What flavor of FIRE are you chasing - or if you're already post-FI, which are you following and how is it going? For more information, check out the full episode linked in the description as well as our resources page: twosidesoffi.com/resources/
I think a lot of younger folks start with the lean fire approach, and once they get there, switch to the chubby fire mentality. "One more year" syndrome sets in for a while, plus that desire to have a margin of safety is built into us.
Agreed. Because i am right at that spot right now. Can Lean fire but figured with a couple more years it gets more cushy. Taking it one step at a time because thankfully no pressure to make rash decisions. Good luck to all on the same path to fire.
By the way, you guys are lucky to have discovered this at a young age. I’m retired now three years at 61 and lament that I didn’t know about FIRE at 18. When I first heard about FIRE I was only three years away from being able to collect my government pension so wasn’t about to leave. Fortunately I had begun maxing out my 457 at age 36. You guys are in much better shape. That said, my husband and I are loving our slow travel retirement.
Thanks for sharing, Tom. As we talked about in an earlier episode, we did each come to this in different ways. The thing that is the same is that once we realized what we wanted to do and more importantly, that we could do it - we went full steam ahead to achieve it. We do feel fortunate in many ways, 100%. It's great to hear you and your husband are loving retirement! Please don't hesitate to pass on any travel suggestions as we always love to hear about those.
One thing to think about on Coast Fire is it may be a good gradual transition for people regardless of whether they technically have enough now. It also provides an opportunity to work part vs full time (doesn’t have to be a minimum wage job) and avoid high healthcare insurance to help mitigate the sequence of returns risk. There is likely a point where you no longer need to accumulate (and may already be at your number) so if you can just meet your living expenses with less stress this may be a better more gradual transition for some than taking the plunge all at once.
Brian, we agree 100%! Your points are spot-on. The transition can be a difficult one and there's no question that for many if not most, something more gradual vs. a cliff will be more palatable - plus all the other benefits you point out. Thanks for the feedback!
I’m planning for chubby/fat FIRE ($4.5M - $5M+) with a target age of 50. I live pretty frugally with an engineer salary, but any wife/kids may shift it to the right a couple years. It’s VERY conservative, but I want to be able to leave it all in stocks (while retired) and never worry about it.
We have reached FI but are working for another year while covid is making traveling problematic. Since we will be going from an accumulation phase to a withdrawal phase, we plan to transition to a risk parity portfolio. It minimizes the volatility while keeping the returns close to an all-stock portfolio. The high volatility really hits hard if you have to withdraw income in a down market. If you can lower the volatility while keeping the returns high, you have found the Holy Grail. These Risk Parity type portfolios have a mix of uncorrelation assets (Stocks, T-Bills, Gold, etc. ). Now the Safe Withdrawal rate is 5% or you can continue with 4% for an ever greater safety margin.
@@ismaellocate8156 The All Weather portfolio was the original but there are other Risk Parity Portfolios that are slightly less conservative for better gains. Check out the 'Golden Butterfly' or the 'Golden Ratio' portfolios
Thank you for putting so much valuable information out here for the rest of us... I'm pretty close to retirement, big thanks to Jason for informing me about the C FIRE simulation. I have done different sims, based on different withdraw rates. I know its an individual personal decision, but Would you recommend that I lower my withdraw rate until I have 100 % success rate in the simulation? Or is 90% good enough ? I would appreciate hearing your thoughts on the matter...
With the equation at the 1:09 mark, if my target annual spend amount is $40k in your example, do I need to shoot for a higher gross amount to factor in income taxes? Maybe at $40k taxes are low, but for chubby fire you are targeting, wouldn't you have to account for income taxes? Thanks guys, great stuff, really enjoying the conversation.
Hi Harvey, thanks for your question. Indeed, if like most early retirees you will be relying on a taxable brokerage account, you do need to consider the impact of taxes. This is certainly an individual question but generally speaking, a cushion to handle federal and state (if this applies) taxes is important. Here's a piece that may get you started. From there you might consider checking in with a tax professional to vet your plan. www.forbes.com/sites/wadepfau/2016/07/28/how-do-taxes-affect-the-4-rule/?sh=122edcc0123a
@@thejusticejen Absolutely. Roth conversions make sense in most cases where you expect your taxes to increase later vs present, via RMDs or otherwise. We both plan to leverage these for ourselves. However, there are some important caveats to be aware of w.r.t. potential impact on Medicare / ACA, Social Security, etc that one needs to consider. www.fidelity.com/viewpoints/retirement/roth-ira-conversion-after-50
My fire number is 4 million. Seems like the right balance where it's probably I'll hit it by my late 40s or early 50s, which will give me a very comfortable retirement.
