Assets in dollars/net worth is irrelevant. $500K or $5MM in real estate equity (and everything in between) can BOTH pay you the say $200K you need per year to have a great retirement. 4% rule is not relevant to everyone.
I could listen to you guys talk about this for hours - in fact I have. You guys talk about all the things that have been swirling around in my head for years - but most early retirement blogs and podcasts are either about lifestyle reduction or amassing crazy amounts of money (financial samurai). Thank you.
Enjoy your channel, clearing up things that I have had questions about. I love the flow, no trickery or vague answers.. its real. thanks for the content.
Guys...the questions, answers, interaction is really great. I loved the identity responses...I've said this for years - you are not your job. You have a job identify and your own identify. When folks walk out the door they are not a VP anymore, they are Tom or Sally. Unfortunately, we spend most of our hours at work so that's who folks tend to associate themselves with. Anyway, great vid.
I am glad I found this-- I retired in my fifties (about 5 years ago)-- I waited that long as I felt guilty "wasting" my education. I agree the hardest is just feeling that I can spend some of the money I saved.
@@TwoSidesOfFI I had set my number pretty high and my husband has a number that is a little lower. I don't budget, but, I am not a spender. I ask if I need it and I think more about how much I will use. I spend on health insurance, food and before covid a couple of good vacations per year. I worked with a financial planner since age 34 ---and fortunately although a lot of Americans have seen their worth decrease, our total net worth probably went up a couple of million dollars in the past 4 years.--- I say to myself , I can spend up to 50% of how much my portfolio has increased in the past year.
31:38 The positive side happens when for some reason the conversation goes to FIRE and someone you don't know says "Me too! I am doing that!". Instant friend right there. It's only happened twice so far though :)
Jason here - oh man if you ever meet Eric you need to hear that story. Scary stuff for them (that worked out) but definitely some screaming and arguing along the way!
Jason with perfect deadpan delivery: "I said family. I didn't say friends. Apparently my priorities only lie with people I don't know and my family. Everybody in between, you can just go to hell." Spit my drink across the room!😆
I stopped drinking a few gulps before, with the 'level up' to crewed yacht / Eric's trawler and then the subtle question about sharing the increasing pot of money ...... yep - i lost it too -- !!! None of my friends nor I talk about even bequests (i am old relative to most of my friends) ... LOL
I know it is very personal but I thinks it does help to provide your FI number and provide some of the assumptions around that number. Doing so with others will help gage their situation. I would love to see others share as well along with few of their assumptions. 3 years ago I retired at 48years old after accumulating $8.5 million in taxable and IRA accounts. Aside from ensuring I can cover the basics such as food, shelter, and health insurance, I also planned out being able to send 2 kids to private colleges and for my wife and I to take at least 1 trip overseas a year.
Thanks for the comment. You're right, it is very personal. As we discussed in the "So, What's your FI Number" episode, it's always a balance with respect to the level of detail we're comfortable sharing + the utility we're trying to provide. We did disclose our ranges in that episode along with the all-important logic of how that number is arrived at. Importantly, "the number" varies so much based upon where you live and the lifestyle you want to live, along with your expected lifespan - that any two numbers are almost impossible to compare. A belated congratulations to you on your early retirement! It sounds like you should be well set to take care of all the things you wish to do, which is great. Best wishes to you.
11:51 I think that's a great point. Being open to change the withdrawal rate. Just because I can do 4% doesn't mean I will every year. We've budgeted for 2x international trips a year in our FIRE number and once we are there, having extra money coming in would translate on trip #3 or part of our "Experiences" bucket. Thanks for the interesting content.
Thanks, Hugh. Flexibility is certainly helpful. And there are lots of different approaches to WR, a number of which do involve flexing your rate in response to market conditions.
I love that answer to what are you going to do? Be a spouse, father, continue to learn, continue to be pursue my interests. I think people are so used to having one main "thing" that they are "doing" people forget about the different roles. Love your answers to the Q&A!!!! Five stars!
