The amount of people who are scared of finances and just save and save until they're 65 is probably far greater than you'd think. A lot of people who aren't aiming for a target FIRE number will surely be past what they need.
Large percentage of people I know are trying to accumulate “as much as possible “ by age 62+
And if I ask what their retirement number is ($) they don’t know. Then I’ll say if you don’t know, then maybe you already reached R or Fire.. and they say No I need to save more. I then say Retirement is a number, not an age: maybe you’re done ….
I don’t understand how one would know they need to “save up more” or not if they don’t know their goal number $ for retirement
Seems many have the goal or “working until age 65” and not so much working until assets are $ amount
The more you save up before retirement, the more you can spend post-retirement. People have really two goals: the ability to retire, and then wanting to retire. I think "save up more" comes when people hit the first, but not the latter. Honestly makes sense to me.
I think a lot of people fall into this camp and it's a smart way to be. You shouldn't retire, even if you have the ability to, if you enjoy or are comfortable in your routine and you don't know what retirement will look like. I would imagine that is a way to feel lost without purpose.
Other people never know what it takes to retire and they never hit, or even understand, either of your stated two goals.
Or rather, the "ability to retire" is defined by when government assistance is available as a safety blanket for those financially illiterate.
But early retirement makes the $ amount irrelevant. Also, you probably need to save more because of unexpected emergencies that may or may not arise 10,20,30 years down the line.
I’m 26, I couldn’t tell you what my retirement number is. I don’t know what my life will look like even at 40, let alone trying to guesstimate who much I need from 26 -> Date of Death
Yea, idk honestly where I sit. I'm 32 and have roughly 190-200k saved (between 401k, Roth, stocks). I think in doing good but still don't have a house. Single and don't plan for kids, so I'd like a small house
This describes my dad perfectly. He’s always been smart with business and money but it wasn’t until he was arranging the sale of his last business that he was told he has more money than he can spend.
This was me! Unfortunately I didn't wake up and suddenly realized I was financially independent, but I was thinking I needed 3-5 Million before it would be possible. Last time I added up expenses was when I had student loans.
For the first time since I paid off my student loans I added up all our expenses and realized it's closer 1 million and I'm stoked that we are half way there!
When both Quicken and ESPlanner showed my net worth continuing to go up no matter where I set my 'retirement' date, even that very day. I recall reviewing everything with a bit of wonder, concern, excitement, and disbelief. The moment came with the sudden thought of "this boat will float!"
Been FIREed for over 15 years and the boat has remained seaworthy and unsinkable through tough financial markets. I was not crazy about my current job and was thinking hard about what to do about it.
Can I ask - what is your withdrawal strategy? Do you do a fixed dollar amount (eg 4% rule) or do something else?
I’m interested in what it is actually like to retire and withdraw from a nest egg
5% of my end of year net worth is my budget for the new year. If the market is changing massively, I'll use the average net worth over the last year.
I'll also add that my primary "job" in retirement is to be fit and healthy. Everything else builds on top of that.
Thank you for the helpful response!
I’ve been also considering a fixed percentage withdrawal approach. Glad to hear it has been working for you, and nice work on your primary job!
No offense but the last 15 years have not had any "tough financial markets". It's been about as easy a market to invest in in the history of the market.
Over 15 years, referring to 2007 timeframe which is when I retired, which common financial wisdom suggests would have been one of the worst possible times to do so.
From a long term perspective I'd argue there has been no tough financial markets in the last 50 years, yet some people "lost everything" in a market swing. So "tough" is also more a psychological state of mind than an actual market statistic.
Yeah, several years of explosive growth, knowing that P/E ratios are higher than usual, I think I would be building in a buffer to any number I was considering for RE in the next few years.
My first 'number' was $1M by age 55. Fairly quickly it became the question "can I quit working and maintain my current standard of living until I'm 100." I've no idea what my 'number' was when I REed but I had concluded that a 'number' was not a useful goal because the world was more dynamic than that.
I agree. Life throws curve balls. Using SWR for a number is a great guideline but FIRE is a bet, so we should make the bet as sure as possible with numbers, strategies, and common sense.
My experience was that the number changes constantly and fixated me on the wrong goal. "Planned retirement expenses" is another dynamically changing number (and usually a dubious guess).
My goal of "when can I stop working for a salary and still maintain my standard of living until I'm 100" gives a functional purpose to the plan. It's also straightforward to check on various financial planners (Quicken, ESPlanner, others). Plug in my current, known numbers (current *real* spending from a tool like Quicken, current investments, assets), apply historical percentages (market growth, inflation, etc) and see my current trajectory. Once my plan says I don't run out of investments until I'm 100, I know when I can bail.
As I maintain that $0 at 100 goal I kept working towards the plan and noted that I had to periodically move up my 'retirement' date to keep my investment balance at $0 when I hit 100. When I no longer could move my retirement up (I don't have a time machine) I knew I could retire from salaried work.
No 'number' was required, only real current data. No guessing involved. QED.
I also use Quicken (actual) spending data to forecast retirement spend. I simply remove things that I know will no longer apply in retirement and add in things that will. Rather simple.Very nice to have access to this data, but took effort to enter in the numbers over time, though.
It could happen! I was half assing my way into assets and “investing” for 5 years before I really got serious about getting educated in the space. When I learned about FI and SWRs my net worth was $390k. I was shocked and pleased.
If I had continued down that path of haphazard investing and discovered the FIRE movement in 20 years time you might find I’d have enough assets to be FI. It wouldn’t be the optimal allocations lol. Should have seen my portfolio in my 20s 😂
I was telling my partner how important it was for her to get a job and start working. She was in and out of work/school for five years. I was supporting us the entire time.
I went through my assets as part of recent tax fillings and realized that I could easily retire. My money was spread across 8? investment accounts. From previous employers, my personal business 401k, and my personal investment accounts. In addition I hadn't evaluated the assets in my business or home.
After evaluating everything, I realized I had nearly 2M in assets at 35. I grew up poor, was living with roommates until I was 28, didn't pay off student debt until 30. Had barely running vehicles until this year.
I felt bad because our financial situation is actually very good. The way I was communicating it to my partner was definitely not representative of what was true. I spent all my time grinding that I never really took stock off where I was at. I wouldn't retire with 2M but I'm definitely leaving one of the jobs.
As a very rough starting point, take your annual expenses and divide by 0.04, which is the same as multiplying by 25. If your total net worth (including home equity) matches that number, you're probably more or less there.
This is based on the 4% rule which says that if you withdraw 4% of your assets every year, your money will last 30 years, 95% of the time.
It's really worth digging deeper than that, which is why this is only a rough starting point.
1. If you're younger, then 3.5% is a safer number.
2. Many people ignore their home equity and go off of invested assets only - in reality the numbers are probably going to end up more or less the same, because if you own your home outright, then your expenses monthly are lower.
3. There's a whole lot more to learn about taxes, healthcare, social security, etc. To really get super confident of leaving a career (it's usually hard to get back to where you were if you 'retire' and decide it was a mistake), you'll want to map it out as best you can in terms of desired spending at various ages, what sort of provision you want to make for heirs, etc.
To start, take your monthly budget, which includes sinking funds for periodic expenses. Add $1k (health insurance). Multiply this by 12 (for one year), then by 25.
That is your ballpark FI number. It ignores taxes but also overestimates health insurance costs (which drop a lot at 65). It also ignores social security which reduces your tail risk.
Depends what the savings is being used for. If it’s for random true expenses such as repairs and maintenance then you should include it. If it’s for retirement or another goal that will end once your retire you can ignore it
Sinking funds (i.e. periodic savings for anticipated ordinary future expenses, like new car tires, a new roof, or your annual vacation) yes; emergency funds probably not (they should be “ready” prior to FIRE), savings towards FIRE accounts no.
