Author Topic: FIRE'd Folks: Retiring on a Small 'Stache?  (Read 3214 times)

nexus

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FIRE'd Folks: Retiring on a Small 'Stache?
« on: November 29, 2019, 02:12:28 PM »
Sorry if this has already been discussed extensively. I'll post the question first and some context after:

What is your experience/have you retired early or plan to retire early on a small nest egg -- lets say $400k or less? What's your plan if the market tanks and your holdings drop 30-50%?

My fiance and I live together, and are getting married next year. We split our expenses. In order to cover my portion [more than half] of our expenses, I realistically only need about $250k-$300k to fund my current lifestyle because my annual spending is around $10k. She is pursuing FI at her own pace, and is totally fine with me doing my thing.

I'm 29, and will likely have $250k-$300k in my taxable brokerage account in 2-3 years (currently at $143k). I'll still have my 401k, which by then will be above $100k (currently at $56k, and plan on maxing every year until I stop working). I'll be able to pull 4% from my taxable brokerage without touching my 401k... so technically my withdrawal rate would be less than 4% of my total assets. Right now I'm sitting at $219k with about 95% of it invested* and the other 5% in cash

I also have a part-time side hustle that I plan on continuing at least at my current levels into FIRE, which nets an extra $500-$1k+ per month, depending on the time of year. Worst case, if things aren't going as planned I'd likely be in my mid 30's and be able to jump back into the type of work that got me to FIRE in the first place.

Unless we decide to have a kid, or our lifestyle drastically changes I can't foresee anything that would trigger me having to go back to work, especially if I'm able to pull it off for the first five years.

*401k, HSA, taxable brokerage, and some company shares that have to mature/vest before I can cash them out.

Financial.Velociraptor

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #1 on: November 29, 2019, 05:28:26 PM »
I've been retired 7 years on a smallish stash (under 500k). 

My strategy is to be current income centric.   I have about a third each in high yield (most closed end funds), fixed income, and options trading.  I budget 25,000 a year and have a 5.86% withdrawal rate at that level.  My passive interest, dividends, and distributions come to 104.14% of my budget (I actually spend less making it about 122.04 of actual spend this year).  The options income generates another half or so of my budget.  That is a total of 158.88% of budget projected through year end.  Plus or minus some capital gains and I eek out a modest gain each year. 

The fixed income component will be very resilient in a downturn.  The high yield component is also largely tilted towards fixed income as the underlying but will be slightly more volatile although, the plan is to live off distributions and not sell.  The options component is a wildcard but I'm current making two small trades each week.  One a bullish in the money spread and one a bearish in the money spread.  I keep at least 7% downside protection in each trade and am doing very well and should make money at least on the bearish half in the event of a crash.

I can discuss in detail via PM or you can visit my blog (sig line) for more.

Malkynn

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #2 on: November 30, 2019, 04:47:10 AM »
If you were looking to leave the workforce and never ever work again, then you would be taking a significant risk.

However, if you are happily going to pursue part time work and if you are prepared to keep up the skills and networking needed to hop back into more profitable work if needed, then I think that gives you enormous flexibility and you will actually probably end up with a solid chunk of money by the time you reach your senior years.

Since your side hustle covers half to all of your cash flow needs, your stache will passively grow pretty rapidly.

I think you have more than enough to start exploring what your best life should look like.

APowers

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #3 on: November 30, 2019, 06:00:35 AM »
Sorry if this has already been discussed extensively. I'll post the question first and some context after:

What is your experience/have you retired early or plan to retire early on a small nest egg -- lets say $400k or less? What's your plan if the market tanks and your holdings drop 30-50%?

My fiance and I live together, and are getting married next year. We split our expenses. In order to cover my portion [more than half] of our expenses, I realistically only need about $250k-$300k to fund my current lifestyle because my annual spending is around $10k. She is pursuing FI at her own pace, and is totally fine with me doing my thing.

*snip*

I'm not FIRE yet, but have done the math for myself so. many. times. One of the really great things about a low-income/small stash FIRE, is that if you DO have a time of terrible returns, literally almost any job or side hustle will cover your expenses. You've got a $10k annual spend; even if we assume expenses of $1k/month, you can hit that by delivering pizza 3 nights a week. or any minimum wage job full-time. or working on a landscaping crew for the summer. or whatever. build adirondack chairs in your garage and sell them at the farmers market. And that's assuming your investments are doing So Badly that they provide zero income (which is an absurdly conservative assumption) and that your expenses are 20% greater than normal. This is a Much Easier situation to handle than someone who has a baseline $60k expenses when their $1.5M stash tanks and they have to somehow find a way to make up a $60k income. Those jobs are harder to find, and more difficult to get back into after being out of the market for a while.

The greater risk with a low-income FIRE is an "SOUE"-- sequence of unexpected expenses-- your car gets totalled in a crash, your apartment burns down, then you find out that your GF is pregnant, needs a c-section, baby spends 6 weeks in NICU.....all of a sudden, you have >$300k of expenses that wipe out your stash.