Great episode! Speaking of new identities, I heard a story about some eccentric guy that had floor seats for the Lakers and his business card just had three things: Architect, Basketball, and something else (forgot). That could be a fun exercise to figure yours out. Joining the fire movement soon so maybe mine will be Fitness, Guitar, Travel? I don't know yet lol.
5% chances of failure is assuming your action plan is decided now and cannot adapt. If you have any kind of buffer, you should be able to trim your spending to get back onto a good trajectory at the cost of spending less.
Great conversation guys. But I just don't see a situation where I would have any reservations about just telling anyone, "I'm retired and I'm doing whatever I feel like on any given day."
Jason here - thanks! We appreciate that, Dan. And sometimes it works for me too! But I’ve learned I need to choose how and when to communicate my status. Some people are just kinda awful about it. But I don’t let it get to me when they are!
@@TwoSidesOfFI That's likely the point I would choose the followup response of either, "Get stuffed" or possibly, "You'll understand once you're retired too." Assuming my wife hasn't anticipated and started pulling me away before then.
Great show guys! I have a few topics I was hoping you can cover (or point me to where you did already). 1. Healthcare premiums and medical unknowns as we age worry me, how are you handling the unknowns in your modeling and what do you do for healthcare insurance? 2. There are a lot of decent modeling tools out there, are there any that you all recommend? Any tips or pitfalls in modeling you can share? 3. Any thoughts behind distribution of assets to enable the drawdown phase (tax deferred, tax free, taxable, dividends, etc) that may be helpful to the audience? 4. How hard was / is it to convince yourself to walk away during peak earning years? Recently found you channel and appreciate your perspectives.
Thanks, Brian! We appreciate the questions and are really glad to learn you are liking the show. We will cover healthcare insurance in an upcoming episode. We will have a guest with a lot of benefits experience for that show and I think you'll find much of what you're asking about answered - but please let us know if there's more you'd like us to cover! NewRetirement.com (there is a free version) does let you model healthcare costs and allows you to show the impact of increasing costs on your portfolio survival likelihood. We haven't talked much about the nuts and bolts of draw down phase too much yet but it will be touched upon soon, and in more detail before too long. We also recently recorded a show on asset allocation that will air later this fall. Jason here - walking away from peak earnings can be tricky, that's for sure! For me I never truly hesitated once I had locked in a date. Any unsureness I had was also less about money left on the table vs. just whether leaving my career was "the right thing to do". It's also true that I trusted the model I had been working from and while more money certainly only increases likelihood of success, I also knew I wanted to move on to next things. So my eagerness to get to that phase of life definitely trumped any desire to accumulate more money. I hope that makes sense!
Great information gentlemen... Hello from Seattle. I'm approaching retirement, thinking about Florida, Nevada, or Arizona for retirement. I already live a Minimalist lifestyle, so need for lifestyle reduction. I'm' thinking that low property taxes and other low cost of living is the most important thing for someone like me. Maybe Thailand...
*The reality of the rich and the poor is this: the rích Invest their money and spend what is left. The poor spend their money and invest what is left"*
@@TwoSidesOfFI FYI, these are spams targeting people to contact fake traders and lose their money. You may want to keep an eye on the comments for these. But congrats for the spammers considering your channel worth the effort!
Thanks for the question! We actually recorded a show on this topic recently and it will likely air in the fall. In the meantime- we are both strong believers in indexed mutual funds. Jason’s portfolio is a bit more complex and does feature bonds and REITs as well as other alternatives. Eric is more closely aligned to a “Simple Path to Wealth” whole market fund approach. Stay tuned!
The main thing I'm concerned about, is how will I feel when I'm like 2-3 years out from hitting my goal. Because I don't wana work now and I'm 28 haha but when I'm 48 and 2 yrs from having my number invested in index funds, property. How will I force myself to continue to work, what if I just think "this is enough, fuck it" haha 1st world problem I know.
