Author Topic: T minus ~5 years FIRE?  (Read 1823 times)

Gumption

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T minus ~5 years FIRE?
« on: April 14, 2017, 08:59:05 AM »
Anyone out there looking for FIRE in about 5 years? If so, are you doing anything differently?

I am socking as much as I can in 85/15 VTI/VBLX.

Seeing as how a downturn will happen, I am thinking i need to divert some funds to start building up a 2-3yr cushion to feed off of in order to let portfolio heal when that happens.

So close yet so far away... its a frustrating stage as I would love to start saying "no" to current work.
« Last Edit: April 14, 2017, 09:14:33 AM by Gumption »

Gumption

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Re: T minus ~5 years FIRE?
« Reply #1 on: April 14, 2017, 10:35:08 AM »
Thanks for your reply Steve. Appreciate you taking the time.

In reality, I will still do some work in FIRE (I'm an independent consultant, working from home;) but I don't really want to factor that in there with my assumptions.

We live in Boulder, CO and prop values are ridiculous and keep going up. Part of my FIRE plan involves cashing this out, downsizing out of state, and using the extra proceeds as a buffer from a downturn.

Ideally, the portfolio would not be touched too soon in this scenario, so that's why I'm a bit more aggressive on the VTI.

jhcollins seems to promote going 100% VTI up until day 1 of FIRE and then maybe put in 20% bonds....but we all have different situations I guess.

5 years is a ways to go, but I am just putting all this out there to see what others have done.

boarder42

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Re: T minus ~5 years FIRE?
« Reply #2 on: April 14, 2017, 10:45:26 AM »
Dont try to time the market.

I'm 100% stocks about 5-6 years out.  i'll switch to 90/10 at my FIRE date most likely. 

Gumption

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Re: T minus ~5 years FIRE?
« Reply #3 on: April 14, 2017, 10:57:12 AM »
appreciated. I don't feel that I am trying to time the market; but really, one can't assume FIRE at any particular date because (if invested) who knows where your portfolio will be.

Question is, when you generally feel you are getting warmer to the target date, do you do anything differently?

for me, I think, its good to get a little more conservative with some steadier stream of income...ie, cashing out house appreciation
« Last Edit: April 14, 2017, 01:17:13 PM by Gumption »

yachi

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Re: T minus ~5 years FIRE?
« Reply #4 on: April 14, 2017, 12:07:33 PM »
I guess I'm 5 years away from FIRE.  It requires I continue to keep up my current savings rate, and 7% after-inflation returns from my Stache.  ER would be 4% withdrawals and rental income from 1 house.
I guess I'm about 68% of the way to my minimum FIRE goal, but I'm not terribly convinced that I can live at that level permanently and be content.

Laura33

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Re: T minus ~5 years FIRE?
« Reply #5 on: April 16, 2017, 09:21:29 AM »
First, I don't see it as "trying to time the market" in this case -- you're not selling now to buy back in later, you are transitioning from a pure growth period to one in which you will need to draw some income.  The reality is, there *will* be a market downturn -- probably several -- over the extended period of your planned retirement, so of course you want an asset allocation that will allow you to weather that.  So to me, it makes perfect sense when you are a few years out to start to think about the long-term repositioning of your assets.  Although, like PizzaSteve says, you are in a somewhat different position, because you will get a big influx of cash from selling the house, so you could wait and use that for your cash stash.

The thing to keep in mind here is that the 4% rule generally works if you are getting market-based returns, so if you choose to keep a significant portion of your assets in cash-equivalents, that will bring down the overall return, and you need to take that into consideration in your planning.  FWIW, I also plan to keep several years' expenses in non-stock assets (e.g., CD ladder, bond ladder).  But I am not counting that in my base assets that I count towards my 4%.  Yes, it is overly conservative, but I am in a field in which it would be much, much harder to re-enter once I leave, so I consider it retirement insurance.

Gumption

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Re: T minus ~5 years FIRE?
« Reply #6 on: April 17, 2017, 08:53:54 AM »
I agree. You cant leave large sums of money in cash. seems like you could get some laddering 2 yr bonds that will keep up with inflation? I havent figured that piece of the puzzle out yet.

the 4% rule relies on 50/50 portfolio. I think what we are talking about at this point in this thread is how can you do just a little beyond that to mitigate risk...but perhaps I need to remind myself that that isn't the point with the 4% rule.

boarder42

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Re: T minus ~5 years FIRE?
« Reply #7 on: April 17, 2017, 08:59:55 AM »
I agree. You cant leave large sums of money in cash. seems like you could get some laddering 2 yr bonds that will keep up with inflation? I havent figured that piece of the puzzle out yet.

the 4% rule relies on 50/50 portfolio. I think what we are talking about at this point in this thread is how can you do just a little beyond that to mitigate risk...but perhaps I need to remind myself that that isn't the point with the 4% rule.

the 4% rule is to make money last 30 years.  the asset allocation of 50/50 if you were actually FIREing and trying to make your money last would not support you at a 4% SWR to last the 40-60 years most here will need.  bonds were also alot more lucrative when the trinity study was run.  most looking for a long FIRE timeline around here plan to keep 75-80% equities or higher if they are going to use something near the 4% rule.