Freedom 45: The math behind my retirement plan

I had read this story a few years back and just found an update

Initial story

Freedom 45

 

Freedom 42: My retirement math was wrong

 

Retired at 39

 

A man at 39 who plays dungeon and dragons....and making his own wine. And he is married. For now.

$30,000 a year doesnt buy anything close to what it bought in 2020. And I am not referring to loo paper. I do wonder what he will do in early retirement. Not travel. Maybe just visit childrens toy stores ? Rising energy costs in canada are worse than here. 50-100% increases ?

 

He now has the freedom to spend his days worrying about how the save the next 35 cents.

He may even buy a used alternator and connect it to a stationary bike and generate his own electricity and save on gym fees at the same time!

Or , as usual half of the real story is missing.

 

What's his annual expense to financial assets ratio when he RE'd?
Is he doing the 4% thing?

 

@Piston_Broke I think you will enjoy this recent anti-FIRE blog post.

The FIRE Movement

Jared Dillian certainly has a way with words.

 

I agree, most of the fire crowd are commie hippies happy to live squallid lives and be miserable.
And like most commies they hate work, wealth and consumption.
The blog for money, and when it stops they stop too. Which is why most blogs are dead.

I don't agree with a lot else he says though. Ha made lots of money as a bank trader on a good run, enough to retire, then when markets changed he got fired.
And started being a writer.

I too retired and now spend most days lounging on my yacht

 

That pretty well sums up what I think of the FIRE movement .

I’ve just retired at 65 which was earlier than I planned . I enjoyed my job until COVID came along and that sucked the life out of it for me , so a job I enjoyed became one I didn’t .

choices

? Therapy ( but it wasn’t “ my problem “ so why should I do that when I can just walk away from it all )

New job ? Part of the reason I liked it was I like most of the people I worked with were nice and sensible .

Retire early ( well , 65 …) . I knew it would take a while to adjust because I’ve seen lots of people do it . You need things you want to do . The older you get , the harder it is to adjust to retirement . My father retired at 80 . He loved his job and he never really adjusted as he didn’t have hobbies and didn’t have a group of “ mates “ to do things with .

Gradually adjusting . Starting to get into the flow of what I want to do . The first thing is taking a slightly slower pace . For me , getting organised is important . It’s so easy to have things to do but because there’s no time table , it’s easy to get to the end of the day and find you haven’t done all the things you wanted to do ( or you forgot that you wanted to do xyz ) .

Retiring at 35 with an income of 30-40 k … wtf .

That’s what we’re planing on having as a monthly income …

cheers

cliff

 

I have too many things I want to do/see/achieve outside of corporate life to work until 65. FIRE plan at full steam ahead. Aiming for FIRE around 45 +/- 5 years depending on markets etc.*

Many paint FIRE as this black-and-white all-or-nothing thing:

It's almost as if the 'middle ground' never occurred to them. It is so strange.

One FIRE size doesn't fit all.

I am not prepared to wait until my body starts deteriorating in my sixties to start really living my best life. Freedom for me means doing things when the masses aren't, doing things unencumbered from health issues, doing things slowly, and doing things at a tempo and time that suits me, not the three-week once-a-year annual holiday that was approved by corporate 4 months in advance.

I intend to retire with enough for a balanced lifestyle, comfortable home, complete freedom to pursue interests, holidays, no penny pinching but equally no extravagance like first-class flights or dom perignon for brekky.* Sure I could work longer so I can have more extravagance but I don't value this, and the price I would pay (in good years of my life spent working) is too high for me. *I acknowledge a certain level of privilege and environmental factors have helped make this attitude and perspective possible. While there is no inheritance for me, not everyone in this world is so fortunate to have the opportunities I, and many Aussies have.

Comments like "The is the ****ing stupidest thing I have ever heard of in my life" really make the author of the article linked above come across as unintelligent. He is so closed-minded, that he uses his one-dimensional definition of FIRE to dismiss the entire movement/philosophy.

All-or-nothing thinking on any topic is a cancer IMO.

 

Indeed, funny read and all but the writer seems prejudiced against the FIRE movement which I don't think he actually understands.
He sounds like your average material consumer who think the next shiny thing will make him happy and also shows some terrible ignorance for his age ...

Would love to see Dave Gow's reply to this!

 

I am sure the article is only intended to garner clicks but this quote is so sad...

" This is a fact: material things bring us happiness. It is good and right and a joyful thing to see a fancy new jacket in a store, try it on, look in the mirror, whip out your credit card, wear it out of the store, and show it off to all your friends."

Sorry mate I don't get validation or a sense of progress and achievement from a jacket.

I semi agree with this point

"They had visions of going to the beach, traveling, or visiting the grandkids, and instead they spend their days in the living room with the brown carpet with Fox News turned up to 11"

But I think that is because they were boring job focused losers during their working life who never cultivated their own hobbies or aspirations. They barely got past stage two of Maslow's hierarchy of needs so when it came time to retire they never really knew who they were without the structure that society and work imposed on them.

 

Problem with FIRE is if it doesn’t work out for you , it’s hard to go back and redo things .

In the 25 years on the forum I’ve seen people claim on line that they’ve retired . Actually they hadn’t , they left their job and then “ worked “ doing other things . I have no problems with them doing that , but that’s not what they appeared to claim they were doing . It may well be that they enjoyed the other things more but …

Having worked as a GP for close to 40 years , and seeing the real life experience of an extensive group of friends and acquaintances , I’ve seen the financial fragility of a normal retirement with multiple people . I can’t think of one person ( with normal expectations eg around 80-100 k ) who financial and
Lifestyle expectations in retirement were met . Seems to be an ongoing round of tweaks , reviews and restrictions . Eg we have a group of 8 friends and maybe once every 6 weeks we get together and go out to dinner . One couple no longer come .