I would love to hear why “dying with $40mm in ur bank account” feels like a fail? But tweak the situation, and instead use a current $10mm or $20mm as your baseline now, with an upside of $300mm when you die. Then is it a failure too, ratios all remaining the same? I guess what I am trying to get at is, if $40mm when you die is a failure because then you aren’t living your life enough now, what happens if you bump the baseline to a higher start number that more easily covers the lifestyle you want to take advantage of? Does the answer remain the same?
Thanks for the comment. Our sentiments may not have been clear from the video. We think it's more about having a plan for your money vs. dying with large sums in the bank. That doesn't necessarily mean you have to spend it all, to your point. Rather, it's a combination of being mindful of your portfolio value over time and being intentional about how you deploy money - whether on your own expenses, charitable giving, establishing a legacy for your heirs, etc.
@@TwoSidesOfFI So would you say, if your baseline now was $20mm instead of $2-$5mm range, then the model would change significantly, because the ratios relative to the cost of living are so different? Thanks! :) :)
@@jmueller8081 Jason here - At least speaking for myself, yes the model would be substantially different if I suddenly found myself with $20M. For sure there would be some spending changes (business/first class travel sounds like a good start!) and perhaps a second home. Definitely a few more lavish dinners :) But our expenses would not change drastically on net. I do think we would start structuring directed giving immediately as well. I haven't spent much time daydreaming on this topic but it would be a nice "problem" to have!
Great videos guys. Really appreciate the content and what you share. I am 56 and sold my company 10 years ago. because a large portion of my assets were illiquid I have been doing some side hustles since and that has been covering my annual costs. I am just about to liquidate those assets and would be in a position to freely invest the proceeds. My question is about withdrawal rate. I am planning to continue some of my side hustles while I withdraw up to 2% for the next four years with the hope of growing the portfolio during those years and only increasing the rate when I reach my target number. What are your thoughts on such an approach.
Hi Arif, thanks for the feedback. We're always supportive of lower WR if you've got other sources of income. Anything that lets you draw down less will let your portfolio grow more, right? And your strategy to draw less during those early years where you are most susceptible to Sequence of Returns Risk is certainly prudent. Best wishes to you!
When you talk about a withdrawal rate, are you talking about drawing down from capital or drawing down from your passive income? When i think about retiring, I want to live 100% from my monthly interest from my assets. I never want to decrease my capital amount. Case in point I want to hold dividend paying stock and never sell the stock, but instead just spend the monthly dividends. Why don’t any FIRE folks talk about that and only focus on a withdrawal rate? Am I just way to cautious? How could you withdraw from your capital and still sleep at night? Thanks for your time and insight!
Great question, and the answer is "it depends". Most people are drawing from their assets in some fashion, which may be reduced vs. what it would be otherwise if they didn't also have other income sources - passive earnings, pension, side hustles... Some are able to fund their expenses largely/solely via dividend earnings as you're talking about. Still others employ a bucket strategy (see Retirement Manifesto blog) where they refill their cash needs via sales (from rebalancing or otherwise) of stocks or bonds. Done right you can follow this approach without depleting your assets prior to your lifespan.
Growth and dividend stocks are just complementing methods to create gains. Most of the stocks can produce both in various ratios. If the dividend payments do not get taxed in your investment vehicle (e.g. in Finland dividends were always taxed - although slightly more favorably than capital gains, we only recently got a pension investment vehicle in which you can buy/sell and receive dividends without triggering taxation - you only pay tax when you draw money out of it), ultimately it doesn't matter which ones you chose. My portfolio is also built to be able to live on the dividends alone, but who knows...
Perhaps it's only me but I don't care what 'your number' is (assuming that's the total of your individual assets) but what I'm interested in are some real world numbers as an example that includes the many factors you mention. Withdrawal rates and why? From how large a portfolio? Real world living expenses. Maybe yours maybe yours but anonymously. Future proofing? A spreadsheet format, or a simple white board that lists the factors that go into FIRE. Of course they will different for everyone and sure there's a risk that someone in small town Nebraska is going to think that their 2 acres with a 1200 SF home on it will be confused by numbers that aren't theirs, but really? And how did you accumulate 'between 2 and 5 million'? Perhaps this has all been answered before or under different venues so apologies if I'm a little late to the table and appreciate the videos either way. Thank You.