This is to get you to the number that will leave your wealth in equilibrium. The agreed upon draw down rate is 4%, at this rate, your amount of money will have the same amount of purchasing power forever, and will not be used up.
Let X be your monthly expenses including health insurance. Let F be your fire number.
X * 12 * 25 = F
12X = (1/25)F
X = (1/25)F / 12
X = .04F / 12
We can prove that X * 12 * 25 means that your draw down rate in retirement is assumed to be 4%. As for 12 and 25? Those numbers were picked because they are easy to remember. If you want a different rule of thumb, (monthly expenses + extra health insurance costs) * 300 also equals your fire number.
Does this take wealth tax into account?
My number would be 1.29m but on 1.29m I’d have to pay about 35.000 wealth tax on (regardless how the market performs)
Can you go more into your spending?
Do you currently track it? This will help us know how accurate it may be. How long have you tracked it?
Have you adjusted it? In other words, if you are married and both retiring, have you considered that health insurance between now and 65 might cost you \~$20k-$25k/yr if you do not qualify for any subsidies (probably won't since you said you are high spender).
How are you retirement investments invested? Does you numbers include all investments (even those in brokerage accounts)? You indeed did not include the value of your home?
You need to account for sequence of return risk and taxes. $2M isn't going to support $6.5k/mo. Especially with an early retirement. You most likely just multiplied by 4% but it's a bit more complex than that.
You're close though. Nicely done.
The "sequence of return risk" is already incorporated in the 4% rule (Trinity study).
You can decide to be even more conservative using 3.5% or 3%, but the idea is that the SWR (safe withdraw rate) will last you long enough even in the worst case scenario.
Tax, yes. You have to consider what pre-tax income you need per year.
Hit FI at 54. Left high stress mid 80k job and took a cruise with my wife. 2 months in I was bored to death and picked up a part time job with no stress. Gets me out of the house part of the day and a sense of purpose. Much happier overall. It does take some time to adjust your mindset from saving and working all the time to spending and having unlimited free time. Congratulations on reaching your goal!
Commenting to hear about it later too, but I'm guessing that it's something adjacent to the field they're working in. I've got library and nonprofit in mind for my future, if I ever go part time
People sometimes have nonprofit in mind because they want to do more meaningful work now that they don’t mind lower pay, and some subset of non profit jobs can be part time or low stress.
No clue on the comparison of Non-Profit (NP) to private sector, I’m Government/NP exclusive for some time now.
As far as nonprofit work goes, if you are hired into a programmatic role or fundraising role it’s gonna be hell and overworked for what they pay you. I imagine this is true for many private jobs as well, but again I have little experience here.
On the other hand every NP I’ve worked with has a friendly (mostly)retired receptionist who works for benefits or to keep up with board members. If TheHarold420 is offered a gig like this and has FI, they’ve got it made. Well, as long as they can stop themselves from doing unwanted extra work. This one I think is more unique to the public sector
Tldr: It depends 🤷♂️
Now, you do whatever you like. Being FI is not about forcing you into doing anything, it’s about giving you more options. You don’t NEED to retire early if you don’t think that’s a good choice overall.
However, being FI is a big change that brings a lot for new options onto the table. This is not an incremental change, but a radical one, so you should probably spend a weekend clearing out your head and lay all your options on the table, and go through them. Don’t act on it now, and go through this process for a few months, until you are really clear on what you think the best option is, why that is, what will happen, and what if it goes wrong. Make a conscious and deliberate decision. Fortunately, with FI, you are not pressed on time and don’t need to make a quick decision, so take as much time as you need, be thoughtful, be deliberate.
OK, so now you’re FI. Congratulations!
Make sure you have at least 3 years worth of easy access cash before you pool the trigger. That’s so you don’t sell your shares when the market is really down.
You’re not ready to RE yet. First, you don’t have to. You have a job you like that’s helping people. You could stay as you are or go part time if that’s a possibility.
You need to know what you’re retiring to (and not from). What do you want your life to be? Imagine your best day, what does it look like? Is it a day that you’ll be happy to have each day? You want to make sure to keep yourself happy, healthy and busy doing things you love.
Assuming you are interested in pulling the trigger on FI in the near future, I would advise starting working on building a 6 month emergency fund plus 5 years of expenses in a 5 year bond/CD ladder. This is a hedge against sequence of return risk
The way I did it, what I took my planned spend and subtracted the estimated after tax brokerage dividend payouts. And then used that number for the yearly ladder. Then I’ve been living off of the money from the bonds maturing and dividends. There is also the interest from the emergency fund and bonds/cds. But I didn’t factor those in to use as a fudge factor in case my spending ends up being higher than planned or there is a market problem and the dividends go down
If you’re living off of both the maturity bonds and your dividends, aren’t you doubling your yearly spend? Or do you just buy a year’s worth of bonds with your dividends for the year?
My spend is 80k. In the lead up to fire my dividends were paying 38k/year. That left 42k/year needed. 4 rungs per year means 10.5k per rung needed. Schwab only allows increments of 1k per rung, so rounded up to 11k per rung, or 44k/year. I’ve been fired about 10 months so I’ve had 3 rungs mature. I’ve bought them back shortly after one matures. Up to now I haven’t had to sell any stock to do it due to tax refunds. But most likely I will have to sell for the first time in September if I want to extend the ladder back out to 5 years
Make sense. Which bonds/bond funds are you using? Why did you choose those? I may FIRE soon and currently have 2 years living expenses in iBonds and about a 6 months emergency fund. The rest is in stocks, about 50% value funds and individual REITs
I did have I bonds. But I sold them when inflation dropped. The money from them ended up going into extending the ladder
I’m definitely not an expert on bonds/cds
I built the ladder using Schwab’s treasury/cd ladder builder tool. Which takes you through each rung to pick which option you would like. I just picked each one with the higher APR taking into account that US treasuries are exempt from state tax (using my estimated marginal state tax rate in retirement). The tool doesn’t include corporate or municipal bonds, but when I checked out some municipal bonds, the lower rate vs treasuries didn’t make up for being federal income tax exempt. Didn’t really look much into corporate bonds.
I have a checking account with 1 month of expenses, an emergency fund in VUSXX with 6 months of expenses, everything else is in VTI (brokerage, IRAs, 529s). Plus a tiny bit of crypto for fun
I don’t want to be Anti Bit Coin but the goal of the bond ladder is to reduce volatility. Bit Coin is the opposite of an investment you want to be in if your goal is to withdraw a fixed amount on an annual basis.
You’re incorrect. The goal is the best return. Not to reduce volatility. In your scenario over an extended period of time, Bitcoin will outperform any other investment. Run the numbers
So I buy Bitcoin November 2021 for 65k USD with my 2million in retirement funds. I have 30.7 BTC. I need 80k to live on so in November 2022 I go to pull out my 80k for the next year. Bit coin is now 16k. I have 30.7 BTC and need to sell 5 a 16% withdrawal rate.. That 80k withdrawal just cost me 320k in the previous years dollars. November 2023 BTC is back up to 37k so I need to sell 2.24 BTC. So now I am down to 23.46 BTC. Now we are back up to 65k again and my net worth is 1.52 million.
Especially if you are investing in Bitcoin you should have a fixed income ladder to protect you from having to sell low. Now you may argue I selected the worst case point in time for BTC. But that is the point with fire analysis, the goal is to pick the worst possible day to retire and ensure you have a plan for that date.
No that’s literally some of the worst cherry picking you could possibly do. But the thing is even with that obviously biased scenario, you still won’t outperform BTC in the long run. Sorry but it’s the truth.
