4 years to FIRE

[Anne]

Hi everyone. My name is Anne, and I'm confused about dryer sheets.

I am rebuilding my life after going through a whirlwind marriage and divorce that cost me a lot of money and unhappiness. One of the things that experience made me realize about myself is that I got married because I thought I was supposed to... because I thought that's just the path that one's life is supposed to take. When I realized that that wasn't the case, I started challenging other assumptions that I'd been making about life... one of these being that you w*rk until at least 60. I stopped taking the idea of a predetermined, socially-mandated "retirement age" for granted. I found Clyatt's book and now here I am.

I turn 30 later this year and my goal is to be able to retire by my 34th birthday. This is highly dependent on my ability to stick it out in my j*b for those years. I make a very good living as a lawyer in BIGLAW and I LBMM, allowing me to save/repay debt/invest about 85% of my take-home pay. I have student loan debt which will be repaid by my 30th birthday (I can't imagine a better present to myself--I had $115M in loans when I graduated, and they've really been an emotional burden), and no other debt except my mortgage. My plan after the student loans are gone is to continue to max out my 401(k), invest my take-home pay (after expenses) in taxable mutual funds, and put bonuses towards paying off my mortgage early. If I do all of this and the mutual funds average 8%, I should have a net worth of $1MM in 2012 comprising about $600M in taxable, $170M in 401(k), a paid-off home and $20M in cash.

I realize that's a lot of "if." I really dislike my j*b, and 4 more years seems like an eternity. I am okay with the idea that I may leave my job or be let go and have to w*rk at a lower-paying (but lower-stress) job for much longer. But the idea of putting in a little more time for a lifetime of independence is very motivating, I must say.

Anyway, I'm really happy to have found these forums and look forward to becoming a dryer sheet aficionado. Would welcome any of your thoughts.

 

[Urchina]

Anne,

Welcome to the boards! I'm new here myself, but loved your post (my DH and I are also on the young end of the spectrum here). It sounds like you have both motivation and a plan, and that counts for a lot.

You might also want to max out an IRA, if you're eligible for one. The extra $5K a year sounds like a drop in the bucket for you, but with the power to compound tax-free it might be a very nice buffer when you hit 60.

Have fun, and we'll be seeing you.

 

[dumpster56]

A lawyer who hates her job. Wow. And I thought you guys just loved being like Perry mason!O0

Anyway you go and get out of the rat race at 34, I still say there is a wonderful person out there for you to spend your years with. .

Good luck.

 

[travelover]

Welcome Anne. We are looking forward to hearing more about / from you.

 

[bssc]

Hi and welcome.

Yes, you can retire before 60. Or 65.

Well, Martha might be able to give you some tips about dealing with the law. It sounds like you are well on your way to FIREing. Have you run your numbers through FIRECalc yet?

 

[MooreBonds]

Welcome Anne,

I'm a 31 year old FIRE apprentice who is a little familiar with the position you find yourself in: I worked for my father's construction company through college, and up through Nov 07. Was assigned to a 2-year project of insanely high stress and incredible neglect on the part of my father and ridiculous meddling on the part of my brother. Thankfully, it was incredibly successful (largely due to a certain person's efforts ), and the financial compensation allowed me to greatly move up a potential FIRE date.

At any rate, after the project was over in Oct 06, I knew I wanted out. I tried to leave, but my father pleaded with me to stay for "a few more months" (famous last words) to get a project off the ground. I stayed, but was miserable (thankfully, not nearly as miserable as the previous project).

I ended up saying enough was enough, and started putting the feelers out, and quickly found my present career - which could be my perfect fit career-wise: an excellent use of my experience and background in a somewhat related field (building design).

So, while many things can seem unbearable, try to pinpoint just what it is that is unbearable. Is it really that annoying co-worker, or could it simply be some underlying factor that's letting something else become so more irritating than it normally would be? Or, are you simply not cut out for being a lawyer (as I'm not cut out for being a contractor). Even though you're successful at it, it doesn't mean you have to literally lose years of your life just to earn money, so you can spend more, so you [-]have to [/-]can work more, so you can spend more, etc.