Thanks for the question, Larry. We haven't done a detailed budgeting episode yet, but some of your questions are indeed spoken to in earlier videos you can find on our channel. You're absolutely right that expenses will differ quite a bit based upon lifestyle, where you live, etc. Thanks for your support!
Jason, thank you for saying that you made the conscious choice to live in California (on the central coast) and made allowances to spend accordingly. I live in California as well and am constantly confronted with how “terrible” it is to live in this state. But I, aside from some of our political issues, love this state and its natural beauty. My family lives here as well, which will be a crucial part of my retirement life.
Jason here - you’re welcome! Oh yes many in the FIRE community and otherwise like to talk down about living here. Geoarbotrage is a completely valid path. But for us, climate and a whole host of other factors meant that this is the right place for us. I talk more about this in our “Where to Live” episode. Best wishes to you on your journey!
When you're withdrawing your %, how are you doing that? I.e if you have multiple types of assets, index funds, Individual stocks, crypto, cash reserves. Are you diluting each asset class by the same % to get your yearly figure. Because that seems very in depth to me. But if you only dilute 1 assets - say S&P500 index, you'll be un-balancing your portfolio, presuming you have a balanced portfolio to begin with.
Great question, and the answer will differ. Some people are largely or entirely funding their expenses via dividends. Others, like Jason, will sell assets from their taxable account. In that case, you want to ensure your target asset allocation are maintained. So sales could be just that - selling off assets that have done well (in an up market) to maintain allocation. Or it could be selling down of fixed assets like bonds when stocks are down, knowing you will buy more later to adjust the allocations. Some people make those sales / bucket refills annually, while others do it more frequently.
@@TwoSidesOfFI Thank you for responding. Its something that has puzzled me, despite being decades from retirement lol great content guys, I really like your approach to the topic and your mature delivery.
Jason here - Interesting question. I think for me it just comes down to my generally more conservative (measure 5X, cut once) approach particularly when it comes to finances. I’m definitely not obsessive about Sequence of Return Risk. But it is the potentially big gotcha in the early years so I do want to be mindful of it. That said, I do think it’s true that my tendency to go to a spreadsheet model is just a comfortable place for me. I did plenty of that in the workplace so it’s always a first reaction for me when it comes to personal finance.
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Do you have a question you'd like us to cover in a future Q&A episode? Comment below or send it in via our SpeakPipe: www.speakpipe.com/TwoSidesOfFI
Assets in dollars/net worth is irrelevant. $500K or $5MM in real estate equity (and everything in between) can BOTH pay you the say $200K you need per year to have a great retirement. 4% rule is not relevant to everyone.
I could listen to you guys talk about this for hours - in fact I have. You guys talk about all the things that have been swirling around in my head for years - but most early retirement blogs and podcasts are either about lifestyle reduction or amassing crazy amounts of money (financial samurai). Thank you.
Thanks very much, Richard! We appreciate your support.
This might just be the most honest and real channel on retirement and financial planning on all of YT. Kudos and gratitude to you both.
Thank you so much, Taylor. We truly appreciate your kind words and your support!
Enjoy your channel, clearing up things that I have had questions about. I love the flow, no trickery or vague answers.. its real. thanks for the content.
Thanks, Kathleen! Welcome to the channel
Guys...the questions, answers, interaction is really great. I loved the identity responses...I've said this for years - you are not your job. You have a job identify and your own identify. When folks walk out the door they are not a VP anymore, they are Tom or Sally. Unfortunately, we spend most of our hours at work so that's who folks tend to associate themselves with. Anyway, great vid.
Thanks, Dan! We really appreciate the feedback. So glad you are enjoying the show. We are 100% in agreement about identity. Cheers
I am glad I found this-- I retired in my fifties (about 5 years ago)-- I waited that long as I felt guilty "wasting" my education. I agree the hardest is just feeling that I can spend some of the money I saved.