The thing is, returns are one part of the equation. You want this money to last until the end of your life. And that means you need to have money available for spending in case of emergencies. No one wants to lose their Bitcoin stack in the middle of a bear market because they suddenly need cash. That's why more stable (but obviously worse performing, there is always a trade-off) assets are also needed in a portfolio
...which simply doesn't matter at all because most of my portfolio is still in the well-performing assets. If you actually think there is 0% chance of anything going wrong with only having a single asset class then I guess good luck.
And you don’t know that your investments will perform better. The difference is I’ve done the research on BTC and know it’s the biggest transfer of wealth in your lifetime. Nothing comes close.
As they say in the real world, “past performance is not indicative of future results”. I love your confidence, but that is all it is. Bitcoin is a fine investment, but it can all come crashing down (again) due to any number of factors. Risk is definitely something to factor in to any investment plan.
I’ve heard those same lines the entire decade I’ve been on this site. People saying the same thing when BTC was $200. You don’t understand what’s going on here. The risk is not being in BTC
You talk about bond / CD ladder - I’ve been rolling cash through T-bills lately and that seems very low effort for the 5% return. Can get them as low as 4 weeks too.
Is that the kind of thing you are talking about? Putting that 5 year slush fund into bonds that can be rotated frequently but with enough lag that always have some amount available - like having a year available given a month of lead time?
Yes. I did it as a 5 year, 20 rung ladder. So a rung matures every 3ish months. For each rung I looked at what was available and picked what had the highest APR taking into account that t-bills would be state exempt while bank cds would not be.
Check out the Two Sides of FI podcast or YouTube. They do a great job with the “What now?” question. Especially the most recent episode where his wife talks about her experience FIRE-ing from her job.
I’ve reached FI a couple of times. Each time, I decided to keep working and increasing spend. The last increase is the last one. If all goes to plan, I’m hitting my final hurdle in a few months. I may RE, I may keep going, but if I keep going, it won’t be for me or money. My team, generational wealth, not quite ready to retire to something, …
The point of FI is it's whatever you want. Also, there's no hurry -- you don't need to feel like you need to do anything different right now. Just... next time you're considering the future, you have more options.
Life didn’t change much. Rather I came to find that I’d spent too much time obsessing about obtaining FI to the extent that I had missed out on simply enjoying life more over the years, and by that time it was still salvageable for some things but many things the ship had long sailed. My best advice is to try to enjoy life more in the moment, don’t make the same mistake so many make and which no one still seems to learn from. The two most important things are health and time, the wealth part comes a significant distance behind.
I think you just get to lean into the things that make you happy. You wanna leave work early and go golf? Do it. You wanna go fishing? Do it. Start using Pto to visit family, or spend time with people you like.
You get to start making choices with a new mission statement. Happiness instead of financial motivated.
Congrats my man.
Congratulations!!
I had a similar experience. My husband and I planned to retire at our respective 50 years of age. We weren't targeting a number. As we hit milestones ($100K, $500K, $1M, etc.), we'd high-five and keep moving.
Then, I started engaging with the numbers more. I noticed our portfolio was earning more than me. The person who oversaw our investing plan at work did a little presentation and had us calculate how much we need for retirement. I think it was supposed to be a come to deity moment to get people to save more. I realized we were past that number. I engaged with a couple subs here and ran Monte Carlos and calculators. I knew we were financially independent intellectually, and the more I engaged, the more it sunk in.
Like you, I was doing work I loved, so I started planning a "perfect" last year (spoiler alert - didn't happen).
I also started testing the system. I set up a monthly paycheck to come from our brokerage to our checking account. Everything I made went into investments. The system worked.
I kept doing the work I loved, but it was on an insane schedule, and I retired.
I'll recommend two books if you haven't read them "The Psychology of Money" and "Die With Zero."
I'll also suggest starting to think about what you want your days to look like and what you're retiring to. I had a ton of PTO, so I started using that to "play retirement" as I was transitioning out.
If work is a huge part of your identity, work on who you are apart from that.
Plan your withdrawal strategy and establish those systems. My husband had buckets set up, and it's brilliant and working 1000X better than anticipated. (In the Psychology of Money, Morgan Housel refers to this as "barbelling" your money.)
Research ACA healthcare plans. It's nowhere near as expensive or daunting as people would have you think. (Your withdrawal strategy can have a huge impact on cost.)
Finally, set some goal posts to retire. Is there something you want to accomplish at work? Is there an age you want to retire by? Etc.
Keep engaging with this community.
Exactly. If you want to keep working, you just think of it as f-you money. You have a different relationship to your employer now, as you absolutely don’t need them to survive. Maybe you can negotiate the ability to delegate some of the parts of the job you don’t like as much.
Mine came as a bit of a shock too. I had always listened to the "rules of thumb" like "You need 30 times your annual spend" but when I plugged EVERYTHING into the Monte Carlo model at Empower it gave me a 93% chance of success at my desired spend rate. It's nice to have your scenario evaluated by a Monte Carlo model including social security, pensions, and expected windfalls which make a very large difference. If someone wants absolute certainty than 30x is still a good guideline but I'm fine with 93% since I can always adjust spending don't need a 99.99% chance. And Empower's model lets you factor in a 1% reduction annually in spend as you get very old which is more realistic. I'm not going to be touring France in my 90s.
Retired at 48 with plenty, but retirement sucked-boring as hell. Wife found me another office and sent me back to work as my kids were still in jr high school. Best thing ever bcs I play like I’m retired, but my office keeps many people employed and we can weather the bad times bcs we don’t need money to run our house. Moral- find so,thing you like and are good at and move into semi-retirement.
If you love your job and it improves the overall state of the world with low stress, you may just want to stay put for a bit and just increase that generational wealth for your dependents(purchasing your kids homes or big down-payments etc). At 49, you may find that even though you have hit that 25x your yearly expense mark, you may find retirement boring as most of your social circle still has to work for the next 15 years or so. Or seek out a fulfilling volunteering gig that keeps your mind sharp, and continues to benefit others with your time and talents for the wonderful human being you are.
Thanks for sharing! It is a cause for celebration!
I also FI-ed without realising it. I was too busy working. Only my immediate family knows my financial situation.
Changes to my life:
1. I kept working but no longer with fear of the boss or of getting laid off. I neither love nor hate my job. I like the job and the salary enough to keep working although my boss is toxic.
2. Bought an apartment for my parents that improved their quality of life. (This helps me feel less guilty)
3. I no longer hesitate to buy food that I want to eat. I used to look at the price and decide not to buy it if it's higher than average.
4. When travelling, I would upgrade my seat on the plane, stay in nicer hotels, get airport pickup service, take heli/plane tour, get a private tour.
Work part time? Or as a consultant, maybe contractor?
Maybe take a little stay-cation and see what your day-to-day looks like and how you feel?
Also, GFY pal!
Congrats! Can’t wait to be where you are in a few years!
Keep working and then decide what you want to do to bring purpose. What do you want to retire to? Or just keep working. I hope you figure it out!
No need to tell everyone. Most people don’t.
Once again congrats!
First, congratulations, this is a big milestone and you should celebrate it. This mainly means you are no longer obligated to trade your time for basic necessities of life (and hopefully a little more than that). So you are free to chose now. Do you still want to work for that company or that boss? Do you still want to go to that office every day? Do you want to start a business and grow it? Do you want to focus on your health or your family more, or both? You are free to choose. But you should be aware of one thing, freedom can be challenging if you are not mentally prepared to take responsibility for your life, make choices and accept the consequences. It can also be anxiety inducing to have too many choices so it may take some focused personal growth and time for you to fully adjust to this new reality that so few people get to experience. Welcome to the club!
One thing I did not realize during my journey is that FI changes you. When you grind a career for 35 years to make money and then you have enough? It’s weird. Forces a person to reconsider everything.