The answer to your question of staying in a toxic environment for just (insert time period) vs working years longer in a more enjoyable job is a difficult one which only you can answer, as only you can feel what you go through on a day-to-day basis and only you know truly how bad it is (or isn't). Just remember that there is a big difference between annoying work environments (which we ALL have) and truly toxic environments which literally eat away at your body. The former should be put up with, while the later should (under most circumstances) be fled from.

If I hadn't received the financial rewards from that insane project, there's no way in hell I would have stayed as long as I did. In fact, if the project was looking mediocre halfway through, I likely would have bailed before the end, as there were periods of entire MONTHS where the ONLY thought that kept me from crying, going insane, and having a breakdown was the realization that I would be able to retire in a few short years if I just keep looking straight ahead, focused on the goal, and finished up the project. Financially, I'm taking a hit working for someone else vs my father, but I can do my 40-44 hrs/week now, walk out the door, and not have someone act like I'm slacking off for not working 20+ more hours/week (like I used to do). The financial differential - while large ($20-$30k/year) - is not only worth the peace of mind, but several financial factors have resulted in me being able to bypass that and still be on track to FIRE before I'm 40.

If I had to do it all over again, I probably wouldn't have changed anything - except try to remind myself that none of the things that cause us stress today will ever matter 5 years from now. Just keep reminding yourself that in the midst of your next stressful situation.

 

[Anne]

Thanks everyone for the warm welcome.

@Urchina: I am not eligible for a Roth nor a deductible tIRA, unfortunately.

@newguy: I haven't given up on love; actually I'm currently in a happy relationship with a great guy. I have just become disillusioned with the idea that love is a means to an end (marriage).

@bssc: I haven't done a lot with FIRECalc because I'm still trying to figure out a good asset allocation. I need to do that sooner rather than later as I've decided to start my taxable investing next month. I'm still confused about taxable v. tax-deferred and buckets... so I have some homework to do.

@MooreBonds: That was a very thought-provoking story. I've thought about my options--quit now or stay a while to build up a nest egg--and I thinK I would really regret quitting when I have a great opportunity to earn. I've realized that a lot of the stress from my job is self-imposed. I'm trying to relax a little bit and focus on doing the best I can and continuing to bill just enough hours to earn my keep. That's all I can do. I am originally from St. Louis BTW.

 

[ziggy29]

Welcome aboard, Anne. Have you given any thought to a more fulfilling "second career" -- something less motivated by high income but more by something you may feel a passion for? I ask primarily because that could affect how you structure your portfolio -- in other words, it changes whether or not you will need to structure your allocation to produce an "income stream" when you kiss "big law" goodbye.

If you had a different occupation -- at least one which pays the bills, which may not be hard if you LBYM and own your home free and clear -- you could probably keep a portfolio of almost 100% equities at your age. But if you completely drop out of the w*rk force, you may need something more like a "buckets of money" strategy where you only invest above and beyond an amount of money you need for the next few years of income.

There isn't a right or wrong answer to whether or not you quit completely or make a career change -- but it does, IMO, affect how the optimal portfolio should be constructed.

 

[Anne]

Thanks ziggy. I am not at all averse to working part-time, freelancing, or taking one-off projects in ER. What I do not want to do is have to go to another 9 to 5 (or 8 to 6, or 7 to 7...). I like to travel and would like to be able to take off on a whim, and not when my j*b allows me to get away. I also would like to be able to spend more time with my parents.

I think I understand what you're saying about 100% equities, that because I'm still able to w*rk, I can handle more volatility in my portfolio. If I can't pay the bills from 4% of my portfolio in any given year, I can w*rk to make up the difference. I think, though, that if I have the means to do it, I would rather take a less volatile portfolio even if it means less growth. I really like the idea of FI which to me means not having to w*rk at all if I don't want to.

 

[ziggy29]

I think I understand what you're saying about 100% equities, that because I'm still able to w*rk, I can handle more volatility in my portfolio. If I can't pay the bills from 4% of my portfolio in any given year, I can w*rk to make up the difference. I think, though, that if I have the means to do it, I would rather take a less volatile portfolio even if it means less growth. I really like the idea of FI which to me means not having to w*rk at all if I don't want to.