Thanks, Sharon. How have you helped yourself become more comfortable with spending?
@@TwoSidesOfFI I had set my number pretty high and my husband has a number that is a little lower. I don't budget, but, I am not a spender. I ask if I need it and I think more about how much I will use. I spend on health insurance, food and before covid a couple of good vacations per year. I worked with a financial planner since age 34 ---and fortunately although a lot of Americans have seen their worth decrease, our total net worth probably went up a couple of million dollars in the past 4 years.--- I say to myself , I can spend up to 50% of how much my portfolio has increased in the past year.
31:38 The positive side happens when for some reason the conversation goes to FIRE and someone you don't know says "Me too! I am doing that!". Instant friend right there. It's only happened twice so far though :)
Finally getting back into watching these videos, Looks like I have to play catch up as you guys have put out a lot of content in the past 6 months.
Thanks! We appreciate the support.
The Italy comments made me laugh out loud 😂 And idea of long-term goal of giving was inspiring ❤️
Jason here - oh man if you ever meet Eric you need to hear that story. Scary stuff for them (that worked out) but definitely some screaming and arguing along the way!
Appreciate the content and insights gentlemen. Confidently stepping away into a new era of my life in 2024.
Thanks, James! 2024 is super close, so early congrats from us both! It seems you and Eric will have plenty to discuss being on similar timing.
Iam 61, planning my early retirement. Your personal endeavors made me think of things i wouldnt of otherwise. Thanks Eric, Jason
You’re welcome, Pierre. We are so glad to hear that. Thanks for your support!
Great episode, and an extra thumbs up for covering my question with such solid reasoning! Thanks guys.
Thank you! Really glad you enjoyed it - and thank you for sharing your question with us. Cheers
Jason with perfect deadpan delivery: "I said family. I didn't say friends. Apparently my priorities only lie with people I don't know and my family. Everybody in between, you can just go to hell." Spit my drink across the room!😆
I stopped drinking a few gulps before, with the 'level up' to crewed yacht / Eric's trawler and then the subtle question about sharing the increasing pot of money ...... yep - i lost it too -- !!! None of my friends nor I talk about even bequests (i am old relative to most of my friends) ... LOL
😆😆🤭😆😆
I know it is very personal but I thinks it does help to provide your FI number and provide some of the assumptions around that number. Doing so with others will help gage their situation. I would love to see others share as well along with few of their assumptions.
3 years ago I retired at 48years old after accumulating $8.5 million in taxable and IRA accounts. Aside from ensuring I can cover the basics such as food, shelter, and health insurance, I also planned out being able to send 2 kids to private colleges and for my wife and I to take at least 1 trip overseas a year.
Thanks for the comment. You're right, it is very personal. As we discussed in the "So, What's your FI Number" episode, it's always a balance with respect to the level of detail we're comfortable sharing + the utility we're trying to provide. We did disclose our ranges in that episode along with the all-important logic of how that number is arrived at. Importantly, "the number" varies so much based upon where you live and the lifestyle you want to live, along with your expected lifespan - that any two numbers are almost impossible to compare.
A belated congratulations to you on your early retirement! It sounds like you should be well set to take care of all the things you wish to do, which is great. Best wishes to you.
11:51 I think that's a great point. Being open to change the withdrawal rate. Just because I can do 4% doesn't mean I will every year. We've budgeted for 2x international trips a year in our FIRE number and once we are there, having extra money coming in would translate on trip #3 or part of our "Experiences" bucket. Thanks for the interesting content.
Thanks, Hugh. Flexibility is certainly helpful. And there are lots of different approaches to WR, a number of which do involve flexing your rate in response to market conditions.
29% return in the stock market in 2021 definitely helped everyone a ton last year!
It sure did!
Interesting. Thanks
thank you both for sharing your journey! this information is very valuable
I love that answer to what are you going to do? Be a spouse, father, continue to learn, continue to be pursue my interests. I think people are so used to having one main "thing" that they are "doing" people forget about the different roles. Love your answers to the Q&A!!!! Five stars!
