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Trouble pulling the trigger
Old 04-03-2008, 07:19 PM   #1
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Trouble pulling the trigger

Been planning an ER for the past few years and hit what I thought was my number. My problem is that I'm having a hard time making the jump into FIRE. I'm 45 and will need my nest egg to last for a long time

A few of the books I've read say it is dangerous (higher change of running out of money) to head into early retirement at the start of an economic downturn. I've got 2.2m in stock and another 600K in my 401K. Given that I live on the left coast and don't plan on moving my monthly expenses are higher than most of the people I've seen posting here. At this point I have NO debt and own the house I live in.

I've run the firecalc and survive 100% of the time for 45 years using a 4% withdrawal rate, this puts me 35K under my current salary but now that I just paid off the house my monthly expenses are way down.

How do people know when they have enough to say goodbye to Megacorp? I'm having a hard time determining if my reluctance is that I'm just not ready or a real concern about the economy.

Brian
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Old 04-03-2008, 07:33 PM   #2
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Yes, a prolonged bear market shortly after retirement would be most unpleasant, but I think it is only a nightmare for those whose plans call for excessive dependence on performance of the stock market.

Most retirement strategies you read about here include a pretty large pile of non-equity holdings to tap into for expenses without touching stocks. My understanding is that most bear markets are over in 12-15 months, and most business cycles affecting the larger picture are in the range of 7 years or so.

So if you can weather > 6-7 years without selling stocks (10 is better), and you really want to retire, it seems like the odds are strongly in your favor, barring any extremes in your plan or personal needs.

On the non-financial side, there are several threads around here somewhere about the "just one more year" phenomenon (like this one which I started back in 2006).
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Old 04-03-2008, 07:34 PM   #3
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Welcome brianinsf,

You are in very good financial shape, especially for your age. The main reason the left coast is thought to have a high cost of living is due to the price of housing. Since you own outright, the main concern would be taxes.

I would suggest setting a projected budget according to your FIRECalc figures and live on it for 1 year. You should know then if you are financially ready.
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Old 04-03-2008, 10:07 PM   #4
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Welcome brianinsf;

Do you really have 2.2m in stock? If so, assuming your entire 401k is bonds, that is ~78% equities and awfully high for your stage if you are planning to retire soon. I'm too far away from my target to help you with the "pulling the trigger" decision, there are others including RIT who are better poised to help you there. You have an enviable nest egg for your age so good luck with whatever you ultimately decide to do.

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Old 04-03-2008, 11:03 PM   #5
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Brian,

I am in a very similar position, also on the left coast, but a couple of years behind you in age and assets. I've chosen to put a significant cushion into my retirement expenses so that its relatively painless for me to cut back if in the early years I face a down market. I've also shifted my portfolio allocation so I have less dependence on stock returns toward a lower volatility portfolio including bonds, commodities and REITs in addition to stocks. Faced with today's market conditions/ uncertainty when I planned to FIRE, I might give it six more months or take a leave of absence rather than quit my job outright.

Lagniappe
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Old 04-03-2008, 11:24 PM   #6
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How do people know when they have enough to say goodbye to Megacorp? I'm having a hard time determining if my reluctance is that I'm just not ready or a real concern about the economy.
Congrats on your substantial nest-egg. Money may not be the most important issue: saying goodbye to Megacorp is fine, but what are you going to say hello to instead? There's no sense doing ER and then being miserable (it happens!)

That said, your finances do have to be in order. I suggest preparing a budget for your first year of ER, and see if you're comfortable with it. My budget has many 'virtual' expenses on it (such as $2k / year toward eventual car replacement; $1k / year for emergencies, etc.). It really isn't wise to do your budgeting based on actual expenses - these virtual expenses are important, too. I'm only comfortable if my investment income is substantially more than my expenses (I've never been happy with the % drawdown per year mental model). In 2007 (my first year of ER), the finances went well. I actually don't consider myself retired, but in an entrepreneurial mode where the highs will be very high and the lows will be very low. However, to have fun with my new lifestyle, I don't want the stress of having to make my ventures immediately generate positive cash flow.

Good luck!
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Old 04-04-2008, 12:35 AM   #7
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Same here, west coast, hit my FIRE target 1-2 years ago (25x annual expenses in liquid investments), then decided to keep going for 30x since I'm still in my late 30s and wanted more cushion in the budget. I just hit 29x around Halloween, but the recent downturn in the market has me back down to around 26x. However, I spend so much time thinking about it and all the things I want to do when I do FIRE, I think I'm going to pull the trigger this autumn (timing to pick up my final profit sharing comp) regardless of where the savings end up.

The big thing for me to make myself comfortable with this line of thinking was creating a cash/bonds bucket of 5x expenses - which should allow me to live for about 5 years w/o having to sell any equities until the market recovers. I figure this current rut will have passed within the next 5 years, and hopefully I will have recovered to closer to my original 30x once we're out.

The second big thing is realizing that, if I needed, I would much rather work later in life than now. Not that anyone wants to have to go back to work, but I would much rather have my 40-55 free and have to work during 55-65 for health insurance if money gets tight, than to keep working and waiting.