Normally a 50/50 or 60/40 stock/bond allocation is commonly recommended for a 4% withdrawal. But that's usually based on someone a bit older than their 30s, so 4% could be a little aggressive for someone who may be only 34 or so when they start tapping it. At that age 70/30 might be better, but could still prove vulnerable to an Ursa Major.

Alternatively, you could use a "buckets of money" approach where you put about 10 years of "safe" income into money markets, CDs, high-quality short-term bonds, and so on. The idea is that if the stock market declines sharply, you have 10 years to "wait it out" and never have to sell when the market is down. If the market rises sharply, you add to your 'safe' money bucket to lock in a few more years of income.

 

[Anne]

Normally a 50/50 or 60/40 stock/bond allocation is commonly recommended for a 4% withdrawal. But that's usually based on someone a bit older than their 30s, so 4% could be a little aggressive for someone who may be only 34 or so when they start tapping it. At that age 70/30 might be better, but could still prove vulnerable to an Ursa Major.

What if I also have my 401(k)s/rollover IRAs that I won't touch until my 60s? The 4% would be based only on my taxable portfolio and if it's gone by the time I'm 65, oh well. Of course I realize this goes against the general grain of looking at the entire overall portfolio rather than separating taxable from tax-advantaged. I have a hard time reconciling these two ideas.

Alternatively, you could use a "buckets of money" approach where you put about 10 years of "safe" income into money markets, CDs, high-quality short-term bonds, and so on. The idea is that if the stock market declines sharply, you have 10 years to "wait it out" and never have to sell when the market is down. If the market rises sharply, you add to your 'safe' money bucket to lock in a few more years of income.

I could do this--but wouldn't that require an awful lot of capital?

 

[Rich_by_the_Bay]

Welcome, Anne. Your goals are ambitious and I wish you well.

Just a guess here, but I get the feeling you may be in a bit of a backlash against your recent tumultuous life. Retiring at age 35 or so is an admirable goal, but without some sort of external funds such as an inheritance or pension, I would advise extreme caution. There are a lot of "black swans" that could come along over that time period. Then there's health insurance, the fate of SS, etc. ...

I'm glad you read Bob Clyatt's book -- you might find that a part time job does nicely, keeping you solvent yet not totally stressed out. Ray Lucia's Buckets of Money as mentioned above will help you to build a conceptual infrastructure for your nest egg.

Go for it, but keep your options open and allow yourself the luxury of a reassessment once you have some distance from the turmoil you described.

I love hearing the perspective of young lawyers since I spawned one (doing IP law in the San Francisco region). Look forward to your progress reports.

 

[Gumby]

Welcome Anne. As a big law firm refugee, I understand the position you are in. In my case, the choice was whether to continue at my firm for another two to 3 years and retire completely or to down shift to a less stressful, lower paying position and just work longer. I chose the latter and am now working in my state attorney general's office. It is a much better atmosphere and reminds me why I became a lawyer in the first place -- to help people who need it, not merely to make a few rich people even richer. I will stay here for approximately another 6 years and then retire entirely (that is when my wife will become eligible for her own pension).

I think you will soon come to a position where you realize that the internal growth of your portfolio will in the near future result in your having an amount that will support you in retirement, so long as you leave that portfolio untouched in the interim. At that point, you will be ready to make a transition to a lower stress, more enjoyable position, because you will need only to make sufficient money pay your daily living expenses so that you can leave the nest egg untouched. Given that you have been a strong saver thus far, that point will come sooner than you think.

 

[Anne]

I appreciate the words of caution. If anyone sees any other holes in my plan, by all means, please point them out.

I knew from the first semester of law school that I didn't want to be a lawyer. Tuition was so high that even by that point I felt that I'd incurred so much debt that I had to stick with it. (In retrospect, this decision made no sense.) And then I graduated and the only way to pay off my loans was to take that high-paying lawyer job...