Thanks very much, John!
Another solid episode.
Good to see Eric wearing black shirts again.
Great episode! Speaking of new identities, I heard a story about some eccentric guy that had floor seats for the Lakers and his business card just had three things: Architect, Basketball, and something else (forgot). That could be a fun exercise to figure yours out. Joining the fire movement soon so maybe mine will be Fitness, Guitar, Travel? I don't know yet lol.
Thanks, Jeri! That sounds like a really fun exercise. Best wishes to you!
5% chances of failure is assuming your action plan is decided now and cannot adapt.
If you have any kind of buffer, you should be able to trim your spending to get back onto a good trajectory at the cost of spending less.
We agree 100%, Omry!
Great conversation guys. But I just don't see a situation where I would have any reservations about just telling anyone, "I'm retired and I'm doing whatever I feel like on any given day."
Jason here - thanks! We appreciate that, Dan. And sometimes it works for me too! But I’ve learned I need to choose how and when to communicate my status. Some people are just kinda awful about it. But I don’t let it get to me when they are!
@@TwoSidesOfFI That's likely the point I would choose the followup response of either, "Get stuffed" or possibly, "You'll understand once you're retired too." Assuming my wife hasn't anticipated and started pulling me away before then.
Great show guys! I have a few topics I was hoping you can cover (or point me to where you did already). 1. Healthcare premiums and medical unknowns as we age worry me, how are you handling the unknowns in your modeling and what do you do for healthcare insurance? 2. There are a lot of decent modeling tools out there, are there any that you all recommend? Any tips or pitfalls in modeling you can share? 3. Any thoughts behind distribution of assets to enable the drawdown phase (tax deferred, tax free, taxable, dividends, etc) that may be helpful to the audience? 4. How hard was / is it to convince yourself to walk away during peak earning years? Recently found you channel and appreciate your perspectives.
Thanks, Brian! We appreciate the questions and are really glad to learn you are liking the show.
We will cover healthcare insurance in an upcoming episode. We will have a guest with a lot of benefits experience for that show and I think you'll find much of what you're asking about answered - but please let us know if there's more you'd like us to cover! NewRetirement.com (there is a free version) does let you model healthcare costs and allows you to show the impact of increasing costs on your portfolio survival likelihood.
We haven't talked much about the nuts and bolts of draw down phase too much yet but it will be touched upon soon, and in more detail before too long. We also recently recorded a show on asset allocation that will air later this fall.
Jason here - walking away from peak earnings can be tricky, that's for sure! For me I never truly hesitated once I had locked in a date. Any unsureness I had was also less about money left on the table vs. just whether leaving my career was "the right thing to do". It's also true that I trusted the model I had been working from and while more money certainly only increases likelihood of success, I also knew I wanted to move on to next things. So my eagerness to get to that phase of life definitely trumped any desire to accumulate more money. I hope that makes sense!
@@TwoSidesOfFI thanks, Guys. Very helpful. I look forward to the future episodes!
love the input, thank you😉
Thank you, Heidi! We’re so glad you like it.
Great information gentlemen... Hello from Seattle. I'm approaching retirement, thinking about Florida, Nevada, or Arizona for retirement. I already live a Minimalist lifestyle, so need for lifestyle reduction. I'm' thinking that low property taxes and other low cost of living is the most important thing for someone like me. Maybe Thailand...
1st merch idea, T shirt. " You deserve to be invaded' 😂
Ha! Love it. We both cracked up over that comment during editing.
*The reality of the rich and the poor is this: the rích Invest their money and spend what is left. The poor spend their money and invest what is left"*
This is the kind of information that we don’t get from most youtubers..
Bitcoin is my finance present and future investment, the wisest decision have done to diversify portfolio
I did traded on my own but it only left in loss chasing market dip.
Real estate investment is so less profitable to investors as crypto trading...
@@TwoSidesOfFI FYI, these are spams targeting people to contact fake traders and lose their money. You may want to keep an eye on the comments for these. But congrats for the spammers considering your channel worth the effort!
