Author Topic: SO does not "get" FIRE  (Read 7414 times)

Threshkin

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SO does not "get" FIRE
« on: March 04, 2014, 02:28:30 PM »
My SO just does not get the concept of FIRE.  We have more than enough assets to cover our annual expenses but when I start explaining that we have reached FI and should consider RE I hit a brick wall.

Saving and controlling expenses is no problem, in fact I can hardly ever talk my SO into even going out for dinner once every couple of months.  But when i suggest RE my SO just falls back on "How will we live with no income?"  In my SO's mind it seems that saving is just something you do, spending savings is unthinkable.  Gains on investments are not income, trying to explain a 4% withdrawal rate is like speaking in Greek.

Any ideas on how to Bring my SO around to the idea that we have saved enough and can now start enjoying the fruits of our efforts?

Quick financials to illustrate the situation: (all annual unless noted)
Assets: $1.5M (~500K in real  estate, the remainder in savings)

Debt: $0 (only month to month expenses, no mortgage or other debt)

Post RE Income: ~$18K ($12K net rental income plus an easy $6K in alternate income)  Income will increase significantly in 10-15 years when SS kicks in.

Expenses: Current ~$35K post RE ~$45K (Increase is mainly insurance.  The cheapest ACA quote for the two of us is $885/month, bronze plan.) 

Our net post-RE expenses will be about $27K.  The investment fund should spin off an easy $30 to 40K (3 to 4% ROI). 

But when I suggest RE my SO says "We only get $1500 a month from the rental.  After we pay for insurance we will only have $500 left.  How can we live on that?"  Again, my SO does not even consider the passive income we receive from the investments.

Suggestions?

StarryC

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Re: SO does not "get" FIRE
« Reply #1 on: March 04, 2014, 03:05:12 PM »
I would consider 3 things, depending on your SO.

1) meet with a professional wealth advisor/ retirement advisor/ Financial planner.  Maybe hearing it from an expert might help. Also just talking to the SO about when they think you should retire, how you will finance your life when you retire, and what that money in the investment accounts will be used for might help.

2) Starting today, write down the balance of all accounts.  In one year, compare.  Show the SO the figures: We made $40,000 this year on investments, + $18,000 on the rental/ alternative income.  If we took our needs of the accounts to live on for the upcoming year we would still be SAVING $13,000 a year.  (Maybe you have the data to do this comparison from 1 year ago? Maybe this is something you can determine from your taxes?) 

3) Start with not retirement: Talk about planning a 3 week vacation this summer.  Then another 3 week vacation at Christmas.  Talk about going "part time" at work so that you always have 3 day weekends but make less. 

Peter

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Re: SO does not "get" FIRE
« Reply #2 on: March 04, 2014, 03:11:46 PM »
Maybe you just need to take that extra million and buy a few more rentals! haha.

Perhaps easing them into explaining how the dividends from a portfolio of blue chips would work "just like interest".

Having "savings" and spending "the interest" is a lot less scary and easier to understand for a beginner than talking about capital appreciation, dividends and distributions, market fluctuations and safe withdrawl rates.

Congrats on the FI though, even if your the only one in your family that knows it!

Threshkin

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Re: SO does not "get" FIRE
« Reply #3 on: March 04, 2014, 03:22:27 PM »
Thanks Starry.

I would consider 3 things, depending on your SO.

1) meet with a professional wealth advisor/ retirement advisor/ Financial planner.  Maybe hearing it from an expert might help. Also just talking to the SO about when they think you should retire, how you will finance your life when you retire, and what that money in the investment accounts will be used for might help.

This might work but trying to find a mustachian adviser is not easy.  I will give it a shot.

2) Starting today, write down the balance of all accounts.  In one year, compare.  Show the SO the figures: We made $40,000 this year on investments, + $18,000 on the rental/ alternative income.  If we took our needs of the accounts to live on for the upcoming year we would still be SAVING $13,000 a year.  (Maybe you have the data to do this comparison from 1 year ago? Maybe this is something you can determine from your taxes?) 