The man that I married, though well-educated, didn't pull his weight (to put it mildly). In addition, he had a ridiculous amount of consumer debt and continued to spend, spend, spend. I was becoming increasingly unhappy at work and begged him to agree to reduce our spending so that I could take a lower-paying job. He said I should take whatever job I wanted and we'd worry about our finances when that became an issue. I was never going to sleep well with that arrangement, so I kept working.

And now that my student loans are under control, my spending is greatly reduced, and I have only myself to look after, I no longer feel that I'm working for my lender or to maintain someone else's lifestyle. I'm working for myself and for my future self. That is why I can live with working at this job for a few more years--because I now see it as an opportunity to make more money in a short period of time than I'll ever be able to again. Maybe it works out and I have enough to totally retire. Maybe I only get halfway there and decide to supplement my investment income with part-time work, which I am totally fine with. Or maybe I do what Gumby did and change jobs now, work a little longer in a job that's less stressful, but continue to keep FIRE in sight. These are all options that I think I could live with.

I appreciate everyone's comments--they have given me a lot to think about.

 

[Anne]

Just a guess here, but I get the feeling you may be in a bit of a backlash against your recent tumultuous life. Retiring at age 35 or so is an admirable goal, but without some sort of external funds such as an inheritance or pension, I would advise extreme caution. There are a lot of "black swans" that could come along over that time period. Then there's health insurance, the fate of SS, etc. ...

I'm kind of curious about this as it seems to echo some skepticism I've seen elsewhere (i.e., not on a board that supports RE)--and it seems to be based on the assumption that early retirement is an irreversible decision. It's true that when I leave this job, I will probably never have another opportunity to make this much money again. But I will still be generally employable, at least I hope so...

 

[Meadbh]

I'm kind of curious about this as it seems to echo some skepticism I've seen elsewhere (i.e., not on a board that supports RE)--and it seems to be based on the assumption that early retirement is an irreversible decision. It's true that when I leave this job, I will probably never have another opportunity to make this much money again. But I will still be generally employable, at least I hope so...

Welcome, Anne.
I don't think you have too many worries about being generally employable. After all, Barack Obama and Hillary Clinton are two lawyers who are finding different avenues for their legal skills!



I have a close friend who became disillusioned with his high profile legal firm. While he did stay in the legal field, he began an independent practice, and now travels all over the world doing interesting international development projects.

 

[aworkingrachel]

Welcome, Anne! Your plans look great. A savings rate of 85% is amazing!

 

[Rich_by_the_Bay]

I'm kind of curious about this as it seems to echo some skepticism I've seen elsewhere (i.e., not on a board that supports RE)--and it seems to be based on the assumption that early retirement is an irreversible decision. It's true that when I leave this job, I will probably never have another opportunity to make this much money again. But I will still be generally employable, at least I hope so...

No question you'll be employable, and no skepticism about your ability to stick to your plan. When you say,

"I turn 30 later this year and my goal is to be able to retire by my 34th birthday."
​

I guess that just sounded to me (and I gather to some others) like someone with a fairly permanent plan (versus going part time, cutting back, working intermittently, pursuing an alternate vocation, etc.) -- sorry if I misread it. ER is definitely not an irreversible decision unless you want it to be.

I love the idea of determining when you can stop saving for retirement, allow the portfolio to grow, and just work to earn your expenses until R-day arrives. I'll be doing something like that, too, though on a shorter time scale (like 4-5 years).

Please don't mistake my message of caution as one of discouragement, especially if part-time or intermittent employment is acceptable and available. You could be retired for 50 or 60 years. Amazing!

 

[Anne]

@Rich: I'm sorry if I was defensive. I should have pointed out in that post that I am not averse to the idea of doing some kind of work in "retirement"--I guess I should have called it "semi-retirement," although I'd be happy to retire retire if I have the means to. I am pretty burned out on the idea of a full-time desk job, though.

Having a four-year goal gives me focus to continue to LBMM and invest steadily. If I don't have enough money by that date, or if I leave my job earlier, I'm okay with that as long as I know that I built up as much as I could... and work for a while longer to keep growing it.

I do appreciate the cautionary advice given by you and some others--I would much rather be thinking about this stuff now than quit my job down the road and then realize, oh yeah, I need health insurance (for example).