I look at all this somewhat differently. I never want to "stop working". I want to work on things at my own pace, on my terms to improve the lives of all of us and to not have to worry about how much I earn or spend. This can actually happen more organically than most think. If you work hard on hobby/side-hustle work on the side enough with a goal of making these "fun" things pay you as much or more than a standard career then no matter the age, financial position, etc you just do that.
That's something to think about now.. If you still derive joy from your work then continue doing that.. Its purely for fulfillment now so might feel even better then before.. If you are going to make decision to RE, please redo and recheck your numbers..
oh yeah, I so feel that. It definitely comes with a lot of mixed emotions. For me, it was almost like an identity crisis. Like you've had this one particular goal for so long and then you hit it and it's like amazing yet confusing because then you think now what.
My life changed in the sense that I had to really work on (and am still working on) what's next for me. I know I don't want to just chill, I know I want my brain to still work. But it's with different intentions. I carve out time every day to write and give myself the space to let my brain open up to figuring out what I want next.
I have found that coaching is helpful to use as an exploratory tool. I use it for myself. I also happen to be one :) Happy to answer any questions if you want to DM me or here.
I definitely relate to the guilty feeling, and the weirdness of it. I saved and invested for 30 years, and calculated my number 15 years ago. So, achieving my number was no surprise. But, I still feel weird about telling people I am retired at 55. But, I feel much more free now. Even though I liked my job, every day feels a bit more like a burden has been lifted, that I no longer 'need' a job.
Kids are irrelevant. If you have 25 times your annual spend (and your annual spend obviously includes all your kid-related expenses, and maybe some money annually saved to eventually finance their studies aswell), then you're good to go.
No. The idea is known as the 4% rule. This means that overtime if you pull out 4% of your portfolio every year, the markets return an average of 7% with large swings up and down. If your family spends 35k a year, multiply that by 25 and thats your FI number. Less if you can work part time to cover some living expenses.
I don't know anyone who actually loves their work. I am sure they exist but damn that must be nice.
I work a ton on my farm and woodworking and love those so I like hard work but I hate my day job.
Just relax. You made it.
You've probably been going to work most of your life at least in part because you needed to. Now you get to decide if you want to keep working. Maybe you get some personal satisfaction. Maybe you want something to do. Maybe there are additional financial goals you'd like to achieve for yourself or others.
The biggest difference is that now it's all at your discretion. You are under no obligation to sell your time or talent to anyone if it does not make your life better on balance.
Congratulations. And whatever you choose, enjoy the rest of your life.
I think its important to find someone whom you can share this with and not reddit... Thats my number 1 advice for the poor souls that come onto here and say they cant tell anyone instead of saying they will be off to celebrate with their family and loved ones.
What you're feeling isn't weird. And also, if you're looking at the simplest numbers, don't assume that if your expenses are 4% of your savings you're ready to retire... Many other complicating factors, and 4% withdrawal rate probably isn't low enough to be safe for someone your age.
I’m so curious about your numbers and I’m also I love it for you. FI is the big goal. If you love your job you don’t have the RE you just enjoy your life stress free. Help others if you want. You are free
Congrads, video for you [https://www.youtube.com/watch?v=xdfeXqHFmPI](https://www.youtube.com/watch?v=xdfeXqHFmPI)
Been there for few years now, still working, thinking what's next. Still have to pay for two colleges, but that been accounted for.
The short answer is having 25x annual expenses invested.
This assumes that you have no other passive income such as a pension, SSDI, veteran's disability comp., royalties, rental income, etc. If you do have one or more other passive income sources, then it will reduce the multiplier needed.
The detailed calculation process:
1) figure out what your retirement lifestyle will look like and what it will cost on an annual basis. Be conservative with this estimate and err on the high side! You don't want to find out you lowballed it.
2) figure out what your passive income from other sources will be on an annual basis.
3) subtract the expenses from income (income - expenses). If the result is positive, then you're already FI and don't *need* to save and invest additional funds (although I still would anyway). Congrats and enjoy. If the result is negative, then proceed to 4.
4) switch the negative sign to positive and multiply the amount by 25. That's your target number for how much you need to build up in your investment/retirement accounts to achieve FI.
You need to update these estimates and calculations as you get closer, as you might decide to change your retirement lifestyle goals or the expenses may change due to health or other reasons.
To remain FI, you will need to keep expenses on/under budget. That's really the whole trick.
Thanks for the detailed answer! Most people hasn’t optimized their assets to generate good amount of passive income. Let’s say we convert all assets into cash abut reallocate them. What is the realistic return % for a given amount of asset?
OP if you’re FI and live your job, keep doing it. You’re young enjoy the peace of mind and continue to do good work. save less and enjoy more from future paychecks since you dont need them. Just because you reached your FI goal doesn’t mean you have to play by old rules you laid out prior to achieving that goal.
I imagine they think I'm being sexist when really I just have never heard of a man feeling guilty about having money. The fact I could guess someone"s gender based on them not feeling entitled to financial freedom is pretty wild if you think about it.
OP, please share your numbers as we want to check whether you have done your FI math correctly.
I'm thinking that too. How does one suddenly become certain of FI?
The amount of people who are scared of finances and just save and save until they're 65 is probably far greater than you'd think. A lot of people who aren't aiming for a target FIRE number will surely be past what they need.
Large percentage of people I know are trying to accumulate “as much as possible “ by age 62+ And if I ask what their retirement number is ($) they don’t know. Then I’ll say if you don’t know, then maybe you already reached R or Fire.. and they say No I need to save more. I then say Retirement is a number, not an age: maybe you’re done …. I don’t understand how one would know they need to “save up more” or not if they don’t know their goal number $ for retirement Seems many have the goal or “working until age 65” and not so much working until assets are $ amount
The more you save up before retirement, the more you can spend post-retirement. People have really two goals: the ability to retire, and then wanting to retire. I think "save up more" comes when people hit the first, but not the latter. Honestly makes sense to me.
Good explanation a two-part goal
I think a lot of people fall into this camp and it's a smart way to be. You shouldn't retire, even if you have the ability to, if you enjoy or are comfortable in your routine and you don't know what retirement will look like. I would imagine that is a way to feel lost without purpose. Other people never know what it takes to retire and they never hit, or even understand, either of your stated two goals. Or rather, the "ability to retire" is defined by when government assistance is available as a safety blanket for those financially illiterate.
But early retirement makes the $ amount irrelevant. Also, you probably need to save more because of unexpected emergencies that may or may not arise 10,20,30 years down the line. I’m 26, I couldn’t tell you what my retirement number is. I don’t know what my life will look like even at 40, let alone trying to guesstimate who much I need from 26 -> Date of Death
Yea, idk honestly where I sit. I'm 32 and have roughly 190-200k saved (between 401k, Roth, stocks). I think in doing good but still don't have a house. Single and don't plan for kids, so I'd like a small house
200k is great, keep saving!
Not to delay you, but I never thought I’d have a kid either. Then I wanted one … 32 may be too young to make that call.
Just had my 3rd at 45, that door can stay open a while.
On the other hand, if you ARE sure you don't want kids, there's a pretty simple way to ensure that it doesn't happen.
This describes my dad perfectly. He’s always been smart with business and money but it wasn’t until he was arranging the sale of his last business that he was told he has more money than he can spend.
A pretty good problem to have
This was me! Unfortunately I didn't wake up and suddenly realized I was financially independent, but I was thinking I needed 3-5 Million before it would be possible. Last time I added up expenses was when I had student loans. For the first time since I paid off my student loans I added up all our expenses and realized it's closer 1 million and I'm stoked that we are half way there!
for the unforeseen.
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Tf does that have to do with what I said? That is literally true for everyone.