I'm not saying this to somehow dissuade you. I think a low-income FIRE is great. Just plan for the things that are actually dangerous (financially) in your situation, instead of the things that won't really move the needle for you.

flyingaway

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #4 on: November 30, 2019, 07:12:39 AM »
 
I'm not FIRE yet, but have done the math for myself so. many. times. One of the really great things about a low-income/small stash FIRE, is that if you DO have a time of terrible returns, literally almost any job or side hustle will cover your expenses. You've got a $10k annual spend; even if we assume expenses of $1k/month, you can hit that by delivering pizza 3 nights a week. or any minimum wage job full-time. or working on a landscaping crew for the summer. or whatever. build adirondack chairs in your garage and sell them at the farmers market. And that's assuming your investments are doing So Badly that they provide zero income (which is an absurdly conservative assumption) and that your expenses are 20% greater than normal. This is a Much Easier situation to handle than someone who has a baseline $60k expenses when their $1.5M stash tanks and they have to somehow find a way to make up a $60k income. Those jobs are harder to find, and more difficult to get back into after being out of the market for a while.

The greater risk with a low-income FIRE is an "SOUE"-- sequence of unexpected expenses-- your car gets totalled in a crash, your apartment burns down, then you find out that your GF is pregnant, needs a c-section, baby spends 6 weeks in NICU.....all of a sudden, you have >$300k of expenses that wipe out your stash.

I'm not saying this to somehow dissuade you. I think a low-income FIRE is great. Just plan for the things that are actually dangerous (financially) in your situation, instead of the things that won't really move the needle for you.

I think you can retire without any money. If you need money, just deliver a pizza to someone to get a tip.

2Birds1Stone

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #5 on: November 30, 2019, 07:27:33 AM »
I FIRE'd this year, on ~$500k and am using a 3% withdrawal rate. This provides $15k/yr of income from investments.

My average expenses while working over the last 5 years I've tracked, have worked out to just a hair over $20k, but many of them were work related and have been slashed. I'm projecting needing $18-20k/yr to live a very robust lifestyle, with my essentials (housing, food, healthcare, basic transportation) only accounting for $12-14k of that.

The gap between $15k @ 3% WR and $18-20k spend will be easily covered by some creative income from churning bank/CC sign up bonuses, misc online work, and other one-off income generating opportunities. I'm only going for things that are truly low hanging fruit, or are fun to do without the money (and $ being a bonus). The extra $3-5k/yr is my "fun money', so I have no doubts about being able to make it work.

From a portfolio standpoint, I have ~$275k of my assets in stocks, and the rest is sitting in bonds, precious metals, REIT's and a 5 year CD ladder, such that regardless of what happens with the markets, I have the next 5 years of expenses (even at the $20k/yr level) completely covered.

Being 32 years old, I have plenty of time to go back to work if I get bored or need the money. Maybe I won't get another $100k/yr job immediately, but I only need a sliver of that to cover my expenses and replenish the portfolio.
« Last Edit: November 30, 2019, 07:30:11 AM by 2Birds1Stone »

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #6 on: November 30, 2019, 10:47:24 AM »
While I technically retired on a small stash under $400k I had 3 HUGE advantages.

First I had bought and paid off a house that I planned to eventually sell and downsize. Second I had free/low cost medical coverage thru the VA. And third I would have a small gov pension/VA benefit of approx $1500/month combined once I hit 50 (and could easily covered the 10 years between quitting my job and being old enough for pension just on my stash).  With the low cost housing and medical I found I needed less than around $500/month to cover basic expenses so had lots of left over for fun stuff.

In your case you need to consider such things as rising rents, rising healthcare costs, market downturns eating into your stash unless you go back to work, possible disability that leaves you unemployable or under employed, the possible break up of you relationship which means you'll have higher expenses, kids, SO disabled, fair g for elderly parents and just general future expenses you may want to save for like travel or vehicle replacement or just lifestyle changes.  What you want at 60 might be very different then what you want at 30.

That said I think you would be a good candidate for Coast FIRE


In.

lhamo

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #7 on: November 30, 2019, 11:18:50 AM »
Since you are in the East Bay, I'd say one of the biggest risks you are running is housing costs -- if you own your own place you are probably good, but if you are renting then the risks are much higher unless you are in a really solid rent control situation and can stay in your place even if you have kids. 

Since your side-gig income can cover your current expenses and you have a big non-retirement portion of your stash available to fall back on, I'd say give the plan a try and see how you like it.  If it isn't the life you dreamed you can always go back to work.

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #8 on: November 30, 2019, 12:36:51 PM »
Like others, I think you're fine if you keep working your hobby deal. However, if you ever want a child, make sure to keep your options open for more work.

I am FIREd but with a larger stash (about 560k at fullest valuation), but feel like I'm in thin FIRE because I spend much more than you - well over 20k IRL. I did not work for the past 4 years or more, but maintained a professional certification as income insurance of sorts, and may return to work soon. The work decision is partly for personal fulfillment, but partly for money too. One aspect is that I have a lot of home equity but may run into liquidity problems at some point. Part of the reason for a spurt of work is that it would let me get a bigger mortgage and invest the proceeds, increasing liquid assets.

Regarding return to work if necessary after a fallow period, I have definitely had interviews during FIRE but not gotten the job once the interviewer grasped that I really hadn't been working. I think whether that happens consistently depends on job type, how you handle the interview, and whether after a non-work period you can still bring unique qualities that the employer strongly desires. Does your part time work relate to your full time job?

That said, it's quite possible that your thrift and your part time work will cause you prosper greatly. Good luck, and keep us posted.

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #9 on: November 30, 2019, 03:58:44 PM »
Wow, I'm really stoked to see all of the awesome responses, advice, and testimony thus far. I'll try go back through each response and answer any questions or provide more insights. I'm going to try and answer a few right now, then I'll hit the rest when I get back from the gym.

