Author Topic: Overshoot FIRE target in an instant - would this change anything?  (Read 1927 times)

Gremlin

  • Bristles
  • ***
  • Posts: 303
Scenario:

You are gradually tracking towards FI and have FIRE in sights.  Let's say you are at 90% of your FIRE target and have 12 months to go, all things being equal.

Something happens that instantly takes you to 180% of your FIRE target.

Questions:

What would you change, if anything?  Would you adjust your asset allocation to be more risky or more conservative?  Would you allow yourself a little extra spending money each year?  A lot of extra spending money each year?  More money to charity?  Treat the 'extra' as if it didn't exist?  Would your answer differ depending on what created the windfall - inheritance, lottery win or successful investment?

sokoloff

  • Handlebar Stache
  • *****
  • Posts: 1192
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #1 on: May 20, 2018, 05:44:33 PM »
My asset allocation is already max-risk-on, but if it wasn't, suddenly snapping from 90% to 180% would put it max-risk-on for sure. (I have two young kids, and intend to pay for their college and leave them an inheritance and doing some charitable giving of substance once retired.)

Would I retire immediately? Probably not, as I love what I do and the kids are in elementary school, so it's not like I could travel the world immediately anyway.

I'd probably spend some of the excess on some (frankly optional) home improvements that we've been putting off while we focused on growing the stash. Other than that, as another poster said last week, "it's hard to beat the cheap out of me", so I doubt we'd go buying a jet or something... :)

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5988
  • Location: Earth
  • K Thnx Bye
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #2 on: May 20, 2018, 06:00:44 PM »
I would actually de-risk my portfolio. Probably move to a 50/50 allocation.

Sleep much better at night knowing I won't lose 80-90% in a severe market downturn vs. chasing upside?

Retire immediately.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4883
  • Age: 12
  • Location: UTC-10:00
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #3 on: May 20, 2018, 06:11:18 PM »
At 90%, my portfolio would already be my FIRE portfolio. Going from 100% to 180% doesn't warrant making drastic changes, in my opinion. So I would probably just bump my standard of living and call it a day.

secondcor521

  • Magnum Stache
  • ******
  • Posts: 2908
  • Age: 51
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #4 on: May 20, 2018, 06:36:19 PM »
I would not treat the excess as though it doesn't exist, because it does.

I would not plan differently based on the source of the windfall, because money is fungible.  Although it would be impossible for me to have a lottery winfall as I do not play the lottery.

Since I have heirs, I would treat the 100% of my FIRE goal as my money and invest it according to my FIRE plan (which at the moment is 90/10).  The other 80% I would consider to be money that would end up in my kids' hands, so I would invest that portion at 100% stocks, because they would likely not get it for another 30 years or so.

I would reevaluate my insurance situation and would consider adding umbrella insurance, which I don't carry now but at 180% of FIRE I would probably consider it a good buy.  If I owned life or LTC insurance (I don't) and the windfall made me self-insured, I would cancel those policies.

I would review my tax situation with my CPA and also review my will.

Steeze

  • Pencil Stache
  • ****
  • Posts: 573
  • Age: 32
  • Location: NYC Area of Earth
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #5 on: May 20, 2018, 07:12:59 PM »
First, I would put in my notice at work. 30 days max. Next, I would give notice to my landlord that I would be breaking the lease. Then I would travel to see all my friends from college, my grandparents, and my wife's parents and grandparents.

Allocation would be more conservative, maybe 80/20 at 33x. Once the dust settled a bit I would purchase a few things: a used car, a house in Boulder, and some outdoor gear. My spending would not change significantly.

I would camp, snowboard, hike, float rivers, skateboard, and do crossfit as much as possible. Basically make up for the last 5 years.

I would would start having kids immediately, and consider 2-3 instead of 1-2. I would support my wife in starting a music school for the guzheng. I would look for part time seasonal work doing something fun - guide in Rocky Mountain National Park, teach snowboarding, work at a rock climbing gym, etc. I would invite my parents and in laws to live with us.