Can you discuss how your investments are allocated? stocks, funds, index, reits, etc
Thanks for the question! We actually recorded a show on this topic recently and it will likely air in the fall. In the meantime- we are both strong believers in indexed mutual funds. Jason’s portfolio is a bit more complex and does feature bonds and REITs as well as other alternatives. Eric is more closely aligned to a “Simple Path to Wealth” whole market fund approach. Stay tuned!
The main thing I'm concerned about, is how will I feel when I'm like 2-3 years out from hitting my goal. Because I don't wana work now and I'm 28 haha but when I'm 48 and 2 yrs from having my number invested in index funds, property. How will I force myself to continue to work, what if I just think "this is enough, fuck it" haha 1st world problem I know.
I really think Eric achieved FI many years ago. At least that's the kind of FI I envision for myself.
On point! Sometimes we fail to see that which is right in front of us. Thanks for this. - Eric
I would love to hear why “dying with $40mm in ur bank account” feels like a fail? But tweak the situation, and instead use a current $10mm or $20mm as your baseline now, with an upside of $300mm when you die. Then is it a failure too, ratios all remaining the same?
I guess what I am trying to get at is, if $40mm when you die is a failure because then you aren’t living your life enough now, what happens if you bump the baseline to a higher start number that more easily covers the lifestyle you want to take advantage of? Does the answer remain the same?
Thanks for the comment. Our sentiments may not have been clear from the video. We think it's more about having a plan for your money vs. dying with large sums in the bank. That doesn't necessarily mean you have to spend it all, to your point. Rather, it's a combination of being mindful of your portfolio value over time and being intentional about how you deploy money - whether on your own expenses, charitable giving, establishing a legacy for your heirs, etc.
@@TwoSidesOfFI So would you say, if your baseline now was $20mm instead of $2-$5mm range, then the model would change significantly, because the ratios relative to the cost of living are so different? Thanks! :) :)
@@jmueller8081 Jason here - At least speaking for myself, yes the model would be substantially different if I suddenly found myself with $20M. For sure there would be some spending changes (business/first class travel sounds like a good start!) and perhaps a second home. Definitely a few more lavish dinners :) But our expenses would not change drastically on net. I do think we would start structuring directed giving immediately as well. I haven't spent much time daydreaming on this topic but it would be a nice "problem" to have!
Great videos guys. Really appreciate the content and what you share. I am 56 and sold my company 10 years ago. because a large portion of my assets were illiquid I have been doing some side hustles since and that has been covering my annual costs. I am just about to liquidate those assets and would be in a position to freely invest the proceeds. My question is about withdrawal rate. I am planning to continue some of my side hustles while I withdraw up to 2% for the next four years with the hope of growing the portfolio during those years and only increasing the rate when I reach my target number. What are your thoughts on such an approach.
Hi Arif, thanks for the feedback. We're always supportive of lower WR if you've got other sources of income. Anything that lets you draw down less will let your portfolio grow more, right? And your strategy to draw less during those early years where you are most susceptible to Sequence of Returns Risk is certainly prudent. Best wishes to you!
When you talk about a withdrawal rate, are you talking about drawing down from capital or drawing down from your passive income? When i think about retiring, I want to live 100% from my monthly interest from my assets. I never want to decrease my capital amount. Case in point I want to hold dividend paying stock and never sell the stock, but instead just spend the monthly dividends. Why don’t any FIRE folks talk about that and only focus on a withdrawal rate? Am I just way to cautious? How could you withdraw from your capital and still sleep at night? Thanks for your time and insight!
Great question, and the answer is "it depends". Most people are drawing from their assets in some fashion, which may be reduced vs. what it would be otherwise if they didn't also have other income sources - passive earnings, pension, side hustles... Some are able to fund their expenses largely/solely via dividend earnings as you're talking about. Still others employ a bucket strategy (see Retirement Manifesto blog) where they refill their cash needs via sales (from rebalancing or otherwise) of stocks or bonds. Done right you can follow this approach without depleting your assets prior to your lifespan.