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #10 on: November 30, 2019, 04:31:43 PM »
Financial.Velociraptor
I'll definitely check out your blog. While your strategy seems way more complicated more thought out than mine, I'm open to learning about it. I do like the idea of being income centric, however it'll be pretty tough to get me away from putting everything into VTSAX, or a similar index fund.

Malkynn
Right now I'm a data analyst who moonlights as a tennis instructor and racket stringer. When the weather is good, I get more business. In the colder months, things slow down, but in CA there aren't a lot of those. There's a good chance that in FIRE, my side hustle would cover most of my expenses during about half of the year so my portfolio could go untouched.

What I've been doing the last few years is really grinding in the months where daylight savings is to my advantage. The other perk is it is all cash. After I hit my number I may look to expand my hustle because I'll have more free time and I generally enjoy teaching*. I'm considering trying to partner with local cities or HOA's that have courts. Or, I may just work part-time at a club. It would give me a free membership, but they'd take a cut of my earnings. Right now I charge anywhere from $40-$50 per private lesson (long-time clients have a grandfathered rate), and stringing earns me at least $10 per racket --more if they use the strings I have stocked and only takes me 20 minutes per racket. So, tennis is really easy money for me.

Also, for my Vanguard account this is the first year where my all-time earnings have matched my YTD contributions (about $30k each).

APowers
You're absolutely right. I've even considered that I could just work part-time now and let time take care of the rest. It gives me a nice sense of security that practically any job will cover my expenses.

I also like your insights how my situation is easier than someone's with a larger stash and larger expenses.

SOUE - this is a really good point too that I don't have a good answer for. I do plan on having about $20k** in cash when I pull the trigger that way I won't have to touch my investments for at least the first year. I also have a checklist of things I plan on stocking up on, replacing, or buying before I'm allowed to leave the 'fire hose of cash' job such as tires, furniture, new laptop (mine is 9 years old), etc. I think the only thing I don't have accounted for are the unexpected medical expenses.

Flyingaway
I've actually been a pizza delivery driver three different times, and I enjoy it. Two different Round Table Pizza's in CA, and a Marco's Pizza when I lived in Nashville briefly.

2Birds1Stone
Congrats!! I think I'll be 32 or 33 when I finally take the plunge too. It sounds like you have a solid plan. With the CD ladder, did you just put $20k in a 5 year CD for the last 5 years? So each one matures one year after the next?

Next year is the first year I'm going to start tracking all of my expenses. My current situation is messy because of all the tennis crap I buy for other people, so my spending on Mint was pretty inflated and I think it was double counting stuff such as purchases made on credit cards, then payments made to credit cards for said purchases.

Out of time, I'll respond to the rest when I get back :)

*In my early 20's I was a club pro, but the hours weren't on my terms and I got burnt out really quick. So, I enjoy teaching on my own terms.
**I can foresee my spending going up a little right after FIRE because I'll likely travel.

lhamo

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #11 on: November 30, 2019, 05:47:59 PM »
Another option for your tennis side gig: coaching high school tennis players.  Probably wouldn't pay as much as your private clients, but you could probably easily find some talented kids in the east Bay area who wouldn't be able to afford private coaching and might do really well (both sports-wise and life-wise) with some solid mentorship.

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #12 on: November 30, 2019, 06:35:08 PM »
@nexus, if I were in your situation I would ask myself 6 additional questions: (1) Do I dislike my current job/career-path/going to work enough that I'm willing to jump into FIRE soon or can I handle FIRE'ing in ~5 years to help pad the stache and iron out more of the FIRE details. (2) Will I or my Fiance feel financially-anxious when I FIRE in 2-3 years due to the size of the stache? (3) How will I handle a significant market correction and a subsequent annihilation of my funds? In a bull market a lot of people say they'll "stay the course" but in a bear market when the bear shit hits the fan their emotions take over and they're quick to pull out of the market. (4) What sort of risk mitigation strategies should I have in place to protect my stache during a market correction? (5) Do I have an emergency fund? (6) Do I plan on purchasing a home in the future?

This isn't meant to be a slight so please don't take it that way, but there are a lot of intelligent and disciplined mustachians on this board who've FIRE'd with significantly larger staches and were still noticeably anxious about their stream of income during FIRE. From what I've observed the level of financial comfort during FIRE largely correlates with the size of one's stache, one's spending habits, the COL in their area, their debt and a myriad of other factors. I think it's possible to FIRE with your suggested stache level, side hustle and low annual expenses, but for me personally I think the question of "Do I have enough money?" would likely be in the back of my mind until I've adjusted to my new lifestyle
« Last Edit: November 30, 2019, 06:37:28 PM by ApacheStache »

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #13 on: November 30, 2019, 10:33:58 PM »
Ihamo
SO and I rent from her mother, who owns several properties. It is very unlikely that our rent will ever go up, and far more likely that SO ultimately inherits our place along with other rental properties in a couple of decades. One day she will wake up and be FI whether she wants to or not.

I would say if we ever decide to move, it'll likely be out of state to a LCOL area (like Nashville, though the cost of living has gone up since I lived there briefly in 2014). The only motivation for that would be so that we can have a bigger place for about the same cost. That's very unlikely because SO's license is state-specific. Moving would completely erase my side hustle. I'd have to start all over, or build up a larger stash to offset the difference. The good news is that I would not move somewhere without year-round tennis.

BicycleB
Congrats on four years of freedom so far! I could also see myself returning to work post-FI. I'm considering paying for online school to get my CFPB certification. The steps are pretty straight forward, but I believe it requires 2 years of working in the job w/o certification before you can acquire the designation. I'd be happy to just take the courses and pass the test(s).