So, if i am 61 and retired, with a 33000 per year pension, waiting until 67 to take my combined 42000 ss with my wife, spending 85000 to 90000 per year with taxes, what is my fire number at 61 years of age. How do i calculate what i need to have saved? It not so easy to calculate need for next 5 years, and then post ss income. Any ideas?
Love your channel. It’s really interesting to hear you guys discuss this. Have you guys considered that someone may initially retire with a million dollars and be content with $40,000 a year but very quickly that sum could explode allowing them to increase their standard of living? For instance, $1,000,000 in Vanguard’s VTSAX ten years ago is now worth $4,000,000.
Hi again, Tom! You're absolutely right! And this is why it's important to consider the breadth of possibilities of what your portfolio + withdrawal rate can deliver under various market conditions. Tools like cFIREsim are essential to do the modeling required to make that visible.
$4 million ten years ago adjust for inflation was about $3.2 million tens years ago compared to that $1 million. And just 18 months ago this same account was worth $2 million after it was at $3 million 2 years ago now up to a hypothetical $4 million. That same $4 million can be worth $2-2.5 million in a market pull back and adjusted for inflation $1.7-1.6 compared to 10 years ago. So that $4 million doesn’t look that healthy since we are in a bull stock market that last 10-12 years
@@gabrielgonzalez6456 We don't disagree. That's why it's vital to consider asset location as part of your process (episode coming soon). You need to have sufficient cushion from cash + fixed income to weather the storms that will come and result in volatility to your equity portfolio. Given the long runway for early retirees, one must ensure their portfolio can last the duration of their expected lifespan.
When we talk about target retirement savings (e.g. $2.5m-$5m chubby fire), is that including the money tied-up in your main property where you live, i.e. if you have a $1m house with no mortgage would that be included in your target retirement funds? Or is it only what money you have in savings (e.g. in index funds) and pensions? Thank you
Great question, Michelle. Typically this is defined by one’s investment assets only (including cash and pensions). Home value is a part of net worth but not generally considered as part of the “FIRE number”.
What flavor of FIRE are you chasing - or if you're already post-FI, which are you following and how is it going? For more information, check out the full episode linked in the description as well as our resources page: twosidesoffi.com/resources/
I think a lot of younger folks start with the lean fire approach, and once they get there, switch to the chubby fire mentality. "One more year" syndrome sets in for a while, plus that desire to have a margin of safety is built into us.
Agreed. Because i am right at that spot right now. Can Lean fire but figured with a couple more years it gets more cushy. Taking it one step at a time because thankfully no pressure to make rash decisions. Good luck to all on the same path to fire.
By the way, you guys are lucky to have discovered this at a young age. I’m retired now three years at 61 and lament that I didn’t know about FIRE at 18. When I first heard about FIRE I was only three years away from being able to collect my government pension so wasn’t about to leave. Fortunately I had begun maxing out my 457 at age 36. You guys are in much better shape. That said, my husband and I are loving our slow travel retirement.
Thanks for sharing, Tom. As we talked about in an earlier episode, we did each come to this in different ways. The thing that is the same is that once we realized what we wanted to do and more importantly, that we could do it - we went full steam ahead to achieve it. We do feel fortunate in many ways, 100%. It's great to hear you and your husband are loving retirement! Please don't hesitate to pass on any travel suggestions as we always love to hear about those.
Love that you guys dig into the numbers!
One thing to think about on Coast Fire is it may be a good gradual transition for people regardless of whether they technically have enough now. It also provides an opportunity to work part vs full time (doesn’t have to be a minimum wage job) and avoid high healthcare insurance to help mitigate the sequence of returns risk. There is likely a point where you no longer need to accumulate (and may already be at your number) so if you can just meet your living expenses with less stress this may be a better more gradual transition for some than taking the plunge all at once.
Brian, we agree 100%! Your points are spot-on. The transition can be a difficult one and there's no question that for many if not most, something more gradual vs. a cliff will be more palatable - plus all the other benefits you point out. Thanks for the feedback!
my wife and I decided to plan for a 3% withdrawal rate which equates to 33.3 X yr expenses. Juuuust to be on the safe side lol.
I’m planning for chubby/fat FIRE ($4.5M - $5M+) with a target age of 50. I live pretty frugally with an engineer salary, but any wife/kids may shift it to the right a couple years. It’s VERY conservative, but I want to be able to leave it all in stocks (while retired) and never worry about it.
I didn’t realize there were all these subsets of FIRE. Thanks for sharing.
We have reached FI but are working for another year while covid is making traveling problematic. Since we will be going from an accumulation phase to a withdrawal phase, we plan to transition to a risk parity portfolio. It minimizes the volatility while keeping the returns close to an all-stock portfolio. The high volatility really hits hard if you have to withdraw income in a down market. If you can lower the volatility while keeping the returns high, you have found the Holy Grail. These Risk Parity type portfolios have a mix of uncorrelation assets (Stocks, T-Bills, Gold, etc. ). Now the Safe Withdrawal rate is 5% or you can continue with 4% for an ever greater safety margin.