I did this last year but I suspect the returns were not "real" to my SO because our NW increased ~250K last year (It was a VERY good year in the market and our savings rate is significant. (~75-80%))

Quote
3) Start with not retirement: Talk about planning a 3 week vacation this summer.  Then another 3 week vacation at Christmas.  Talk about going "part time" at work so that you always have 3 day weekends but make less. 

Unfortunately this does not work with my job.  It is either all-in or nothing. 

irononmaiden

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Re: SO does not "get" FIRE
« Reply #4 on: March 04, 2014, 03:37:43 PM »
What would your SO like to do with the (awesome) savings you've built? Also, does the SO ever plan to retire?

Threshkin

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Re: SO does not "get" FIRE
« Reply #5 on: March 04, 2014, 04:02:45 PM »
What would your SO like to do with the (awesome) savings you've built? Also, does the SO ever plan to retire?

My SO thinks in terms of retirement as being age driven.  Retiring early is not an option, you work until 65 and then retire, regardless of savings.  My SO's parents did this. SO's sister in Germany states flat out that if she (sister) retires before 65 her SS equivalent will be reduced to a fraction of what she would receive if she stays (in a job she hates) for another 15 years until she is 65. (In other words sister is trapped.)

Exflyboy

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Re: SO does not "get" FIRE
« Reply #6 on: March 04, 2014, 04:06:23 PM »
Its possible he may be bought itno the standard definition of FI

I.e 65 years old and $2m in clear assets.

In a way it culd be argued your still a bit short.. I.e you have about $1m in non RE assets which makes $40k per year.. Plus you are assuming that you will always want to be in the rental business (of course you could then sell the rentals).

Would working for say another couple of years and get to say $1.2M make your SO feel more comfortable?

Frank

MrsPete

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Re: SO does not "get" FIRE
« Reply #7 on: March 04, 2014, 04:08:22 PM »
Ask your spouse AT WHAT POINT it's appropriate to begin living from savings and investments.
Then negotiate from that point. 

ShortInSeattle

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Re: SO does not "get" FIRE
« Reply #8 on: March 04, 2014, 04:12:11 PM »
Does your SO *want* to understand FIRE?

If not, it's not a math problem. 

If yes, then I'd start by talking about safe withdrawal rates, in as much detail (or not) as needed and introduce the SO to a few calculators like FIRECALC to model different scenarios.

The simplest way to explain things IMO goes something like this.

"We have 1 million dollars in investments today.  Every year we need to keep our investments growing by 3% just to keep even with inflation.  So if we earn 3% returns on average, we've gained nothing and lost nothing."

"Our asset allocation is currently Y.  That means that we will earn "on average" 6 or 7% return per year. So we can withdraw 3-4% of our money every year and probably never run out.  Isn't that cool? It means we can get 30-40K per year from our investments."

Then once *that* is clear, you can walk through the nuances:

- How you plan to handle market crashes.
- What your expenses are.
- The mechanics of withdrawing money. (will you use dividends only?  Will you sell small amounts of stock?)

In my experience, when someone doesn't "get" something that is fairly simple, it's not about the math. He may simply believe that ER is irresponsible and have some baggage there.

But in either case, I hope this helps. :)


AlanStache

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Re: SO does not "get" FIRE
« Reply #9 on: March 04, 2014, 04:17:58 PM »
Buy a one way ticket to somewhere tropical, text one picture each day of your flip-flops/beach/umbrellaed drink, and include the increase of your networth w/o SO's paycheck, wait to be joined.

MDM

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Re: SO does not "get" FIRE
« Reply #10 on: March 04, 2014, 05:25:20 PM »
You could run the experiment of redirecting all your current job income to a separate account, then living off passive income as you plan for RE.  At least one of you would learn something.

Threshkin

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Re: SO does not "get" FIRE
« Reply #11 on: March 04, 2014, 06:24:04 PM »
Does your SO *want* to understand FIRE?

If not, it's not a math problem. 

....

In my experience, when someone doesn't "get" something that is fairly simple, it's not about the math. He may simply believe that ER is irresponsible and have some baggage there.