As far as my part-time job, it does not relate to my career, and is something I can scale up as needed if I don't want to go back to cubicle world. With my current company, we have contractors that take 18-24 month roles, then have to time out for 6 months before they can come back on board for another assignment. Several of those folks just take the 6 months off and don't work unless they're here on a visa and need to constantly have be employed.

Ihamo (regarding your additional comment)
Very true. If it wasn't for my current gig's hours right now I'd be coaching high school. I really enjoy coaching and developing the rapport with teenagers. I already have 5 years of experience from coaching high school tennis while I was a college student. You're right that the pay can be cruddy. I was lucky enough to get a stipend at the end of the season for anywhere from $2,500 to $3,500, but I think coaches in this area might only get $1,000. Doing so could yield more clients, and earn revenue via stringing for the team as well.

I'd also consider teaching an adult education class on financial literacy. I'm not sure what kind of loops I'd have to jump through in order to get a program put in one of those community pamphlets you get in the mail every once in a while. It would not pay great, but it would be really rewarding.

ApacheStache
These are great questions.
1) I like my job for the most part. I work from home and my boss is a good personal friend. I do sometimes feel weird about mixing my personal and professional life. I also sometimes worry that I'm making his life harder because he could have looked for/hired a better candidate that could have done the job better. So, taking the leap sooner sometimes feels like the healthier thing to do because I don't know how long a good thing will last. I could likely also just switch teams and do so for the sake of moving into a higher paying role down the road, but that could change my working from home situation, which I value above all else.

2) Not sure. I think my fiance will continue to work longer than I plan on it because she wants to, and needs more time to build up her own net worth. I have considered staying employed longer to help her along, or just to work an extra year and be super spendy just to see what it's like while the stash keeps doing its thing. Odds are I'd run out of things to buy or experiences to have and end up going back to my high rate of savings within a couple of months. I bet I'll experience a lot of hesitation and end up working beyond my FI number.

3) I haven't been in the market long enough to have had that happen. The worst I've experienced so far was late 2018 when my $20k of gains went down to -$4K. My reaction was to just keep buying more. So in this instance, I'd probably just cut back on spending and increase the amount of hours I teach tennis. There have also been plenty of times where I've invested $500 - $1000 at a time, only to see it disappear a short time later. The more shares I have, the wider the swings go, I notice.

4) refer to #3 -- mostly just change behavior and possibly go back to work for a while/teach more tennis.

5) Yes. Currently, my emergency fund is $5k in savings and I seem to consistently just have about $10k in cash between checking, savings, and cash on hand. I won't quit my job without at least $20k in cash/bonds to get me through the first year or two without needing to touch my investments in addition to a $5k emergency fund. I suspect that having $20k in cash plus side hustle income will delay me having to withdraw anything from my investments for at least two years. Even when that amount hits zero, I'd still have $5k as an emergency fund. Worst case I'd just have to find a job to replenish the money spent on an emergency.

I think $5k is enough for an emergency fund, but I could be wrong. Since we rent I don't have to worry about unexpected, expensive repairs. I can replace a vehicle for $5k or less also. I'll have thousands of dollars in my HSA for any unexpected medical bills, so I'm not sure what else I'm missing. Family emergency? No problem, they're all within driving distance so no need to worry about unexpected airfare. No pets with crazy medical needs. No kids. I realize several of you guys and gals have more life experience than I do, so I'm curious to hear about times/reasons you've had to dip into your emergency fund. Since having one, I've never had to touch it.

6) No, not in the foreseeable future. Buying a home in my area would give us a mortgage at least 2-3x what we currently pay in rent. And, when something breaks we wouldn't be able to make a call and magically have it fixed at no additional cost.

I can definitely see how more money equals more comfort and security. I don't think I'll really have to do much adjusting when I hit FIRE because my lifestyle's not going to change. I kind of just pretend I'm FIRE'd already in the sense that I make my decisions as if it were true. The only difference I can foresee when it really happens is that I'll have more free time, but I don't think that'll mean I will suddenly spend more money. I think the scariest thing is just going to be not having a traditional paycheck every two weeks, which you'd think would scare me into spending even less money.

Also, I'll still have a 401k* just sitting there, growing tax free until I decide to do a Roth conversion ladder, set up SEPP, or am old enough to touch it. My withdrawal rate will be solely based on the assets I have in my taxable account.

*I'll turn it into a traditional IRA. By this time next year my 401k will be close to $90k. By FIRE, probably between $130-$150k since I max it each year and get a 6% dollar for dollar company match. If your money supposedly doubles every 10 years, in 30 years when I can access it, it'll be ...
Year 0 $130k
Year 10 $260k
Year 20 $540k
Year 30 $1080k

Financial.Velociraptor

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #14 on: December 01, 2019, 08:58:59 AM »
Financial.Velociraptor
I'll definitely check out your blog. While your strategy seems way more complicated more thought out than mine, I'm open to learning about it. I do like the idea of being income centric, however it'll be pretty tough to get me away from putting everything into VTSAX, or a similar index fund.

@nexus active management isn't for everyone.  My approach is a little controversial around here.  For one thing, I target a 66% or higher allocation to bonds and bond like instruments.  The options component scares people and takes a couple hours per week of active maintenance. It is only "worth it" in my opinion if you enjoy doing that 'work' as I do.  Thanks for visiting the blog though.  It my labor of FIRE love.