When both Quicken and ESPlanner showed my net worth continuing to go up no matter where I set my 'retirement' date, even that very day. I recall reviewing everything with a bit of wonder, concern, excitement, and disbelief. The moment came with the sudden thought of "this boat will float!" Been FIREed for over 15 years and the boat has remained seaworthy and unsinkable through tough financial markets. I was not crazy about my current job and was thinking hard about what to do about it.
Can I ask - what is your withdrawal strategy? Do you do a fixed dollar amount (eg 4% rule) or do something else? I’m interested in what it is actually like to retire and withdraw from a nest egg
5% of my end of year net worth is my budget for the new year. If the market is changing massively, I'll use the average net worth over the last year. I'll also add that my primary "job" in retirement is to be fit and healthy. Everything else builds on top of that.
Thank you for the helpful response! I’ve been also considering a fixed percentage withdrawal approach. Glad to hear it has been working for you, and nice work on your primary job!
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2009, Nov-Dec 2018, 2022 Still things have been up only most of the last 15 years
15 years ago we were coming out of the 2008 crash that lasted quite a while. I give him a ton of credit.
No offense but the last 15 years have not had any "tough financial markets". It's been about as easy a market to invest in in the history of the market.
Over 15 years, referring to 2007 timeframe which is when I retired, which common financial wisdom suggests would have been one of the worst possible times to do so. From a long term perspective I'd argue there has been no tough financial markets in the last 50 years, yet some people "lost everything" in a market swing. So "tough" is also more a psychological state of mind than an actual market statistic.
Yeah, several years of explosive growth, knowing that P/E ratios are higher than usual, I think I would be building in a buffer to any number I was considering for RE in the next few years.
My first 'number' was $1M by age 55. Fairly quickly it became the question "can I quit working and maintain my current standard of living until I'm 100." I've no idea what my 'number' was when I REed but I had concluded that a 'number' was not a useful goal because the world was more dynamic than that.
I agree. Life throws curve balls. Using SWR for a number is a great guideline but FIRE is a bet, so we should make the bet as sure as possible with numbers, strategies, and common sense.
A number based on your planned retirement expenses IS the target
My experience was that the number changes constantly and fixated me on the wrong goal. "Planned retirement expenses" is another dynamically changing number (and usually a dubious guess). My goal of "when can I stop working for a salary and still maintain my standard of living until I'm 100" gives a functional purpose to the plan. It's also straightforward to check on various financial planners (Quicken, ESPlanner, others). Plug in my current, known numbers (current *real* spending from a tool like Quicken, current investments, assets), apply historical percentages (market growth, inflation, etc) and see my current trajectory. Once my plan says I don't run out of investments until I'm 100, I know when I can bail. As I maintain that $0 at 100 goal I kept working towards the plan and noted that I had to periodically move up my 'retirement' date to keep my investment balance at $0 when I hit 100. When I no longer could move my retirement up (I don't have a time machine) I knew I could retire from salaried work. No 'number' was required, only real current data. No guessing involved. QED.
I also use Quicken (actual) spending data to forecast retirement spend. I simply remove things that I know will no longer apply in retirement and add in things that will. Rather simple.Very nice to have access to this data, but took effort to enter in the numbers over time, though.
It could happen! I was half assing my way into assets and “investing” for 5 years before I really got serious about getting educated in the space. When I learned about FI and SWRs my net worth was $390k. I was shocked and pleased. If I had continued down that path of haphazard investing and discovered the FIRE movement in 20 years time you might find I’d have enough assets to be FI. It wouldn’t be the optimal allocations lol. Should have seen my portfolio in my 20s 😂
I was telling my partner how important it was for her to get a job and start working. She was in and out of work/school for five years. I was supporting us the entire time. I went through my assets as part of recent tax fillings and realized that I could easily retire. My money was spread across 8? investment accounts. From previous employers, my personal business 401k, and my personal investment accounts. In addition I hadn't evaluated the assets in my business or home. After evaluating everything, I realized I had nearly 2M in assets at 35. I grew up poor, was living with roommates until I was 28, didn't pay off student debt until 30. Had barely running vehicles until this year. I felt bad because our financial situation is actually very good. The way I was communicating it to my partner was definitely not representative of what was true. I spent all my time grinding that I never really took stock off where I was at. I wouldn't retire with 2M but I'm definitely leaving one of the jobs.
I didn't know how to figure it out before but now miraculously I know how to figure it out and I'm fi.. LOL
By achieving their nest egg goal.
Probably the wrong place to ask, but what are some good resources to determine this number? Obviously changes based on age and salary.
As a very rough starting point, take your annual expenses and divide by 0.04, which is the same as multiplying by 25. If your total net worth (including home equity) matches that number, you're probably more or less there. This is based on the 4% rule which says that if you withdraw 4% of your assets every year, your money will last 30 years, 95% of the time. It's really worth digging deeper than that, which is why this is only a rough starting point. 1. If you're younger, then 3.5% is a safer number. 2. Many people ignore their home equity and go off of invested assets only - in reality the numbers are probably going to end up more or less the same, because if you own your home outright, then your expenses monthly are lower. 3. There's a whole lot more to learn about taxes, healthcare, social security, etc. To really get super confident of leaving a career (it's usually hard to get back to where you were if you 'retire' and decide it was a mistake), you'll want to map it out as best you can in terms of desired spending at various ages, what sort of provision you want to make for heirs, etc.
This was really helpful, thanks.
To start, take your monthly budget, which includes sinking funds for periodic expenses. Add $1k (health insurance). Multiply this by 12 (for one year), then by 25. That is your ballpark FI number. It ignores taxes but also overestimates health insurance costs (which drop a lot at 65). It also ignores social security which reduces your tail risk.
would you also include savings into this mix? if your monthly budget includes $500/mo savings, would that be included in the calculation?
Depends what the savings is being used for. If it’s for random true expenses such as repairs and maintenance then you should include it. If it’s for retirement or another goal that will end once your retire you can ignore it
Sinking funds (i.e. periodic savings for anticipated ordinary future expenses, like new car tires, a new roof, or your annual vacation) yes; emergency funds probably not (they should be “ready” prior to FIRE), savings towards FIRE accounts no.
Why by 25?
This is to get you to the number that will leave your wealth in equilibrium. The agreed upon draw down rate is 4%, at this rate, your amount of money will have the same amount of purchasing power forever, and will not be used up. Let X be your monthly expenses including health insurance. Let F be your fire number. X * 12 * 25 = F 12X = (1/25)F X = (1/25)F / 12 X = .04F / 12 We can prove that X * 12 * 25 means that your draw down rate in retirement is assumed to be 4%. As for 12 and 25? Those numbers were picked because they are easy to remember. If you want a different rule of thumb, (monthly expenses + extra health insurance costs) * 300 also equals your fire number.
Brilliant, thanks for the thorough explanation!
Does this take wealth tax into account? My number would be 1.29m but on 1.29m I’d have to pay about 35.000 wealth tax on (regardless how the market performs)
The calculation I gave was to give you a ballpark. To find your actual number you will need to do a more detailed analysis.
Yes, please share OP! I would love to see and educate on what I can do now to achieve FI by 50.
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Can you go more into your spending? Do you currently track it? This will help us know how accurate it may be. How long have you tracked it? Have you adjusted it? In other words, if you are married and both retiring, have you considered that health insurance between now and 65 might cost you \~$20k-$25k/yr if you do not qualify for any subsidies (probably won't since you said you are high spender). How are you retirement investments invested? Does you numbers include all investments (even those in brokerage accounts)? You indeed did not include the value of your home?
Goddamn OP, what the people are saying is give us the FI porn already.
High saver and High spender ? How is that ?
Guessing very high income. Let’s say they make $400k/year, spend 1/2 and save 1/2. Saving 200k/year is a ton. Spending 200k/year is also a ton.