But in either case, I hope this helps. :)

Thanks Short.  I think you hit the nail on the head.  It is likely not a math problem but more of an emotional/culture problem.  In my SO's mindset you are "supposed to work" until a predetermined retirement age.

Daleth

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Re: SO does not "get" FIRE
« Reply #12 on: March 04, 2014, 07:49:03 PM »
You say your current job is all or nothing, no part time--can you change jobs?

Threshkin

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Re: SO does not "get" FIRE
« Reply #13 on: March 04, 2014, 10:07:21 PM »
You say your current job is all or nothing, no part time--can you change jobs?

I have a specialty job in a high tech field.  Part time is not really an option in what I do.  It is a salary position (no overtime) that I could stay busy at 7/24 if I wanted.  Currently I self limit my time to around 40 hours a week.

I could probably find a new job without too much difficulty (knock on wood!) but I do not really want to.  Plus it would be even more intense and time consuming than my current job where I already know the processes and the people.  Working from home is something I would most likely have to give up if I change jobs.  In fact, I would probably have to either relocate or at least have a killer commute (150mi RT) if I was lucky(?) and found a "local" job.

My income is the vast majority of our overall income (~80%).  If I RE I would not expect my SO to keep working if they did not want to but I would not force them to stop either.  They know this.

Really, I am tired of working and not very happy with recent structural changes at work.  I just want to be done.

Khan

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Re: SO does not "get" FIRE
« Reply #14 on: March 04, 2014, 10:08:29 PM »
You could run the experiment of redirecting all your current job income to a separate account, then living off passive income as you plan for RE.  At least one of you would learn something.

I think this is a fantastic idea as you start working on convincing your SO about RE being a thing. Also, speak to a financial advisor to help convince her. I believe Vanguard provides them free.

wtjbatman

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Re: SO does not "get" FIRE
« Reply #15 on: March 04, 2014, 10:41:56 PM »
Really, I am tired of working and not very happy with recent structural changes at work.  I just want to be done.

Keep in mind it's your life here as well. Your SO doesn't get to tell you what to do (well, unless you have that type of relationship, hah). If you have the means to FIRE, and do it, I'm not sure how your SO would have a problem with you being around more. And likely in a much better mood!

DaKini

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Re: SO does not "get" FIRE
« Reply #16 on: March 05, 2014, 03:56:05 AM »
Quote
SO's sister in Germany states flat out that if she (sister) retires before 65 her SS equivalent will be reduced to a fraction of what she would receive if she stays (in a job she hates) for another 15 years until she is 65. (In other words sister is trapped.)
As i understood, it is not so that you have to touch your SS. If you touch it pre 65 (or 67 in my case) you get heavy penalty, that is true. If i just wont contribute to SS anymore, my ss payment would just not rise more. On my yearly german SS balance i have two numbers, the one says what i would get if i would not contribute any further and the other what if i can expect if i continue to contribute until retirement age.

So my plan is to touch SS only if i can do it without penalty (with 70 maybe, hehe) and otherwise treat it as a small security buffer for later retirement. I hope and expect my investments to make SS entirely optional.

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Re: SO does not "get" FIRE
« Reply #17 on: March 05, 2014, 07:42:15 AM »
I agree that this is probably a mental problem more than an economic problem regarding your SO. 
I would suggest explaining to her that you want to retire sooner rather than later, then going "the math" with her, and then walk away.  your SO developed these ideas that retirement is for someone who is 65 over the course of his/her lifetime, and it's not likely to change in a day or a week or a month.

Revisit it periodically (perhaps quarterly) and show your SO how much you've made on the rental, how much on dividends, etc.
Also, talk about *what* you want to do.  Many people's perception of married people is that they sit around gardening or playing bridge.    If you tell your SO that "I really, really want to spend the next 20 years _______" they might be more receptive.

Finally, point out to here that even if you don't earn a single dime (beyond inflation), you can withdraw $25k a year from $1M of savings for 40 years! That + rental income + side income + SS really shows how conservative you are being.