I'll like to add there is nothing at all wrong with the index and 4% SWR approach.  I've had close to a dozen people ask me since I RE how THEY should invest for retirement.  So far, after reviewing their risk tolerance, knowledge of markets, desired time commitment, and any subjective criteria they have, I've recommended they ALL index.  Although, I'm a bigger fan of fixed income and bond like instruments than most indexing plans call for.  I usually recommend Vanguard but I believe they all went with Schwab or Fidelty so they could meet with a live person and save that extra .001% on fees or whatever it is using for profit index tickers.

Finally, if you are determined to do "skinny FIRE" on a small stash where you have little wiggle room, build in some flexibility to earn income.  This can be monetizing a hobby or resigning yourself to 20 hours a week of 'barista FIRE' doing downturns.  Hell, it will be fun to get out of the house and greet people in the morning.  Don't take the 4% prescription robotically, own your retirement!

HTH

Cassie

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #15 on: December 01, 2019, 03:31:57 PM »
Itís best not to plan on a inheritance until you have it. MIL could become in need of long term care and sell the houses to pay for it, etc.   Personally I would be worried at your young age with so little money.  I know of 2 couples that retired in early 40ís on a small amount and now 20 years later are sorry. They cannot afford travel or other experiences.  They have to penny pinch until Lincoln screams. Plus when you get older you prefer more creature comforts. Your SS will also suffer.

BTDretire

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #16 on: December 01, 2019, 06:26:43 PM »
I have a different thought about this.
  Unless you are absolutely miserable in your job, and there is no other work that you could do, why, at 29yrs old are you making a plan to live a life in poverty. At the very least, live that life of poverty for a few years now, so that you can save a huge percentage of your income, and have some real options 5 or 10 years from now.

Malkynn

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #17 on: December 01, 2019, 06:36:54 PM »
I have a different thought about this.
  Unless you are absolutely miserable in your job, and there is no other work that you could do, why, at 29yrs old are you making a plan to live a life in poverty. At the very least, live that life of poverty for a few years now, so that you can save a huge percentage of your income, and have some real options 5 or 10 years from now.

Can we not refer to spending very little by choice as "living in poverty"?

Living in poverty is a very very different thing from how OP chooses to live.
« Last Edit: December 02, 2019, 05:41:34 AM by Malkynn »

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #18 on: December 01, 2019, 10:38:57 PM »
Cassie
True. Best not to count chickens before they hatch. That's why I'm still factoring in having to pay for housing costs indefinitely. This is also primarily why I'm letting SO carve her own course towards FIRE. She's barely warmed up to the idea to open a Vanguard account two months ago, yet has contributed to her 401k consistently over time. While she's always been frugal and a saver, she's very weary of being an investor.

As for your example, it sounds like in those 20 years between retiring and "oh fuck" those folks didn't earn any additional income after retiring, or didn't follow the 4% rule, or made some pretty gnarly miscalculations, or had some shitty luck. I'd be curious to really know what exhausted their nest egg and kept them from going back to work long enough to rebuild it? Perhaps I can learn from their mistakes if you'd care to share; but, honestly I feel like I'd see it coming and if I did not course correct or re-enter the workforce in earnest to create a bigger stash, then I'd probably deserve my fate.

Also, as noted if I don't touch my "old people money" (401k to traditional IRA) in 30 years I'll be sitting on a cool million bucks to afford said creature comforts. That's Plan A. Plan B is somewhere between Roth ladder/SEPP or sucking it up and going back to work full-time.

As for SS, who knows whether it'll even still be a thing 30 years from now. I'm not baking it into any of my calculations or projections. FYI to earn maximum SS benefits you need to make around $128k per year and work 35 years at least that rate of pay. If you work longer they take the 35 years with the highest earnings. If I saved 60-70%* of my income I'd probably have like $10 million in investments but have such a shitty quality of life that I wouldn't be able to enjoy what little I had left. (https://smartasset.com/retirement/how-to-improve-your-social-security-benefits)

Mostly, I do not want to make decisions or delay my decisions based on fear. That's no way to live, FIRE'd or not.

BTDretire
I'm going to give you the benefit of the doubt that you only read the initial post and none of the discussion or additional info provided thereafter.

Absolutely not poverty. Maybe by the strict textbook definition, but not in reality. Depending on the market, it'll take me 2-3 more years to get the amount I need to FIRE on just in my taxable account which will only account for about 2/3 of my total net worth. I'll have other pre-tax investments (HSA & 401k) that'll still be able to sit there and grow.

If you've also listened to MadFientist's podcast with Michael Kitces, around the 42 minute mark he says that for every $10,000 you're willing to work for its about the equivalent of having another $300k invested. Or, to say it another way it cuts down your FI number by $300k. So, you can literally cut years off of your mandatory full-time job by willing to make up the difference with a side hustle or part-time work. The supplemental revenue from the part-time work acts as a buffer and could potentially lower your withdrawal rate below 4%. So let's say my lifestyle changes and I need an extra $10k to make ends meet annually -- nowhere in this post have I said that I wouldn't be willing to return to work. In fact, if I Lean-FIRE I'll get to teach tennis on a larger scale.

Malkynn
Thank you, and exactly. I grew up in poverty and the lifestyle I lead now is like the Ritz Carlton in comparison. The money I put into my investment accounts does not make me "do without" in the present. The simple fact is that I just don't spend money on many things.