The Ray Dalio all weather portfolio!
@@ismaellocate8156 The All Weather portfolio was the original but there are other Risk Parity Portfolios that are slightly less conservative for better gains. Check out the 'Golden Butterfly' or the 'Golden Ratio' portfolios
Thank you for putting so much valuable information out here for the rest of us... I'm pretty close to retirement, big thanks to Jason for informing me about the C FIRE simulation. I have done different sims, based on different withdraw rates. I know its an individual personal decision, but Would you recommend that I lower my withdraw rate until I have 100 % success rate in the simulation? Or is 90% good enough ? I would appreciate hearing your thoughts on the matter...
You’re welcome! It’s a personal decision, but we most often see people talking about 90-95% success. Risk tolerance is definitely an individual trait
With the equation at the 1:09 mark, if my target annual spend amount is $40k in your example, do I need to shoot for a higher gross amount to factor in income taxes? Maybe at $40k taxes are low, but for chubby fire you are targeting, wouldn't you have to account for income taxes? Thanks guys, great stuff, really enjoying the conversation.
Hi Harvey, thanks for your question. Indeed, if like most early retirees you will be relying on a taxable brokerage account, you do need to consider the impact of taxes. This is certainly an individual question but generally speaking, a cushion to handle federal and state (if this applies) taxes is important. Here's a piece that may get you started. From there you might consider checking in with a tax professional to vet your plan. www.forbes.com/sites/wadepfau/2016/07/28/how-do-taxes-affect-the-4-rule/?sh=122edcc0123a
Work on your Roth conversion ladder so that you have more of your FIRE assets that aren’t subject to taxation when you withdraw.
@@thejusticejen Absolutely. Roth conversions make sense in most cases where you expect your taxes to increase later vs present, via RMDs or otherwise. We both plan to leverage these for ourselves. However, there are some important caveats to be aware of w.r.t. potential impact on Medicare / ACA, Social Security, etc that one needs to consider. www.fidelity.com/viewpoints/retirement/roth-ira-conversion-after-50
My fire number is 4 million. Seems like the right balance where it's probably I'll hit it by my late 40s or early 50s, which will give me a very comfortable retirement.
So, if i am 61 and retired, with a 33000 per year pension, waiting until 67 to take my combined 42000 ss with my wife, spending 85000 to 90000 per year with taxes, what is my fire number at 61 years of age. How do i calculate what i need to have saved? It not so easy to calculate need for next 5 years, and then post ss income. Any ideas?
Stay tuned! We’ve got a video coming up in a few weeks that we think you’ll find really helpful.
Love your channel. It’s really interesting to hear you guys discuss this. Have you guys considered that someone may initially retire with a million dollars and be content with $40,000 a year but very quickly that sum could explode allowing them to increase their standard of living? For instance, $1,000,000 in Vanguard’s VTSAX ten years ago is now worth $4,000,000.
Hi again, Tom! You're absolutely right! And this is why it's important to consider the breadth of possibilities of what your portfolio + withdrawal rate can deliver under various market conditions. Tools like cFIREsim are essential to do the modeling required to make that visible.
$4 million ten years ago adjust for inflation was about $3.2 million tens years ago compared to that $1 million. And just 18 months ago this same account was worth $2 million after it was at $3 million 2 years ago now up to a hypothetical $4 million.
That same $4 million can be worth $2-2.5 million in a market pull back and adjusted for inflation $1.7-1.6 compared to 10 years ago. So that $4 million doesn’t look that healthy since we are in a bull stock market that last 10-12 years
@@gabrielgonzalez6456 We don't disagree. That's why it's vital to consider asset location as part of your process (episode coming soon). You need to have sufficient cushion from cash + fixed income to weather the storms that will come and result in volatility to your equity portfolio. Given the long runway for early retirees, one must ensure their portfolio can last the duration of their expected lifespan.
When we talk about target retirement savings (e.g. $2.5m-$5m chubby fire), is that including the money tied-up in your main property where you live, i.e. if you have a $1m house with no mortgage would that be included in your target retirement funds? Or is it only what money you have in savings (e.g. in index funds) and pensions? Thank you
Great question, Michelle. Typically this is defined by one’s investment assets only (including cash and pensions). Home value is a part of net worth but not generally considered as part of the “FIRE number”.
It seems I’m a chubby barista.
I wish I found out about FIRE younger. I didn't have a job though so I'm not sure if it would have made a difference anyways
Hi, with reference to those figures that you quoted, are you guys talking about post-tax or pre-tax and per pax or as a couple?
Yes…
I would like $5,000,000 Thanks to my Tesla stock investment in 2015 I'm more than half way there. Thanks Elon!! You saved my ass