We know some people ( very high net worth ) who are having a very nice retirement .

I’ve also seen first hand the fragility of “ financial projections “ . Some one who retires at 40 may well be going ok at 45 and are able to write a book / set up a book on how to retire at 40 , but I won’t like to bet on how they’re going at 65 , unless they’ve made a killing on the seminar circuit ( oh , but isn’t that working …)

To me this is just an alternative tweak on Steve Navra’s living on equity pitch with variations , and for those long term members we remember how that played out .

I’d have a guess and say the originators and promoters of the FIRE movement are doing very well out of it ….

Cheers

cliff

 

Reflecting on this further

My issue is “ the maths behind ….”

I’ve been around long enough to know that the real world doesn’t give a ….. about the maths …,

cheers

cliff

 

I don't disagree with this but similarly people retire and expect to live out their golden years only to be struck down with health problems etc. There is a fine balance and you sound like you have had great satisfaction from work which is commendable. I actually quite enjoy my job as well as it involves directly helping people but given the choice there is other stuff I would rather be doing. Maybe I would work two days a week and have the other 5 off, like a reverse weekend. I could live with that.

 

Nice post Cliff. Being a GP for so long should give you a good insight into the trade off between years left to enjoy and someone's financial resources to enjoy them.

I can also remember the old LOE / Navra threads and acknowledge the similarities to the FIRE debate. Of course, plenty of FIRE people openly state they still work - the idea being that they can now afford to work at a job they like, rather than always targeting a job that pays well, regardless of whether they enjoy it.

I would argue that targeting a job that you enjoy and still pays well should be the real goal. Why not have both hey? Some seem to have unnecessarily excluded this possibility.

All the same, even if I enjoy my job, it's not my life. My bucket list entails hiking the world's great trails and quite a few of the minor ones, once the kids have finished high school. I need both time and considerable physical ability / endurance to achieve this. Not a hugely expensive pasttime compared to many alternatives but still, at some point the hiking will have to end / taper off and we will be increasingly reliant on more expensive forms of living / travelling and then care. So I agree the financial picture for the rest of our lives still needs a lot of resources to retire well.

In my mind, I was thinking a net worth around eight figures would be sufficient to realistically achieve this, with a PPOR being about a quarter of this, which means a decent one in Perth (for now at least). I'm interested if that aligns with your thoughts on what should be a realistic target, albeit still knowing that you've targeted more?

 

Do you really need a net worth of at least $10m in order to retire? If you take $2.5m for PPOR and $7.5m for investible assets, those assets will generate $300k at 4% drawdown... and your capital will likely continue to grow.

 

That's the question. Cliff's lived experience suggests that may or may not be the case because otherwise retirement can get boring, given it can last a long time. Retirement planning often assumes you can lower your expenses in retirement as now you have more time to do things yourself. That may well be true but what if you don't want to retire just so you can paint the house yourself, when you can work at a more interesting job and pay a painter instead. For a free and interesting retirement, maybe it really takes (a lot?) more income than what you need when working?

I know I can spend a lot more on holiday than when I'm working. What if I want my retirement to be my version of a long holiday?

Anyway, your example sounds good in theory but in practice those assets are mainly properties and aren't generating that income now. To get to that position requires selling, paying CGT and transferring into assets that do pay well or can be drawn down as you suggest into a linear income stream. So a lot of that net worth goes up in smoke. Taxed to transfer into a fund / shares and then taxed again on the way out to use for income. Even with trusts and the best exit planning to soften the blow...

It's hard to watch your net worth drop like that after so long building it up. I've seen people have to spend their retirement on a limited budget - I would rather keep working than experience that. There may also be a future need to help out adult children or grandchildren with health issues etc. Having experienced something along that line, it's not an academic question...

 

That's where we're at . Given we didn't start investing until we passed our 40th , we're happy with where we've go to . Our PPOR is around 3.5 . The thing that has changed in the last years is getting involved with NDIS(P) and that has lifted our income significantly , to a level we hadn't anticipated a few years ago .

Cheers

Cliff

 

No , you don't need $10 mill , but do any of the Billionaires around " need " the money they've got ?

Had no expectations of getting to that point when we started investing 25 years ago , but it sort of just snow balls and when you keep on picking the right markets , it just seemed to happen while we were doing jobs we liked and were living a life that wasn't over the top extravagant , though that might change . We've lived a life where we have watched our money alot closer than most of the people we know .

Camping holidays ( great fun - the best ones are the ones where you get flooded and find frogs under the tent ) . One week skiing a year . No regular OS holidays .

We've also spent ALOT of time over the last 25 years working out how to invest in a smart way that's got us to where we are . That's the difference

Now , it depends on what you want to do with your life . We have choices . Sydney's a hard market to get into and we have three kids .

We sold a weekender so I could retire at 65 . Wouldn't mind buying another weekender once we've finished travelling . That will cost a bit though if we can get there .

We want to spend time travelling , and we're not planning on doing that on a shoe string and with the way travel cost have gone up post covid .

My parents lived to 98 and 93 , my wife's parents just short of 90 so we expectations of a long life ( though you never know ..) and we want to pick a nice nursing home , though by the time we get there , we'll probably need our income to pay for it ...

Cheers

Cliff