Funding FIRE with fish & therealchips
Posted: Tue Sep 30, 2003 7:49 am
Recently Chips has been discussing a few snippets of ideas on the utility of time in relation to the time it takes to save for FIRE vs how much time you have to enjoy FIRE if you wait until your nest egg is large enough. At least I thought that is what he might be getting at as he hasn't fleshed his thinking out a great deal on this issue thus far.
One Chips-like proposal could be the following:
- A FIRE budget which covers essentials for living.
- Retiring at 55 with a 45x multiple of your reduced, basics lifestyle budget.
(A smaller sum than it might first appear because your taxes might be lower at that w/d level and the budget is lower, in my case 40% lower).
- Accepting a longest lifespan of age 100. Acknowledging that in your 80s and 90s you may spend less that in the earlier years of FIRE if only the medical costs issue can be resolved adequately.
- Spending one year's budget out of your nest egg a year, reducing the balance down at an even pace. Investing in a spread of diversified assets to attempt to deliver a less volatile return for every 5-10 year investment cycle.
- Using investment returns above inflation to first plug drops in your net worth due to temporary investment losses and secondly to fund non-essential expenses in the good years (the potential upside would be higher in the earlier years as your nest egg would be a higher multiple and lower in the latter years which may match spending patterns). Having a spouse that understands that this compromise is a choice instead of working ten more years to have more every year guaranteed. Having made the choice, you don't get to complain about a lack of niceties in the bad investment years. Nor does your significant other (if you have one that is).
- Having the option to save an extra sum, say $50k to cover the first 10 years of extra planned non-essential expenses, travel and other niceties that you don't want to not enjoy because of a possible 10 bad early years of FIRE. This is a compromise option which still allows earlier FIRE but affords the things that people dream of early in retirement.
This sort of plan would also serve to turn FIRE from an impossible distant dream to a possible reality because the inital basic FIRE budget sum needed would be considerably less. It will then be up to you to choose whether to fund more travel early on with a single extra sum of money or to work longer to fund annual extras automatically which to use myself as an example would require almost half as much again.
Thoughts Chips & others?
Petey
One Chips-like proposal could be the following:
- A FIRE budget which covers essentials for living.
- Retiring at 55 with a 45x multiple of your reduced, basics lifestyle budget.
(A smaller sum than it might first appear because your taxes might be lower at that w/d level and the budget is lower, in my case 40% lower).
- Accepting a longest lifespan of age 100. Acknowledging that in your 80s and 90s you may spend less that in the earlier years of FIRE if only the medical costs issue can be resolved adequately.
- Spending one year's budget out of your nest egg a year, reducing the balance down at an even pace. Investing in a spread of diversified assets to attempt to deliver a less volatile return for every 5-10 year investment cycle.
- Using investment returns above inflation to first plug drops in your net worth due to temporary investment losses and secondly to fund non-essential expenses in the good years (the potential upside would be higher in the earlier years as your nest egg would be a higher multiple and lower in the latter years which may match spending patterns). Having a spouse that understands that this compromise is a choice instead of working ten more years to have more every year guaranteed. Having made the choice, you don't get to complain about a lack of niceties in the bad investment years. Nor does your significant other (if you have one that is).
- Having the option to save an extra sum, say $50k to cover the first 10 years of extra planned non-essential expenses, travel and other niceties that you don't want to not enjoy because of a possible 10 bad early years of FIRE. This is a compromise option which still allows earlier FIRE but affords the things that people dream of early in retirement.
This sort of plan would also serve to turn FIRE from an impossible distant dream to a possible reality because the inital basic FIRE budget sum needed would be considerably less. It will then be up to you to choose whether to fund more travel early on with a single extra sum of money or to work longer to fund annual extras automatically which to use myself as an example would require almost half as much again.
Thoughts Chips & others?
Petey