*My monthly average savings rate. And the ten million is just a blind non-mathematical guess. But it would be several. million. Actually, it is almost 10 million. If at Year 0 today I have 218k and it earns 7% per year, and I add an extra $50k into it each year for 35 years I'd have $9.2MM. This is actually conservative because it doesn't factor in any increase in income, increases in 401k max contributions, and the fact that I've invested closer to $55k this year into my accounts -- $25k into 401k with help of company match and another $30k YTD into Vanguard. Hell, if I only worked 30 more years instead of 35 more, my NW would be $6MM but what the hell would I do with $240k/4% annually?

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #19 on: December 01, 2019, 10:58:33 PM »
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Cassie

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #20 on: December 01, 2019, 11:03:44 PM »
I donít know enough about these couples to know what happened. I wish you all the best.

Linea_Norway

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #21 on: December 02, 2019, 02:09:31 AM »
Please keep in mind that your relation ship might suddenly break up. Could you manage if you were on your own?
I sometimes run the same scenario in my head, even though I'm married, because you can never take anything in life for granted.

But at 29 years old, there are plenty of opportunities to do all sorts of work, parttime or fulltime. So there is your backup plan.

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #22 on: December 02, 2019, 09:00:03 AM »
I have a different thought about this.
  Unless you are absolutely miserable in your job, and there is no other work that you could do, why, at 29yrs old are you making a plan to live a life in poverty. At the very least, live that life of poverty for a few years now, so that you can save a huge percentage of your income, and have some real options 5 or 10 years from now.

Can we not refer to spending very little by choice as "living in poverty"?

Living in poverty is a very very different thing from how OP chooses to live.
Thank you! There is a HUGE difference living on $12k/year voluntarily with a fat stash you can access if needed or wanted and living on $12k/year with nothing else to shore that up. I can live on $500/month and have an awesome life because I don't have really any expenses and have a lot of assets. I sure as hell wouldn't want to live on that if that was all I had. People living at poverty levels incomes here can easily be millionaires.

That said I DO think the OP needs to take future possible changes into consideration. I think the @Fierymillenials case is a good example of a Coast FIRE plan that didn't pan out because of outside circumstances or lifestyle changes.
« Last Edit: December 02, 2019, 09:35:35 AM by spartana »

jim555

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #23 on: December 02, 2019, 09:47:46 AM »
I am the same way, I live on low spending, BUT DON'T HAVE TO.  I can't imagine being forced to live @ $12K a year, that would really suck.  Those who do go out with low staches probably have pensions and Social Security waiting for them.  Also your age matters, the younger the more $$$ are going to be needed.  A 32 yo with only 400K and no housing locked in to me is insane.

Malkynn

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #24 on: December 02, 2019, 10:07:15 AM »
I have a different thought about this.
  Unless you are absolutely miserable in your job, and there is no other work that you could do, why, at 29yrs old are you making a plan to live a life in poverty. At the very least, live that life of poverty for a few years now, so that you can save a huge percentage of your income, and have some real options 5 or 10 years from now.

Can we not refer to spending very little by choice as "living in poverty"?

Living in poverty is a very very different thing from how OP chooses to live.
Thank you! There is a HUGE difference living on $12k/year voluntarily with a fat stash you can access if needed or wanted and living on $12k/year with nothing else to shore that up. I can live on $500/month and have an awesome life because I don't have really any expenses and have a lot of assets. I sure as hell wouldn't want to live on that if that was all I had. People living at poverty levels incomes here can easily be millionaires.

That said I DO think the OP needs to take future possible changes into consideration. I think the @Fierymillenials case is a good example of a Coast FIRE plan that didn't pan out because of outside circumstances or lifestyle changes.

Yep, I actually spend a lot less now than when I was a "broke student". There are complex reasons for that, and I'm not about to say that I couldn't have spent less, I just find it much much easier to be thrifty now that I'm financially secure than when I was constantly worried about whether or not my debit card would come back with "insufficient funds".

I wholeheartedly agree that a Coast plan needs to be realistic. Depending on working long term is a risk in and of itself that shouldn't be taken lightly, especially if that coasting income is vulnerable.

I personally would be very nervous about depending on an income that requires me to be highly able bodied.

Granted, depending on a stache alone also comes with risks...

It's all about looking at the individual circumstances, risks, and hedges that a person/family can cobble together to establish their best possible paths.

For some of us, generating enough income to cover our annual spend is by far the easiest hedge there is. For others, it's a high risk strategy to depend on.

No matter what, the key is to not get sucked into seeing what works for others and assuming it will work for you.

In terms of capital, we all have such variable capacities and risks.

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #25 on: December 02, 2019, 01:40:12 PM »
Please keep in mind that your relation ship might suddenly break up. Could you manage if you were on your own?
I sometimes run the same scenario in my head, even though I'm married, because you can never take anything in life for granted.

But at 29 years old, there are plenty of opportunities to do all sorts of work, parttime or fulltime. So there is your backup plan.

If this happens sometime down the road, it would be devastating. Ultimately I'd have to move into a LCOL area or get a roommate pretty quick in order to stay within my budget. I'd most definitely go back to Nashville. There's tennis, and an awesome night life. California is only a viable option with SO in the picture just as SO can only live on her own with me in the picture. Odds are, I'd need a pretty hefty distraction from such a life-changing event so distracting myself with a job might not be a bad option, especially after a cross country move.


Spartana
I need to read up on the fireymillenials. *done, read a couple of blog posts* In summation, it seems like she did a similar thing as MadFientist where each cut spending to the point that it affected their happiness/mental health. MF course corrected, but still pursued and achieved FIRE pretty aggressively, whereas FM is taking a more scenic route? It looks like her focus has shifted from saving as much as possible to having "good months" and just enjoying life in DC while boasting a nice 40%+ savings rate.