Of course, it's all just a lot of cheap talk at this point, so hopefully I can get myself past the "just one more year" problem...
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Old 04-04-2008, 09:54 AM   #8
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Brian, you may be running into another fairly common effect -- once you reach FI, the job that was driving you nuts starts not driving you so nuts any more Just knowing you can quit at any time moves a lot of power from your employer back to you.

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Old 04-04-2008, 10:16 AM   #9
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Thanks for all the input. The "stocks" are my term for the e-trade account. It's got 70% split among a number of different sector ETF's with low expenses and the rest are dividend paying stocks. I'm going to move around 25% into bonds/cash when I pull the trigger.

It's not the job keeping me here, I'm over it and the only thing that makes me not go postal is the fact that I can tell them to pound sand and leave. It has more to do with just plain fear combined with a small amount of mid-west work ethic that tells me I'm too young to stop working.

It's going to happen I just need to figure out when.

Brian
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Old 04-04-2008, 03:25 PM   #10
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Don't forget to factor in the regret you might feel if you delay retirement, and realize that you could have done it years earlier.
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Old 04-04-2008, 04:14 PM   #11
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What T-Al said and what Socca said are both important and inter-related. You probably are too young to hang up your hat if ER means sitting around doing absolutely nothing all day. But if it means getting to do what you want to do, when you want to do it, and you know what the "IT" is, you may regret not doing it. In any case, you do have a goal and a basic timeframe. Just give the "IT" some thought, watch your AA so that in the worst case scenario you won't have to sell stocks in the first few years of FIRE, sit back relax, and know that you can tell megacorp where they can go when you've had enough...

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Old 04-08-2008, 05:06 PM   #12
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Quote:
Originally Posted by brianinsf View Post
The "stocks" are my term for the e-trade account. It's got 70% split among a number of different sector ETF's with low expenses, and the rest are dividend paying stocks. I'm going to move around 25% into bonds/cash when I pull the trigger.
You can give yourself some peace of mind through added diversification. Perhaps you might consider working for one more year and putting all of that additional income / savings into gold. That won't yield any income, but it should protect against the continuing devaluation of the dollar.

With a mix of equities, bonds, cash and gold, you will have all the bases covered and should be able to sleep soundly.
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Still can't pull the trigger
Old 05-21-2015, 01:58 PM   #13
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Still can't pull the trigger

Greetings - first time posting. Due to a high paying & stressful job on Wall
Street, my assets (excluding home) are currently 40 times my annual expenses and I am 45 years old. Three children under 18. I know I can financially retire but can't seem to pull the trigger!
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Old 05-21-2015, 02:26 PM   #14
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Hi OnTheBeach - welcome.

Would you like to start your own thread to introduce yourself? That way it's less confusing as to whether responses are to you or the OP.

If you need assistance, let me know.

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Old 05-21-2015, 03:54 PM   #15
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Quote:
Originally Posted by OnTheBeach View Post
Greetings - first time posting. Due to a high paying & stressful job on Wall
Street, my assets (excluding home) are currently 40 times my annual expenses and I am 45 years old. Three children under 18. I know I can financially retire but can't seem to pull the trigger!
Yes, change is hard and it is hard to step off the hamster wheel, especially if you are making big $$$.

Since you are set financially, perhaps downshift to a less stressful job using your skills.
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Old 05-21-2015, 04:32 PM   #16
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Quote:
Originally Posted by brianinsf View Post
Been planning an ER for the past few years and hit what I thought was my number. My problem is that I'm having a hard time making the jump into FIRE. I'm 45 and will need my nest egg to last for a long time

A few of the books I've read say it is dangerous (higher change of running out of money) to head into early retirement at the start of an economic downturn. I've got 2.2m in stock and another 600K in my 401K. Given that I live on the left coast and don't plan on moving my monthly expenses are higher than most of the people I've seen posting here. At this point I have NO debt and own the house I live in.

I've run the firecalc and survive 100% of the time for 45 years using a 4% withdrawal rate, this puts me 35K under my current salary but now that I just paid off the house my monthly expenses are way down.

How do people know when they have enough to say goodbye to Megacorp? I'm having a hard time determining if my reluctance is that I'm just not ready or a real concern about the economy.

Brian
Having been through something similar at a much lower asset valuation when I first ER'd (not FIRE) my advise is:

(1) Have a plan or place to FIRE to (I traveled)
(2) Look for something to do part time that is meaningful and interesting. You have another 20-30 productive years. I'm assuming most of your friends/coworkers will still have fulltime jobs when you pull the trigger and so there is a very good chance that your priorities and interests will start to diverge as time goes by. At least that was the case for me. Also, the part time position could be a cushion if things went South.
(3) I didn't realize this until much later but Social Security is based on the highest 35 yrs of work and like me you'll have some zeros in the calculation so a part time job would help fill-in those zeros. Benefits are calculated on a tiered 3 step process. The first step is paid at 90%, second step @ 32%, last step paid @ 15%. This could also be a fallback so you may want to take a look at how it's calculated.
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Old 05-21-2015, 06:31 PM   #17
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What is money for? What is the time you have left on this planet for? I came to the conclusion that there are about a thousand things more worthwhile to do with my time than pile up more money. Step back a bit, let your head clear, and think about this stuff.
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