FIRE (Financial Independence Retire Early)
# Glossary This is a growing list of commonly used terms in our community. Please suggest more terms not listed here! ____ **Boglehead** = A follower of John C. Bogle's financial philosophies and investing strategies. **COL** = Cost of Living >**LCOL/MCOL/HCOL/VHCOL** = Low/Med/High/VeryHigh Cost of Living **DCA** = Dollar Cost Averaging; the strategy of investing money into the market over many regular intervals of time (as opposed to lump sum investing). **DINK** = Double Income No Kids **FI** = Financial Independence; the ability to live off savings and pay living expenses without needing to be employed. **FIRE** = Financial Independence & Retire Early >**Coast FIRE** = having enough money already invested so that it is not necessary to invest more to achieve FI at the desired retirement age. >**Barista FIRE** = having enough money to retire at the desired retirement age and also getting a part-time job for additional income and health insurance. >**Lean FIRE** = achieving FIRE without having much safety nets for luxuries/children/major health costs during retirement, usually only spending on necessities such as housing, food, and transportation. > **Fat FIRE** = achieving FIRE with the ability to cover unexpected expenses during retirement while living in equal or greater lifestyle as before retirement. **HENRY** = High Earner, Not Rich Yet **HYSA** = High Yield Savings Account **NW** = Net Worth **PITI** = Principal + Interest + Taxes + Insurance **PMI** = Private Mortgage Insurance **SWR** = Safe Withdrawal Rate ____
I watched this video a couple weeks ago, and while it has nothing to do with FI, I thought it was quite interesting how he divides the economic classes. TL;DW: - lower class ($34k income, $3400 net worth) - ~25% of population - truly struggle with emergencies and flirt w/ the federal poverty line; net worth is pretty much nothing (often negative!) due to student debt - middle class - three categories (lower, middle, upper) - lower ($44k income, $71k net worth) - ~20% population - identify more with middle-middle class and tend to get into more debt than necessary by trying to keep up with the Joneses, but _could_ be financially stable w/ some discipline - middle ($81k income, $159k net worth) - ~20% - financially stable, most of assets are in home - upper ($117k income, $307k net worth) - ~20% - passive income and compound interest supplement income; some live paycheck-to-paycheck due to lifestyle inflation (i.e. keep up w/ next group), but some can do really well with investments - upper class - two categories (lower and upper) - lower ($189k income, $747k net worth) - ~10% - specialized professions; most people can get into the lower upper class with discipline (10% savings rate on $65k salary => $787k investments by age 50); little pressure from everyday expenses - upper ($378k income, $2.5M net worth) - ~5% - some college grads working as employees, but a _lot_ of these are business owners At each level, I see two types of people: - savers - have enough cash to weather emergencies, tend to have upward mobility - everyone else - tend to stay in that economic class, and may regress in retirement; routinely keep up with the Joneses and stay in debt I personally have been in the middle to upper middle class for most of my career (started in lower middle class, but that quickly changed), and I'm shooting for lower-upper class to upper-upper class in early retirement. I didn't get any inheritance and don't expect any, and I haven't been particularly lucky with my investments (for every major win, I can show an equal major mistake), I've just been very frugal. Some details: - car(s) - single car for most of my married life; currently have two at 16 and 17 years old; I do most of my own maintenance - house - bought in mid-late 20s and haven't moved - savings rate - was 45%, but it's now 35-40% - current income - upper-middle class range, _might_ get to lower-upper class if I stick with my career; about half my career was middle-middle class - FI target - something like $50-60k spending/year, or $1.5-2M; I plan to be FI around mid-40s, and I intend to keep earning income after FI, but the nature of my work will change Anyway, I really enjoyed this video, and I think it's interesting to compare myself to the various breakdowns, as well as forward to people who argue that the main thing keeping them down is income (despite being middle-middle class or above). What do you think? Do you agree with the breakdown? What do you think the "minimum" income range is for someone who'd like to pursue FI?