Growth and dividend stocks are just complementing methods to create gains. Most of the stocks can produce both in various ratios. If the dividend payments do not get taxed in your investment vehicle (e.g. in Finland dividends were always taxed - although slightly more favorably than capital gains, we only recently got a pension investment vehicle in which you can buy/sell and receive dividends without triggering taxation - you only pay tax when you draw money out of it), ultimately it doesn't matter which ones you chose. My portfolio is also built to be able to live on the dividends alone, but who knows...
Perhaps it's only me but I don't care what 'your number' is (assuming that's the total of your individual assets) but what I'm interested in are some real world numbers as an example that includes the many factors you mention. Withdrawal rates and why? From how large a portfolio? Real world living expenses. Maybe yours maybe yours but anonymously. Future proofing? A spreadsheet format, or a simple white board that lists the factors that go into FIRE. Of course they will different for everyone and sure there's a risk that someone in small town Nebraska is going to think that their 2 acres with a 1200 SF home on it will be confused by numbers that aren't theirs, but really? And how did you accumulate 'between 2 and 5 million'? Perhaps this has all been answered before or under different venues so apologies if I'm a little late to the table and appreciate the videos either way. Thank You.
Thanks for the question, Larry. We haven't done a detailed budgeting episode yet, but some of your questions are indeed spoken to in earlier videos you can find on our channel. You're absolutely right that expenses will differ quite a bit based upon lifestyle, where you live, etc.
Thanks for your support!
Jason, thank you for saying that you made the conscious choice to live in California (on the central coast) and made allowances to spend accordingly. I live in California as well and am constantly confronted with how “terrible” it is to live in this state. But I, aside from some of our political issues, love this state and its natural beauty. My family lives here as well, which will be a crucial part of my retirement life.
Jason here - you’re welcome! Oh yes many in the FIRE community and otherwise like to talk down about living here. Geoarbotrage is a completely valid path. But for us, climate and a whole host of other factors meant that this is the right place for us. I talk more about this in our “Where to Live” episode. Best wishes to you on your journey!
When you're withdrawing your %, how are you doing that? I.e if you have multiple types of assets, index funds, Individual stocks, crypto, cash reserves. Are you diluting each asset class by the same % to get your yearly figure. Because that seems very in depth to me. But if you only dilute 1 assets - say S&P500 index, you'll be un-balancing your portfolio, presuming you have a balanced portfolio to begin with.
Great question, and the answer will differ. Some people are largely or entirely funding their expenses via dividends. Others, like Jason, will sell assets from their taxable account. In that case, you want to ensure your target asset allocation are maintained. So sales could be just that - selling off assets that have done well (in an up market) to maintain allocation. Or it could be selling down of fixed assets like bonds when stocks are down, knowing you will buy more later to adjust the allocations. Some people make those sales / bucket refills annually, while others do it more frequently.
@@TwoSidesOfFI Thank you for responding. Its something that has puzzled me, despite being decades from retirement lol great content guys, I really like your approach to the topic and your mature delivery.
@@TwoSidesOfFI Technically you would want to sell assets that have done poorly and not the ones that are continuing to do well. :)
About other people's opinions about your life choices, I'm a millennial so I'm practiced in the art of ignoring boomer judgments. Comes in handy 😌
We each need to chart our own path, right?
Do you think your concerns about withdrawal rates and general calculations equals som form of job related levels of stress?
Jason here - Interesting question. I think for me it just comes down to my generally more conservative (measure 5X, cut once) approach particularly when it comes to finances. I’m definitely not obsessive about Sequence of Return Risk. But it is the potentially big gotcha in the early years so I do want to be mindful of it.
That said, I do think it’s true that my tendency to go to a spreadsheet model is just a comfortable place for me. I did plenty of that in the workplace so it’s always a first reaction for me when it comes to personal finance.
Will/do you guys have mortgages when you Fire?
Eric here responding, my wife and I own our home, so no mortgage. J has one.
i have some q