@Meadbh: As for president... no can do in 2012. One has to be at least 35.

 

[Meadbh]

@Meadbh: As for president... no can do in 2012. One has to be at least 35.

Oh, I was just providing examples of politics as potential career paths for lawyers. But your response, looked at in the light of your previous posts, suggests to me that you are a very ambitious young lady......you want it all NOWWWW!!!!

 

[Rich_by_the_Bay]

Having a four-year goal gives me focus to continue to LBMM and invest steadily. If I don't have enough money by that date, or if I leave my job earlier, I'm okay with that as long as I know that I built up as much as I could... and work for a while longer to keep growing it.

I like your plan - lots of paths open if one thing or another changes.

A toxic (for you) job for 4 years can be devastating. I like the sound of having an exit strategy if it gets too bad, even if it means postponing full retirement a few years, in a less stressful and more rewarding position.

 

[Rambler]

Hi Anne, and a belated welcome.

Just a couple of points: I am much older than you at 46 targeting 48, but am still planning a 3% or less WR for the first few years at least. I don't want to worry about not having enough when I reach my 80s or 90s.

The other point: you will definitely be able to return to work after retirement if you so choose, but as someone in the position to hire lots of people, I would have to say that most will view you with skepticism if you try to re-enter after 10 or 15 years of retirement. Folks in my position always wonder what someone has done for those years, why they are coming back, and "how rusty are they". The point is you will be able to work, but you will be rusty, and your habits and appetite for w*rk may change. I have seen it often in people I hire who have been out of the ratrace workforce for a few years. The advice is just to exercise caution...

Just my two cents...

R

 

[Anne]

Just a couple of points: I am much older than you at 46 targeting 48, but am still planning a 3% or less WR for the first few years at least. I don't want to worry about not having enough when I reach my 80s or 90s.

I could certainly do this. I do wonder, though, does this still hold if I have a rollover IRA that I won't touch until 60/65? During semi-retirement, I would take out my SWR based only on my taxable account, pretending that my IRA didn't exist.

It seems like the consensus that is developing is that RE in the mid-thirties is a pipe dream. I guess I'm okay with this. Even getting the mortgage paid off and taking a lower-paying job while I let my portfolio grow is a step towards FI at some point in my life.

 

[GoodSense]

Hey Anne, thanks for posting. I am also turning 30 later this year. Although I don't have a high-paying job, DH and I are diligent savers and we are shooting for FI in 10 years. I think your plan is great, especially given your very high saving ratio. It's not that we all want to sit at home all day (although sometimes that would be nice), it's the freedom that matters.

I don't know about you, but DH and I have talked about teaching English overseas or doing other low-stress, more creative jobs that allow us to experience more while our investments continue to grow. If my job really becomes unbearable, we might even quit in 5-8 years. It just means we have to retire a little later (mid to late 40s instead of 40), but it may be OK if we get to teach English in Thailand, Taiwan or Japan for a couple of years. Basically all I want to do in retirement is traveling anyway.

I have seen some high-deductible health plans that are more affordable ($200-300/mo) if you are relatively young and healthy. You may want to look into it.

Anyway this whole Early Retirement concept has really helped me deal with my job. It gives me the hope that there is light at the end of the tunnel, and I won't be stuck in the same place for decades. Keep saving and good luck with the job!

 

[Rambler]

Anne, first of all, I think you may be able to pull it off, but if I were in your shoes at 30, I probably would tough it out even though the environment is kind of acrid, for the four years until you are 34. But, you have to plan the work (seems in good order) and then work the plan. If it were me, I would probably then take a step back (semi-retire) and do something like interim or project work (in the legal world I think they call it "of Counsel")...enough to pay the bills, while letting the nest egg grow. However, you do bring up a good point about rollover IRA vs taxable and can you do a 3% from your taxable...I suggest you look at it as a total. Figure our if 3% per year is enough to meet your needs (when you are not working) and then withdraw up to that total (of your total nest egg) but withdraw from your taxable accounts. There are other ways (look up SEPP) whereby you could withdraw from rollover IRA, but if you are going to work, you will not want to do that, I don't think.

Good luck!

R