I've been at this since late 2015, early 2016. I'm happier now than I was when I started. A lot of it has to do with the friends I have, and the social circle/interaction/camaraderie I get from playing tennis. Tennis is practically free for me to play (it actually makes me money). So, I think the difference is that I'm not isolating myself to the extent that it would impact my mental health. If, in pursuit of FIRE, my actions cut out tennis or gym going (I have a gym buddy and we spend more time gabbing then we do lifting), I think those would be huge red flags. Or, if in FIRE I'm finding I can't afford to do those things -- immediate deal breaker and its back to work.

Fudge, now I want to make a blog.

Malkynn
More great insights. :)

As far as able-bodied goes, as long as you can stand and talk, you can teach tennis. Hand feeding (not using a racket) is surprisingly effective even at incredibly high levels of tennis. Obviously I'd want to actually participate above and beyond that level, but that's how some coaches teach, and how some drills go. Will little kids especially, it's primarily hand feeding. With clinics a coach may fill-in and participate, but usually they assume the role that's least dynamic so that the other players on court can benefit. It also depends on what the client wants. Tennis_haus on instagram has a lot of really awesome drills and you can see that the vast majority of the time his role is pretty stationary, yet the client is getting great instruction and practice.

I'd basically have to suffer a leg or back injury to keep me off a tennis court. If I injured an arm I'd have trouble stringing. This year I've brought in $3.2k from lessons (about 70 lessons), and almost $6k from stringing (400+ rackets). This year, more than ever, I've had to turn down lessons due to other commitments, but the potential to earn more is there. If you average the numbers, I'm teaching about a lesson per week for about $45/hr and stringing over a racket per day for about $15 each. That's an extra $150 per week in cash.

But wait, you said you earn $10k from your side hustle, so where's the rest? Great question, imaginary person! I also have access to discounted equipment. Let's say I get 40% off of something. I may (and do) turn it around and sell to a client for a 20% discount. A win-win for both of us when it happens, and it's happened to generate about $1k in profit in the process.

General Audience
I must emphasize that this is not one of those "Sacrifice as much as possible until your NW hits $X." If it was, I wouldn't be doing it. I'd be saving less and projecting a larger FIRE number at a later date. Quality of life, health, and happiness are the driving forces of this scheme of mine.

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #26 on: December 02, 2019, 02:01:10 PM »
Key Takeaways Thus Far
> Most responses have been encouraging while a few have err'd on the side of caution.
> Over half of you think my plan is workable, especially if I work part-time in FIRE and allow the nest egg to keep growing
> There are some obvious caveats*
> I'm sexy and young enough to go back to work if needed...even 10 years down the road I'd be in my early 40's.
> Since I'm happy with my current job situation, there's no urgency/need to quit so sticking around above and beyond my NW goal is advantageous
> Don't count chickens before they hatch, but I'm also not going to change my numbers/projections for housing costs until we're actually in a situation where we have to/choose to move or rent goes up. This is MIL's youngest daughter leaving the nest for the first time and choosing to still live nearby her mother -- unlike her other two daughters. Proximity is paramount to MIL, so I have a hard time believing MIL would ever do anything that would jeopardize us not living nearby.**


Things That Immediately Destroy the Plan*
> Divorce/separation
> Change in housing situation
> Having children
> Disability/costly health issues

**In fact, when I asked for permission to marry SO, MIL jokingly encouraged us not to move to Nashville/out of state.

Threshkin

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #27 on: December 02, 2019, 10:07:31 PM »
Super skinny FIRE was too scary for me.  I spent time poor in my youth and didn't like it.  (Poor as in several of us living together in run down houses burning scavenged trash pallet wood for heat in the winter because the gas and electric were off for non-payment kind of poor.)

This gave me a strong respect for the value of having money.  I said to myself "No way will I live like this again."  I completed school, got a job and focused on building a career and on saving money.  I FIREd 3+ years ago now on a fairly skinny budget and a healthy stash. 

Keep in mind that in a big depression many of those fall back jobs will not exist and that there will be a lot of people competing for those few remaining jobs. 

Back up plans look easy when the economy is good.  But if the SHTF those plans may not be worth squat.

Linea_Norway

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #28 on: December 03, 2019, 01:30:34 AM »
Having a disability insurance is often smart, if you expect to do some work in the future.
My jobs have always had such an insurance for me, which would typically pay out 200-300K $ in case of full disability. That helps a bit in case it happens.

Much Fishing to Do

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #29 on: December 03, 2019, 05:24:33 AM »
I know you said you were not counting in SS, and in general that seems right to me because of how far away it is for you.  But one thing I always think when I hear about those FIREing with extremely low expenses is you have gotten rid of longevity risk b/c SS taken at some age will likely cover all your planned expenses, even if its dampened by a short working career and even cuts, so really you just need your stache to make it to the point in the 62-70 range that meets those expenses and then SS will cover from there forward

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #30 on: December 03, 2019, 09:49:31 AM »
Key Takeaways Thus Far
> Most responses have been encouraging while a few have err'd on the side of caution.
> Over half of you think my plan is workable, especially if I work part-time in FIRE and allow the nest egg to keep growing
> There are some obvious caveats*
> I'm sexy and young enough to go back to work if needed...even 10 years down the road I'd be in my early 40's.
> Since I'm happy with my current job situation, there's no urgency/need to quit so sticking around above and beyond my NW goal is advantageous
> Don't count chickens before they hatch, but I'm also not going to change my numbers/projections for housing costs until we're actually in a situation where we have to/choose to move or rent goes up. This is MIL's youngest daughter leaving the nest for the first time and choosing to still live nearby her mother -- unlike her other two daughters. Proximity is paramount to MIL, so I have a hard time believing MIL would ever do anything that would jeopardize us not living nearby.**