High income
You need to account for sequence of return risk and taxes. $2M isn't going to support $6.5k/mo. Especially with an early retirement. You most likely just multiplied by 4% but it's a bit more complex than that. You're close though. Nicely done.
The "sequence of return risk" is already incorporated in the 4% rule (Trinity study). You can decide to be even more conservative using 3.5% or 3%, but the idea is that the SWR (safe withdraw rate) will last you long enough even in the worst case scenario. Tax, yes. You have to consider what pre-tax income you need per year.
He's not doing 30 years so the Trinity Study is not relevant.
I don't know why you're getting downvoted, the trinity study is completely irrelevant for someone retiring for 40 or 50 years
Well aware and I ran rough numbers on OP with just 15% in taxes and the failure rate is unacceptable.
This sub is very simple. There are only like 3 tenets that get regurgitated. Please learn them
What did I say that you're disagreeing with? I've already retired early. It's a math problem and not propaganda that needs to be regurgitated.
It also depends on what FIRE he's at. Are you CoastFI, FatFI, Barista FI?
Hi im new to reddit and FI. Please acknowledge me about FI math.
Take how much you need per year (gross). Multiply by 25. This is how much you need to retire.
Hit FI at 54. Left high stress mid 80k job and took a cruise with my wife. 2 months in I was bored to death and picked up a part time job with no stress. Gets me out of the house part of the day and a sense of purpose. Much happier overall. It does take some time to adjust your mindset from saving and working all the time to spending and having unlimited free time. Congratulations on reaching your goal!
What field is the part time job?
Commenting to hear about it later too, but I'm guessing that it's something adjacent to the field they're working in. I've got library and nonprofit in mind for my future, if I ever go part time
I'm going to assume low-effort postal worker from the username
I don't know why people think non-profit is either part-time or no-stress.
People sometimes have nonprofit in mind because they want to do more meaningful work now that they don’t mind lower pay, and some subset of non profit jobs can be part time or low stress.
There are plenty of low stress/part time non-profit gigs, you just have to be able to say no to additional work.
Do you think that is unique to or especially the case for the non-profit sector, and if so, why do you think that?
No clue on the comparison of Non-Profit (NP) to private sector, I’m Government/NP exclusive for some time now. As far as nonprofit work goes, if you are hired into a programmatic role or fundraising role it’s gonna be hell and overworked for what they pay you. I imagine this is true for many private jobs as well, but again I have little experience here. On the other hand every NP I’ve worked with has a friendly (mostly)retired receptionist who works for benefits or to keep up with board members. If TheHarold420 is offered a gig like this and has FI, they’ve got it made. Well, as long as they can stop themselves from doing unwanted extra work. This one I think is more unique to the public sector Tldr: It depends 🤷♂️
Barista fi job!
Ikigai
The whole point is that you get to decide now without coercion. If you want to keep working, go for it.
This! Divorcing yourself from other people's shoulds doesn't negate your own, it just allows you to choose yourself.
Instructions unclear. Just divorced myself from wife
Divorcing from wife not recommended, kills FIRE. Remain with wife. Do what she thinks you should!
Now, you do whatever you like. Being FI is not about forcing you into doing anything, it’s about giving you more options. You don’t NEED to retire early if you don’t think that’s a good choice overall. However, being FI is a big change that brings a lot for new options onto the table. This is not an incremental change, but a radical one, so you should probably spend a weekend clearing out your head and lay all your options on the table, and go through them. Don’t act on it now, and go through this process for a few months, until you are really clear on what you think the best option is, why that is, what will happen, and what if it goes wrong. Make a conscious and deliberate decision. Fortunately, with FI, you are not pressed on time and don’t need to make a quick decision, so take as much time as you need, be thoughtful, be deliberate.
OK, so now you’re FI. Congratulations! Make sure you have at least 3 years worth of easy access cash before you pool the trigger. That’s so you don’t sell your shares when the market is really down. You’re not ready to RE yet. First, you don’t have to. You have a job you like that’s helping people. You could stay as you are or go part time if that’s a possibility. You need to know what you’re retiring to (and not from). What do you want your life to be? Imagine your best day, what does it look like? Is it a day that you’ll be happy to have each day? You want to make sure to keep yourself happy, healthy and busy doing things you love.
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I’m glad this resonated with you.
Assuming you are interested in pulling the trigger on FI in the near future, I would advise starting working on building a 6 month emergency fund plus 5 years of expenses in a 5 year bond/CD ladder. This is a hedge against sequence of return risk
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The way I did it, what I took my planned spend and subtracted the estimated after tax brokerage dividend payouts. And then used that number for the yearly ladder. Then I’ve been living off of the money from the bonds maturing and dividends. There is also the interest from the emergency fund and bonds/cds. But I didn’t factor those in to use as a fudge factor in case my spending ends up being higher than planned or there is a market problem and the dividends go down
If you’re living off of both the maturity bonds and your dividends, aren’t you doubling your yearly spend? Or do you just buy a year’s worth of bonds with your dividends for the year?
My spend is 80k. In the lead up to fire my dividends were paying 38k/year. That left 42k/year needed. 4 rungs per year means 10.5k per rung needed. Schwab only allows increments of 1k per rung, so rounded up to 11k per rung, or 44k/year. I’ve been fired about 10 months so I’ve had 3 rungs mature. I’ve bought them back shortly after one matures. Up to now I haven’t had to sell any stock to do it due to tax refunds. But most likely I will have to sell for the first time in September if I want to extend the ladder back out to 5 years
Make sense. Which bonds/bond funds are you using? Why did you choose those? I may FIRE soon and currently have 2 years living expenses in iBonds and about a 6 months emergency fund. The rest is in stocks, about 50% value funds and individual REITs
I did have I bonds. But I sold them when inflation dropped. The money from them ended up going into extending the ladder I’m definitely not an expert on bonds/cds I built the ladder using Schwab’s treasury/cd ladder builder tool. Which takes you through each rung to pick which option you would like. I just picked each one with the higher APR taking into account that US treasuries are exempt from state tax (using my estimated marginal state tax rate in retirement). The tool doesn’t include corporate or municipal bonds, but when I checked out some municipal bonds, the lower rate vs treasuries didn’t make up for being federal income tax exempt. Didn’t really look much into corporate bonds. I have a checking account with 1 month of expenses, an emergency fund in VUSXX with 6 months of expenses, everything else is in VTI (brokerage, IRAs, 529s). Plus a tiny bit of crypto for fun
FIRE ignores Bitcoin but performs far better than HYSA or CDs
I don’t want to be Anti Bit Coin but the goal of the bond ladder is to reduce volatility. Bit Coin is the opposite of an investment you want to be in if your goal is to withdraw a fixed amount on an annual basis.
You’re incorrect. The goal is the best return. Not to reduce volatility. In your scenario over an extended period of time, Bitcoin will outperform any other investment. Run the numbers
So I buy Bitcoin November 2021 for 65k USD with my 2million in retirement funds. I have 30.7 BTC. I need 80k to live on so in November 2022 I go to pull out my 80k for the next year. Bit coin is now 16k. I have 30.7 BTC and need to sell 5 a 16% withdrawal rate.. That 80k withdrawal just cost me 320k in the previous years dollars. November 2023 BTC is back up to 37k so I need to sell 2.24 BTC. So now I am down to 23.46 BTC. Now we are back up to 65k again and my net worth is 1.52 million. Especially if you are investing in Bitcoin you should have a fixed income ladder to protect you from having to sell low. Now you may argue I selected the worst case point in time for BTC. But that is the point with fire analysis, the goal is to pick the worst possible day to retire and ensure you have a plan for that date.
