It is a benefit that many people are not aware of so I always try to point it out. 

ZiziPB

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #7 on: February 07, 2016, 04:56:16 AM »
Confirm retirement income projections pan out with a satisfactory level of risk on different calculators (I personally use FIRECALC and the Fidelity Retirement Income Planner)

Figure out cash flow plan for any years between retirement date and when you can access traditional retirement accounts.  Plan Roth conversion ladders, etc.

Estimate social security earnings given stop work date and different ss start dates (great worksheet in MDM's case study template makes this really easy to tinker with)

Finalize estate planning documents (will, advanced directive/POLST, any trust documents you may need)

Research health insurance options/costs in both current and projected new location

Understand tax ramifications of possible move to another state (what is the tax structure, what types of retirement income, etc are taxable)

If you currently have life insurance through work, decide whether you will buy your own policies to replace and research costs (if you have minor children keep in mind the social security survivor benefits for minor kids and caretaking spouse, which can eliminate or greatly reduce the need for supplemental life insurance)

If you like to travel, do as much travel rewards/credit card churning as you can in the next 12-18 months to generate points, cash bonuses etc. while you have a steady income to cite on the card applications.  Cut back on that 6-12 months ahead of time if you anticipate applying for a mortgage for your new home.

Declutter to prepare for eventual move.

Great list, lhamo.  Thank you for posting it.  I'm on the same timeline as the OP.

As to life insurance, I have a term policy that ends right around the time I will retire.  I am not planning to get a new one - my daughter will have graduated from her Masters program by then so she should be all set :-)

SnackDog

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #8 on: February 07, 2016, 05:13:19 AM »
Try to get to a high mileage point with at least one airline. Use work travel to get to millions of miles for lifetime award status.  Best is probably seven million miles with Delta.  Get out there and get flying!

Basenji

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #9 on: February 07, 2016, 05:38:13 AM »
Following...
We have 3 years until I quit and a few more after that for DH. I'm working on firming up the plan to cover us from then until the retirement accounts are accessible and really getting the expenses mapped out. On a less financial side, we're thinking through what we will do with our time.
« Last Edit: February 07, 2016, 05:47:31 AM by Basenji »

chasesfish

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #10 on: February 07, 2016, 05:46:01 AM »

- Do anything you are planning to use debt for before you stop working.  If you plan on buying a new house at your new location and want to carry a mortgage at these rates, do it as a second home and close before you/DH quit.   (This is an oft-debated topic, but if I can get a 15 year loan at 3% and make 4% on the Dow Jones Utility Index and 6% on REITS and they increase their dividend every year, its tough to turn down that arbitrage)

- Take some long vacations and answer the where to move question

- Test your expense number, then test it again

- Evaluate your portfolios and make sure they're setup to generate the income you need

- Start working on the house now


Retire-Canada

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #11 on: February 07, 2016, 06:51:45 AM »
I haven't been very frugal with my expenses, so I'm going to start looking at those and cutting out some spending there.

Until you are living at FIRE spending levels for at least a year or very close to them you don't know if they are realistic. So I would adjust your lifestyle to match what you can fund based on your investments. If you find out that your anticipated FIRE budget is too low and you need $10K/yr more that's an extra $250K that needs to be saved and invested.

Determine how you will take your money out each year?

- when and how?
- will you have any triggers to reduce spending or earn some extra money? If so what are they?

What will you do with all that free time? Do you have lots of hobbies/interests or will it be a struggle to meaningfully fill that time?


GrOW

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #12 on: February 07, 2016, 07:03:09 AM »
If at all interested in credit card rewards/points churning, time getting new cards around major expenses. You may find that you have a handful of major expenses such as moving or insurance policies with an annual premium. It would be nice to enter your first year of retirement with enough rewards/points to fund those first few items on your bucket list.

Catbert

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #13 on: February 07, 2016, 02:56:02 PM »
Go through your pay stub item by item (not all at once) to determine how retiring will affect those items.  That includes:

health insurance and life insurance
social security calculations
HSA/FSA - is there anyway to max these out one last year
vacation and/or personal time off - is it paid out or are there circumstance that you could part of it
when are annual COLA raises (may influence when you leave if you'll be getting lump sum payment when you leave),
can you max out 401k/403b/TSP contributions early in the year before retiring or are you limited by %

Look at every item to see how you can best handle it. 


Zikoris

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #14 on: February 07, 2016, 03:09:28 PM »
Mine would look a bit different than most since I have fairly unique plans:

- Start the process of selling everything I own, and finding a family member or friend with extra basement space to store the one or two boxes of personal things I'd like to keep
- Finalize visa/residency papers/whatever for Hungary or a wherever else I choose to live
- Hit the language lessons hard, and try to get as much practice as possible
- Figure out some sort of health insurance to cover my needs
- Finalize whatever plans I have regarding my Canadian taxes - who would I use for my mailing address for tax documents, filing taxes, etc.

But as far as making lifestyle changes, or spending changes? No way. Though I would try to avoid buying any new work clothes or shoes and make do with what I already had. I guess that would apply to acquiring pretty much any new stuff as well.