Things That Immediately Destroy the Plan*
> Divorce/separation
> Change in housing situation
> Having children
> Disability/costly health issues

**In fact, when I asked for permission to marry SO, MIL jokingly encouraged us not to move to Nashville/out of state.
It sounds like you've thought out most potential problems and have solutions if SHTF. Bad things do happen and recognizing the different potential problems and financial ramifications before pulling the cord allows you to better prepare financially for the long haul. I had several things on your list hit me since FIREing (divorce, great recession, a disability that took away a lot of job choices, housing market crash, passive income that would not have kept up with my HCOLA rentals if I rented, etc) that didn't hit me too hard because I was set up well before hand to ride them out. I was also in my late 30s and early 40s so more flexible then I would have been if things had happened in old age. The outcome might be very different.

Even young people, like Gwen from Fiery Millenials who planned to Coast FIRE and did an awesome job of saving a lot by her mid 20s, having a rental property, cheap shared housing with her BF, and a side gig, crashed and burned a bit when her relationship end and she had big problems with her rental. She ended up moving back in with her parents and going back to work full time to amass a larger stash.
« Last Edit: December 03, 2019, 09:51:44 AM by spartana »

Cassie

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #31 on: December 03, 2019, 10:03:08 AM »
I wouldnít count on SS to be enough to live on especially at age 62.

jim555

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #32 on: December 03, 2019, 05:19:47 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.

spartana

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #33 on: December 03, 2019, 05:46:16 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.
I think it's 10 years but in either case something to consider if FIREing young with no plans to earn anything that pays into SS. That also applies to people with jobs that don t pay into SS but a gov pension instead (now most public agencies require you to pay into both). 

nexus

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #34 on: December 03, 2019, 05:54:51 PM »
Threshkin
Congrats on 3 awesome years of freedom thus far!

True about jobs being harder to come by in a depression. Worst case, I couldn't find a job, had to pull more money out than I wanted to, and ended up with a hole in my 'stache. While depressions obviously suck, they haven't lasted forever thus far. Even if it cut my NW by 50%, I'd still have 12.5 years worth of expenses to live off and that's assuming that I didn't teach any tennis or string any rackets during that entire time, and that my SO was being a total ***** and not willing to offer any support which would basically be hurting herself in the process. There's nothing that says I couldn't wait until things recovered before re-entering the work force. It wouldn't be ideal because the more efficient route would be to find a job during a down time to keep from touching the 'stache, but it's still an option.

Ooooo! Let's say there was a depression & I ended up getting divorced and since SO's family owns our current place I'm the one that has to relocate, potentially losing all of my local tennis clients in the process. I think that would be the kiss of death. I'd have to couch surf, live out of my car, or worse -- move back home, until I got a job and could show proof of income. I hear it's kind of complicated to buy or rent when all you have is investment income. That being said, even then the window for SHTF isn't all that wide, given my general plan.

Can we also agree that if most folks survive the first decade of FIRE (by sticking to their plan and the 4% rule), after that they'll probably have a larger 'stache than they need which creates even more safety? The first 2+ years of FIRE I'll have enough cash to not have to withdraw anything*, plus an emergency fund.

Linea_Norway
My corporate job right now definitely has disability insurance. If I take my side hustle to the next level it would include a teaching certification with annual dues. I believe the dues protect me if a client gets injured during a lesson and tries to seek damages. I'd have to work for a club to receive any sort of disability insurance for myself as an instructor.

Much Fishing To Do
If SS happens, it'll be an unexpected surprise. My lifetime earnings will probably be around $1MM by the time I jump ship and I'll probably have worked 15 of the 35 years needed for the calculations. That being said, I really didn't start earning decent money until 2015. SS calculations are still mystical mumbo jumbo to me right now -- just because I haven't spent the time running my personal numbers myself.

Spartana
Ouch, sorry to hear. I'm glad you were able to make it through all of that and come out the other end in tact! We definitely can't be prepared for all the things all the time. I lost my dad in 2012. He was 52 and I was a month out of college. Having been so focused on school, getting over a breakup, and trying to find a job I really wasn't very present for my family so it was quite the shock. I look at life kind of like it's too short (for some unfortunate folks and nobody knows), and I'd rather devise a plan, FIRE earlier rather than later, and just work on being present for the folks I care about and love. There's no point in working your ass off, then not being around to enjoy any of it. And, because we were poor, he didn't leave anything behind (other than his kids). Just an entire existence of hard work and not getting ahead snuffed out.

*Probably longer than 2 years if I work part-time right after leaving firehose of cash job.

jim555

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Re: FIRE'd Folks: Retiring on a Small 'Stache?
« Reply #35 on: December 03, 2019, 06:37:48 PM »
Just an add: Once you are out of work 5 years Social Security Disability will not cover you for a new disabling condition.
I think it's 10 years but in either case something to consider if FIREing young with no plans to earn anything that pays into SS. That also applies to people with jobs that don t pay into SS but a gov pension instead (now most public agencies require you to pay into both).
It is worked 5 of the last 10 years (in quarters).  Thanks for the correction.