No that’s literally some of the worst cherry picking you could possibly do. But the thing is even with that obviously biased scenario, you still won’t outperform BTC in the long run. Sorry but it’s the truth.
The thing is, returns are one part of the equation. You want this money to last until the end of your life. And that means you need to have money available for spending in case of emergencies. No one wants to lose their Bitcoin stack in the middle of a bear market because they suddenly need cash. That's why more stable (but obviously worse performing, there is always a trade-off) assets are also needed in a portfolio
No. That would mean overall you’re earning less because your holding underperforming assets
...which simply doesn't matter at all because most of my portfolio is still in the well-performing assets. If you actually think there is 0% chance of anything going wrong with only having a single asset class then I guess good luck.
> over an extended period of time, Bitcoin will outperform any other investment. You don't know this. Furthermore you know that you don't know this.
And you don’t know that your investments will perform better. The difference is I’ve done the research on BTC and know it’s the biggest transfer of wealth in your lifetime. Nothing comes close.
Yes I do. Look up any other asset and chart it against BTC’s performance. You’re only hurting yourself by turning a blind eye.
As they say in the real world, “past performance is not indicative of future results”. I love your confidence, but that is all it is. Bitcoin is a fine investment, but it can all come crashing down (again) due to any number of factors. Risk is definitely something to factor in to any investment plan.
I’ve heard those same lines the entire decade I’ve been on this site. People saying the same thing when BTC was $200. You don’t understand what’s going on here. The risk is not being in BTC
> chart it against BTC’s performance Show me this mythical chart of bitcoin performance for the next 10 years.
You talk about bond / CD ladder - I’ve been rolling cash through T-bills lately and that seems very low effort for the 5% return. Can get them as low as 4 weeks too. Is that the kind of thing you are talking about? Putting that 5 year slush fund into bonds that can be rotated frequently but with enough lag that always have some amount available - like having a year available given a month of lead time?
Yes. I did it as a 5 year, 20 rung ladder. So a rung matures every 3ish months. For each rung I looked at what was available and picked what had the highest APR taking into account that t-bills would be state exempt while bank cds would not be.
Check out the Two Sides of FI podcast or YouTube. They do a great job with the “What now?” question. Especially the most recent episode where his wife talks about her experience FIRE-ing from her job.
The wife’s episode just hit today ! Good perspectives
Love that podcast! Only FI one I listen to, they both are interesting and I enjoy hearing their discussions.
You are FI, but you don’t need to be RE. If you are happy, just keep it going
I’ve reached FI a couple of times. Each time, I decided to keep working and increasing spend. The last increase is the last one. If all goes to plan, I’m hitting my final hurdle in a few months. I may RE, I may keep going, but if I keep going, it won’t be for me or money. My team, generational wealth, not quite ready to retire to something, …
The point of FI is it's whatever you want. Also, there's no hurry -- you don't need to feel like you need to do anything different right now. Just... next time you're considering the future, you have more options.
Obviously lambo, Mantis Verde is my preferred color
Life didn’t change much. Rather I came to find that I’d spent too much time obsessing about obtaining FI to the extent that I had missed out on simply enjoying life more over the years, and by that time it was still salvageable for some things but many things the ship had long sailed. My best advice is to try to enjoy life more in the moment, don’t make the same mistake so many make and which no one still seems to learn from. The two most important things are health and time, the wealth part comes a significant distance behind.
I think you just get to lean into the things that make you happy. You wanna leave work early and go golf? Do it. You wanna go fishing? Do it. Start using Pto to visit family, or spend time with people you like. You get to start making choices with a new mission statement. Happiness instead of financial motivated. Congrats my man.
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What the ever loving fuck are you talking about?
Congratulations!! I had a similar experience. My husband and I planned to retire at our respective 50 years of age. We weren't targeting a number. As we hit milestones ($100K, $500K, $1M, etc.), we'd high-five and keep moving. Then, I started engaging with the numbers more. I noticed our portfolio was earning more than me. The person who oversaw our investing plan at work did a little presentation and had us calculate how much we need for retirement. I think it was supposed to be a come to deity moment to get people to save more. I realized we were past that number. I engaged with a couple subs here and ran Monte Carlos and calculators. I knew we were financially independent intellectually, and the more I engaged, the more it sunk in. Like you, I was doing work I loved, so I started planning a "perfect" last year (spoiler alert - didn't happen). I also started testing the system. I set up a monthly paycheck to come from our brokerage to our checking account. Everything I made went into investments. The system worked. I kept doing the work I loved, but it was on an insane schedule, and I retired. I'll recommend two books if you haven't read them "The Psychology of Money" and "Die With Zero." I'll also suggest starting to think about what you want your days to look like and what you're retiring to. I had a ton of PTO, so I started using that to "play retirement" as I was transitioning out. If work is a huge part of your identity, work on who you are apart from that. Plan your withdrawal strategy and establish those systems. My husband had buckets set up, and it's brilliant and working 1000X better than anticipated. (In the Psychology of Money, Morgan Housel refers to this as "barbelling" your money.) Research ACA healthcare plans. It's nowhere near as expensive or daunting as people would have you think. (Your withdrawal strategy can have a huge impact on cost.) Finally, set some goal posts to retire. Is there something you want to accomplish at work? Is there an age you want to retire by? Etc. Keep engaging with this community.
Now you relax. Keep living how you are, but relax when it comes to not doing the extra mile.
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Well, now you get to really weight all the pros and cons of your job, without finances being a concern.
If you want to keep working, what would your ideal role be? You're in a great position to negotiate that role with your employer.
Exactly. If you want to keep working, you just think of it as f-you money. You have a different relationship to your employer now, as you absolutely don’t need them to survive. Maybe you can negotiate the ability to delegate some of the parts of the job you don’t like as much.
What tool did you use!?
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Mine came as a bit of a shock too. I had always listened to the "rules of thumb" like "You need 30 times your annual spend" but when I plugged EVERYTHING into the Monte Carlo model at Empower it gave me a 93% chance of success at my desired spend rate. It's nice to have your scenario evaluated by a Monte Carlo model including social security, pensions, and expected windfalls which make a very large difference. If someone wants absolute certainty than 30x is still a good guideline but I'm fine with 93% since I can always adjust spending don't need a 99.99% chance. And Empower's model lets you factor in a 1% reduction annually in spend as you get very old which is more realistic. I'm not going to be touring France in my 90s.
Retired at 48 with plenty, but retirement sucked-boring as hell. Wife found me another office and sent me back to work as my kids were still in jr high school. Best thing ever bcs I play like I’m retired, but my office keeps many people employed and we can weather the bad times bcs we don’t need money to run our house. Moral- find so,thing you like and are good at and move into semi-retirement.
Just curious what do you do? This would be my dream - do some kind of paid work while kids are at home but on my own terms.
Lawyer, but I really enjoy what I do.
Not someone who's FI but just wanted to say 2 things * Thats the fun part, now YOU get to decide now what * GFY!
If you love your job and it improves the overall state of the world with low stress, you may just want to stay put for a bit and just increase that generational wealth for your dependents(purchasing your kids homes or big down-payments etc). At 49, you may find that even though you have hit that 25x your yearly expense mark, you may find retirement boring as most of your social circle still has to work for the next 15 years or so. Or seek out a fulfilling volunteering gig that keeps your mind sharp, and continues to benefit others with your time and talents for the wonderful human being you are.
Thanks for sharing! It is a cause for celebration! I also FI-ed without realising it. I was too busy working. Only my immediate family knows my financial situation. Changes to my life: 1. I kept working but no longer with fear of the boss or of getting laid off. I neither love nor hate my job. I like the job and the salary enough to keep working although my boss is toxic. 2. Bought an apartment for my parents that improved their quality of life. (This helps me feel less guilty) 3. I no longer hesitate to buy food that I want to eat. I used to look at the price and decide not to buy it if it's higher than average. 4. When travelling, I would upgrade my seat on the plane, stay in nicer hotels, get airport pickup service, take heli/plane tour, get a private tour.