If I had anything left I would invest it 80/20 and send the dividends to my parents so they could retire or work part time. Any additional income would go to building that account and making sure my parents were comfortable.

Wouldn't matter where the windfall came from as long as it was reportable to the IRS.

Tuskalusa

  • Bristles
  • ***
  • Posts: 442
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #6 on: May 20, 2018, 07:29:45 PM »
Wow!  What a great scenario!  Wed probably throw some of the excess at paying off our house (just cuz its a milestone weve always kicked around.) Then wed probably chat about whether we wanted to change our work situations, but not sure if wed change much now.  Wed probably stay put for another 8 years until our son heads off to college. Wed probably do some upgrades, increase our donor advised fund, and then hang on to a good amount of cash and breathe easy.

Gremlin

  • Bristles
  • ***
  • Posts: 303
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #7 on: May 20, 2018, 08:21:19 PM »
I should add, this isn't my scenario but is something that is likely for someone I know quite well.  It's an interesting thought as to how I'd play it out if it were me...

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 901
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #8 on: May 21, 2018, 08:58:15 AM »
I'd do the same thing I planned on doing at 100% of my FIRE number, retire. I'd probably give a bit more away in FIRE though (gifts, charity, etc) and maybe spend a little more on myself as well.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #9 on: May 21, 2018, 09:38:00 AM »
I'd FIRE to my projected AA of 50/40/10 and move on with my life.  probably redo our kitchen master bath and deck b/c i've been putting these off for a while - or we'd move lots of options but wouldnt change how i invest.  going to some crazy conservative AA when you have over saved to that level doesnt make a whole lot of sense and is a poor use of the dollars IMO.

honeyfill

  • Stubble
  • **
  • Posts: 248
  • Age: 63
  • Location: Tucson
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #10 on: May 21, 2018, 02:10:45 PM »
Something similar happened to me abut 18 months ago. We went from about 90% of our goal to 133%.  At that time , I had not discovered MMM or the FIRE community.  I had just been sort of gradually drifting toward FIRE with no real plan.  Once I figured out I could retire now instead of at some indefinite point in the future, I got serious about planning.  Unfortunately, I discovered that except for having sufficient savings, I was woefully unprepared both income-wise and emotionally for retirement.  The last 18 months have been spent getting my ducks in a row.  My wife is now retired and I will be pulling the plug in about 6 weeks. The good news is that I will be retiring with about 50% more income than I thought I would have when I was just drifting along a couple of years ago. 

marty998

  • Walrus Stache
  • *******
  • Posts: 6923
  • Location: Sydney, Oz
Re: Overshoot FIRE target in an instant - would this change anything?
« Reply #11 on: May 21, 2018, 03:35:52 PM »
First, I would put in my notice at work. 30 days max. Next, I would give notice to my landlord that I would be breaking the lease. Then I would travel to see all my friends from college, my grandparents, and my wife's parents and grandparents.

Allocation would be more conservative, maybe 80/20 at 33x. Once the dust settled a bit I would purchase a few things: a used car, a house in Boulder, and some outdoor gear. My spending would not change significantly.

I would camp, snowboard, hike, float rivers, skateboard, and do crossfit as much as possible. Basically make up for the last 5 years.

I would would start having kids immediately, and consider 2-3 instead of 1-2. I would support my wife in starting a music school for the guzheng. I would look for part time seasonal work doing something fun - guide in Rocky Mountain National Park, teach snowboarding, work at a rock climbing gym, etc. I would invite my parents and in laws to live with us.

If I had anything left I would invest it 80/20 and send the dividends to my parents so they could retire or work part time. Any additional income would go to building that account and making sure my parents were comfortable.

Wouldn't matter where the windfall came from as long as it was reportable to the IRS.

Some of us would pay NOT to have the parents and in-laws live with us.