I've been reading Yahoo Finance a bit recently due to all of the shifts in the market, and they have a PF section where they cycle through a variety of PF topics. One of them linked to a retirement calculator, which I had a _lot_ of trouble with as someone looking to retire _way_ earlier than typical, so I decided to go look at a few more and compare them. Warning: these are pretty US-centric. # [Smart Asset retirement calculator](https://smartasset.com/retirement/retirement-calculator) - maxes out at 40% savings rate - minimum retirement age is based on birth year (i.e. can't retire before today) - default annual rate of return is 4%? This is worded oddly, because it's called "savings" and is right under "cash savings and investments" - no option for HSA, but you can lump it in with IRA - seems to estimate Social Security income, which is cool - has on option to add a spouse, which was cool This was was pretty awful, but with some fiddling, I got it to spit out some halfway decent numbers. It seems to be a simple flat return tool, so no backtesting or randomness at all, but it _does_ try to account for taxes and whatnot. That said, it got my tax rate _completely_ wrong for some reason. I guess this is acceptable for someone to get a rough idea of what retirement looks like, but it was also really fiddly and buggy (i.e. Social Security age kept resetting to 66 for whatever reason). # My 401k provider (Empower) - minimum retirement age is 50?! - automatically pulled in elective deferrals and employer match, but it was way off (surprising because it's literally the custodian for my 401k...) - can link accounts, but can't add any accounts w/o linking (weird, because my old 401k provider that they bought allowed me to) - assumes 60/30/10 stock/bond/cash split, with no way to adjust it (I'm going 100% stocks) - links with a budgeting app they have internally? Why would I use my 401k as a budgeting app?? - option to simulate what automatically increasing retirement contributions does (not useful for me, but could help others) - option to add kids and estimate college expenses, which was cool This one was absolutely terrible. Not only was it a pain to figure out how to input my numbers, it also didn't really give useful output. Even if I was a typical retiree, I'd _still_ find it largely useless, unless my 401k was literally my _only_ retirement account (which I admit is probably pretty common). # Fidelity brokerage - retirement age must be greater than current age (can't retire _immediately_ - lots of estimates for retirement expenses (i.e. no stupid % of income metric) - can set asset allocation for retirement accounts (domestic, international, bonds, etc) - can link accounts, or just enter their values - can add Social Security, and it'll estimate for you if you want - seems to do some kind of back-testing because portfolio growth isn't a smooth line All in all, I found Fidelity to be pretty good! It's easy to add all of the accounts and provide as much detail as I'd like, and I feel like the result is pretty realistic. # [FiCalc](https://ficalc.app/) Primarily for backtesting withdrawal strategies, and it provides a bunch of tools, such as: - withdrawal strategy - constant dollar, percent of assets, etc - constant withdrawals (e.g. putting a kid through school, pay off house, etc) - extra income - i.e. barista FI or whatever - adjust range of historical data It won't tell you when you can expect to retire, but it'll tell you your retirement plan's chance of success, which is way more important IMO. # [Fire Calc](https://firecalc.com/) Primarily backtesting, but there are some knobs you can mess with as well if you click through the tabs: - pensions/additional income - future retirement date (plus how much you'll contribute until then) - withdrawal strategies - portfolio makeup - additional portfolio additions (house sale, inheritance) and subtractions (one-time expenses at a certain point in retirement) This is the first one I used, so it holds a special place in my heart. # What _I_ personally use I like mucking about with the above, but at the end of the day, I mostly just use my spreadsheet to estimate things. Some specific calculations I find a lot of value in: - FI Date - `EDATE(TODAY(), NPER(...))` - progress toward FI - `1-(NPER(with current assets)/NPER(assuming starting from zero))` - Social Security calculator - [this one exists](https://ssa.tools/), but it assumes _zero_ inflation going forward; so I wrote my own in my spreadsheet that uses average inflation from my working career going forward, and actual inflation numbers going backward; not used in any calculators, but it's nice as a backup plan - withdrawal simulator - how much I'd need to withdraw from tax-deferred accounts before RMDs, by SS max age, and SS min age (helps w/ tax planning) But at the end of the day, the first is the only one that matters. I update my total spending about once/year, my investment accounts when I remember, and my savings rate comes from my budget. I periodically check my FI number against back-tested portfolios, but I've settled on a SWR of 3.5% and assume a 7% real market return. # Conclusion These aren't the only retirement calculators I've played with, but the easier ones to access (i.e. search results or though 401k) tend to be pretty awful, while the good ones are a bit more hidden away. I think with a bit of searching, you can find some decent tools without having to DIY. Then again, I _prefer_ to DIY. Do you have any retirement calculators _you_ like? Do you DIY?
This is exciting for me because: - I model ny taxes in my spreadsheet anyway, so I'm likely to notice a mistake - I usually use FreeTaxUSA to file for free, and this means there's one less party to share my personal information with - my state's taxes are pretty simple, so I don't need state-specific tax software I hope this helps simplify things for some people and save a bit of money as well. I'm going to try it out next year. Do any of you estimate your taxes? Are you interested in trying out this service?
www.madfientist.com
I haven't finished listening to this, and unfortunately there isn't a transcript. According to the comments, the transcript exists on Spotify (I don't have a subscription, sorry), so that can be an option. Anyway, I'm well on my way to my number, so I've been thinking about maximizing my time while I wait for the market to do its thing. I've been listening to a lot of The Money Guy show recently, which has a lot of overlap with the FI mentality, and the recording theme is to optimize for enjoyment. I think that's something I've been forgetting recently, so I'm glad I found this podcast to help keep me grounded. Anyway, thoughts? How are you spending you time now? How to you expect that to change when you're FI? Are there changes you'd like to make to optimize things today?
Here are just the number for all of you degenerates who just want some milestones for your spreadsheets. Average total retirement savings by age: - <35 - $49,130 - 35-44 - $141,520 - 45-54 - $313,220 - 55-64 - $537,560 - 65-74 - $609,230 - >=75 - $462,410 Average 401k balance by age: - <25 - $5,236 - 25-34 - $30,017 - 35-44 - $76,354 - 45-54 - $142,069 - 55-64 - $207,874 - 65 and older - $232,710 And retirement savings targets from various advisors: Fidelity: - 1x by 30 - 3x by 40 - 6x by 50 - 8x by 60 - 10x by 67 Rowley: - 1x by 35 - 5x by 50 - 7x by 70 Anyway, do you like metrics like these?
Sorry last week's post was missing! I've fixed the bug and added better error handling that *should* notify me if it fails again. Thanks to yenahmik for letting me know about the problem.
$120k/yr is a very healthy retirement after you have paid off assets and lower expenses. Yes it’s enough, unless you’re unlucky with health issues which would be a problem if you were at $200k/yr as well.