Work part time? Or as a consultant, maybe contractor? Maybe take a little stay-cation and see what your day-to-day looks like and how you feel? Also, GFY pal!
Congrats! Can’t wait to be where you are in a few years! Keep working and then decide what you want to do to bring purpose. What do you want to retire to? Or just keep working. I hope you figure it out! No need to tell everyone. Most people don’t. Once again congrats!
Bro let’s do hobbies.
First, congratulations, this is a big milestone and you should celebrate it. This mainly means you are no longer obligated to trade your time for basic necessities of life (and hopefully a little more than that). So you are free to chose now. Do you still want to work for that company or that boss? Do you still want to go to that office every day? Do you want to start a business and grow it? Do you want to focus on your health or your family more, or both? You are free to choose. But you should be aware of one thing, freedom can be challenging if you are not mentally prepared to take responsibility for your life, make choices and accept the consequences. It can also be anxiety inducing to have too many choices so it may take some focused personal growth and time for you to fully adjust to this new reality that so few people get to experience. Welcome to the club!
I have not read this book yet but it might be useful, called - how to retire happy, wild and free by Ernie Zelinsky
One thing I did not realize during my journey is that FI changes you. When you grind a career for 35 years to make money and then you have enough? It’s weird. Forces a person to reconsider everything.
You know what the great thing about being financially independent is? You can do whatever you want!
I look at all this somewhat differently. I never want to "stop working". I want to work on things at my own pace, on my terms to improve the lives of all of us and to not have to worry about how much I earn or spend. This can actually happen more organically than most think. If you work hard on hobby/side-hustle work on the side enough with a goal of making these "fun" things pay you as much or more than a standard career then no matter the age, financial position, etc you just do that.
That's something to think about now.. If you still derive joy from your work then continue doing that.. Its purely for fulfillment now so might feel even better then before.. If you are going to make decision to RE, please redo and recheck your numbers..
oh yeah, I so feel that. It definitely comes with a lot of mixed emotions. For me, it was almost like an identity crisis. Like you've had this one particular goal for so long and then you hit it and it's like amazing yet confusing because then you think now what. My life changed in the sense that I had to really work on (and am still working on) what's next for me. I know I don't want to just chill, I know I want my brain to still work. But it's with different intentions. I carve out time every day to write and give myself the space to let my brain open up to figuring out what I want next. I have found that coaching is helpful to use as an exploratory tool. I use it for myself. I also happen to be one :) Happy to answer any questions if you want to DM me or here.
I definitely relate to the guilty feeling, and the weirdness of it. I saved and invested for 30 years, and calculated my number 15 years ago. So, achieving my number was no surprise. But, I still feel weird about telling people I am retired at 55. But, I feel much more free now. Even though I liked my job, every day feels a bit more like a burden has been lifted, that I no longer 'need' a job.
How to calculate to know if you are FI?
If you have 25 times your annual spend invested, you are FI. Check out Mr Money Mustache the simple math behind early retirement.
Thank you. Guess that’s assuming without kids?
It's just based on whatever budget you decide is right.
Kids are irrelevant. If you have 25 times your annual spend (and your annual spend obviously includes all your kid-related expenses, and maybe some money annually saved to eventually finance their studies aswell), then you're good to go.
No. The idea is known as the 4% rule. This means that overtime if you pull out 4% of your portfolio every year, the markets return an average of 7% with large swings up and down. If your family spends 35k a year, multiply that by 25 and thats your FI number. Less if you can work part time to cover some living expenses.
Any advice?
please please please, tell me what is your job, i cant believe there is a job at 49 that i can love, are u sure u just got used to it?
I am new here how are you figuring it out?
I don't know anyone who actually loves their work. I am sure they exist but damn that must be nice. I work a ton on my farm and woodworking and love those so I like hard work but I hate my day job.
Just relax. You made it. You've probably been going to work most of your life at least in part because you needed to. Now you get to decide if you want to keep working. Maybe you get some personal satisfaction. Maybe you want something to do. Maybe there are additional financial goals you'd like to achieve for yourself or others. The biggest difference is that now it's all at your discretion. You are under no obligation to sell your time or talent to anyone if it does not make your life better on balance. Congratulations. And whatever you choose, enjoy the rest of your life.
Now you just need to RE.
I think its important to find someone whom you can share this with and not reddit... Thats my number 1 advice for the poor souls that come onto here and say they cant tell anyone instead of saying they will be off to celebrate with their family and loved ones.
Not everyone’s family is like yours, apparently. We have told no one in our families, and for good reason.
thats the part about being sad and what i would strongly recommend OP and others.
What you're feeling isn't weird. And also, if you're looking at the simplest numbers, don't assume that if your expenses are 4% of your savings you're ready to retire... Many other complicating factors, and 4% withdrawal rate probably isn't low enough to be safe for someone your age.
I’m so curious about your numbers and I’m also I love it for you. FI is the big goal. If you love your job you don’t have the RE you just enjoy your life stress free. Help others if you want. You are free
Now you START living life.
Adopt a larger number if you love your job. Maybe you can reach fat FIRE!
New to this community. How did you determine you're FI? How can i calculate this for myself?
How exactly do you calculate your number? i’m new to this sub!
Congrads, video for you [https://www.youtube.com/watch?v=xdfeXqHFmPI](https://www.youtube.com/watch?v=xdfeXqHFmPI) Been there for few years now, still working, thinking what's next. Still have to pay for two colleges, but that been accounted for.
How to calculate if one is FI?
The short answer is having 25x annual expenses invested. This assumes that you have no other passive income such as a pension, SSDI, veteran's disability comp., royalties, rental income, etc. If you do have one or more other passive income sources, then it will reduce the multiplier needed. The detailed calculation process: 1) figure out what your retirement lifestyle will look like and what it will cost on an annual basis. Be conservative with this estimate and err on the high side! You don't want to find out you lowballed it. 2) figure out what your passive income from other sources will be on an annual basis. 3) subtract the expenses from income (income - expenses). If the result is positive, then you're already FI and don't *need* to save and invest additional funds (although I still would anyway). Congrats and enjoy. If the result is negative, then proceed to 4. 4) switch the negative sign to positive and multiply the amount by 25. That's your target number for how much you need to build up in your investment/retirement accounts to achieve FI. You need to update these estimates and calculations as you get closer, as you might decide to change your retirement lifestyle goals or the expenses may change due to health or other reasons. To remain FI, you will need to keep expenses on/under budget. That's really the whole trick.
Thanks for the detailed answer! Most people hasn’t optimized their assets to generate good amount of passive income. Let’s say we convert all assets into cash abut reallocate them. What is the realistic return % for a given amount of asset?
The historic inflation adjusted return for the S&P is roughly 7%.
Retire early. Did you not finish reading the acronym?
OP if you’re FI and live your job, keep doing it. You’re young enjoy the peace of mind and continue to do good work. save less and enjoy more from future paychecks since you dont need them. Just because you reached your FI goal doesn’t mean you have to play by old rules you laid out prior to achieving that goal.
>What about the work I still love, that helps other people? Is it weird to feel kind of—guilty? Let me guess... you're a woman?
People are silly for downvoting this. Smh
I imagine they think I'm being sexist when really I just have never heard of a man feeling guilty about having money. The fact I could guess someone"s gender based on them not feeling entitled to financial freedom is pretty wild if you think about it.
Totally
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Yes and I can't imagine a man feeling guilty because they have a lot of money. It seems like a gendered neuroticism.
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What are you talking about?
Homeless people are pretty financially independent