I would try to make an effort to do any local stuff that I really enjoy - favourite hikes, and so on - while it's still convenient to do so.

Cassie

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #15 on: February 07, 2016, 03:56:56 PM »
Determining how much health insurance will cost you and how big your deductibles will be are a major item.  This can eat up a big part of your budget.

Giro

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #16 on: February 08, 2016, 06:54:01 AM »
great responses.  Thank you everyone.

I was planning to do this slightly differently than most folks on the forum.  My DH's military pension will pay the basic expenses and a few "needs".  It generally increases each year (he retired about 3 years ago, so I don't know how often it doesn't increase).  For the other needs that we will have, I plan to just withdrawal from our investment accounts.  My concern is that the market may be down when I need the cash.  For folks who live off of distributions that are invested in the market, how do you decide when to sell?  Do you time the market at that point, or just take the risk that you may lose money? 

Basenji

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #17 on: February 08, 2016, 07:42:22 AM »
great responses.  Thank you everyone.

I was planning to do this slightly differently than most folks on the forum.  My DH's military pension will pay the basic expenses and a few "needs".  It generally increases each year (he retired about 3 years ago, so I don't know how often it doesn't increase).  For the other needs that we will have, I plan to just withdrawal from our investment accounts.  My concern is that the market may be down when I need the cash.  For folks who live off of distributions that are invested in the market, how do you decide when to sell?  Do you time the market at that point, or just take the risk that you may lose money?

We're military retirement peeps too. Nords has an interesting take on this exact thing, which we are going to implement: Cash reserves to weather when the market is down. Here's the thread/post that I bookmarked:
http://forum.mrmoneymustache.com/post-fire/what-has-workednot-worked-for-you-guys-who-have-been-fire-for-10-yrs/msg739384/#msg739384

Quote
To ride out the higher volatility of a high-equity portfolio, we keep about 8%-10% of it in cash (CDs and money market).  That's two years of spending, and most recessions are shorter than that.  If the market has a good year then we replenish the cash stash.  If the market has a bad year then we start cashing in CDs.

Giro

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #18 on: February 08, 2016, 08:01:53 AM »
ooh...I really like that.

10% of the entire portfolio seems very excessive.  I'm a little nervous about that much.  But, 1-2 years of expenses (I guess after the pension amount) is really nothing. 

My annual expenses are about $50K with no mortgage.  His pension is more than that.  But, maybe just take out $100K and keep it in "cash".  Less than 10% of the entire portfolio, but enough to ride the market storm if there is one. 


Giro

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #19 on: February 08, 2016, 08:35:27 AM »
And now that I'm in the rabbit hole from posts that reference other posts and so on, I need to step back and think about if this has helped me realize I should be more or less aggressive.

I don't need the returns, BUT I can afford the risk.

I never considered the pension to represent a bond allocation, but it really is.

 

mamagoose

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #20 on: February 08, 2016, 09:57:42 AM »
Go visit the places you may be considering relocating to after retirement, especially if it's out of state. Take your vacations there and see how you like it year-round.

Nords

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #21 on: February 13, 2016, 10:31:31 PM »
ooh...I really like that.

10% of the entire portfolio seems very excessive.  I'm a little nervous about that much.  But, 1-2 years of expenses (I guess after the pension amount) is really nothing. 

My annual expenses are about $50K with no mortgage.  His pension is more than that.  But, maybe just take out $100K and keep it in "cash".  Less than 10% of the entire portfolio, but enough to ride the market storm if there is one.
I'm a little confused by your statement that his pension is more than your expenses.  That's usually a Very Good Thing.

The two years' expenses (~8%-10% of your portfolio) in cash is not necessary for the math of the 4% SWR.  However it provides a two-year buffer to let your portfolio get through most bear markets.  If you don't have to touch it during the first 5-10 years (when your portfolio is most susceptible to sequence-of-returns risk) then you won't need it for the rest of your retirement. 

If you keep the $100K in a ladder of three-year CDs then you'll have the optimal combination of yields, maturities, and minimal penalties for early redemptions. 

The logic behind two years' cash in CDs also reflects your military pension, and that inflation-adjusted annuity means that you can be much more aggressive with the rest of your investments.  In our case that's no bonds and >90% equities.

TomTX

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Re: Is there anything you do differently the last year or two before you FIRE?
« Reply #22 on: February 15, 2016, 05:08:30 AM »
ooh...I really like that.

10% of the entire portfolio seems very excessive.  I'm a little nervous about that much.  But, 1-2 years of expenses (I guess after the pension amount) is really nothing. 

My annual expenses are about $50K with no mortgage.  His pension is more than that.  But, maybe just take out $100K and keep it in "cash".  Less than 10% of the entire portfolio, but enough to ride the market storm if there is one.

My pension will cover our (base) expenses. The stash is just going to be used for fancy vacations and such. Therefore, I plan to have the stash continue to be 100% in equities. Even if we just spend dividends in a down year, it's all luxuries.