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End of Year 1 of ER
Old 05-04-2009, 02:30 PM   #1
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End of Year 1 of ER

Hello to all on this board,

On 4/30/09, we completed one year in ER. It was an amazing year with a lot of travel and quality time together at home and with our friends and family. We are one mellow couple now.

Our expenses came out to 90% of our budget and we did not feel like we had to try very hard or deprive ourselves to achieve it. I did not include income taxes since we worked for the first 4 months of 08. I adjusted the budget accordingly.

We planned to use 4% of our portfolio as our annual budget each year. We have a separate bucket of money used to pay down our mortgage and another one for a rainy day emergency. The 4% is calculated after removing the two bucket amounts from our portfolio.

The bad news - our portfolio is worth 27% less than it was on our first day of ER and a 4% withdrawal falls far short of what we need. Bob Clyatt advised, in a post on this board, against falling back on the 95% of previous year withdrawal rule in the early years of ER. Bob's comment firmed up our decision to go back to work this year to make up the shortfall and maybe replenish the savings too.

We had fallback options which included moving to a less expensive part of the country, but have chosen to stay put for now.

Looking back, this has been a great year. We learned a lot about managing our finances in ER, learned about our risk tolerance and did some wonderful things.

Thanks to all on the board for your advice and, most importantly, for the wonderful sense of community that you provide.

If you are interested in our ER planning, I wrote a series of posts last year
ER'd yesterday!

And an early version of my ER plan is here
My ER Plan - your input requested

All questions and comments are welcome. I would also like to hear from others who ER'd around the same time. I know GotADimple did so on almost the same date.
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Old 05-04-2009, 04:12 PM   #2
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I suppose all us 'old codgers' took a hit last year. Good to see you are battling your way through. Welcome aboard !!
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Old 05-04-2009, 05:29 PM   #3
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Thanks for posting, WalkinWood. I don't have anything constructive to add, as I'm still a young dreamer far from FIRE. But these follow-up posts from those on the other side of FIRE are always interesting and helpful. I hope you are enjoying yourself, and a congrats on your one-year anniversary!
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Old 05-04-2009, 05:49 PM   #4
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WnW,
Coming up on one year in another week or so. Financially -- it hasn't been a walk in the wood (!), but things are recovering and I had a large cash cushion that let's me sleep at night.

I did some travelling, but mostly spent the first six months decompressing and making needed repairs around the house (planned and unplanned). Also set up a routine where I am taking at least one class per quarter. Have hooked up with a group of folks who walk every week, and recently began volunteering for the local humane society.

I'm busy, but also protective of my "goofing off" time.

So far its still good!

-- Rita
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Old 05-05-2009, 07:17 AM   #5
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Quote:
Originally Posted by walkinwood View Post
Our expenses came out to 90% of our budget and we did not feel like we had to try very hard or deprive ourselves to achieve it. I did not include income taxes since we worked for the first 4 months of 08. I adjusted the budget accordingly.

We planned to use 4% of our portfolio as our annual budget each year. We have a separate bucket of money used to pay down our mortgage and another one for a rainy day emergency. The 4% is calculated after removing the two bucket amounts from our portfolio.

The bad news - our portfolio is worth 27% less than it was on our first day of ER and a 4% withdrawal falls far short of what we need. Bob Clyatt advised, in a post on this board, against falling back on the 95% of previous year withdrawal rule in the early years of ER. Bob's comment firmed up our decision to go back to work this year to make up the shortfall and maybe replenish the savings too.
Do I understand correctly that you do not use 4% of your retirement date portfolio, perhaps +/- CPI, but instead 4% of each beginning year?

Since your expenses were 0.9*4% or 3.6% of your retirement date portfolio, wouldn't even moderate downward volatility knock you out of the box?

Ha
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Old 05-05-2009, 07:48 AM   #6
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Congrats on your 1st FIRE anniversary.
I will second the nomination for recognizing the superior value of the collective minds on this forum, serving as my frequent lifesaver as far as budgeting and investing, as well as lifestyle and mental attitude adjustment.
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Old 05-05-2009, 08:48 AM   #7
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Quote:
Originally Posted by haha View Post
Do I understand correctly that you do not use 4% of your retirement date portfolio, perhaps +/- CPI, but instead 4% of each beginning year?

Since your expenses were 0.9*4% or 3.6% of your retirement date portfolio, wouldn't even moderate downward volatility knock you out of the box?

Ha
Ha,
I use 4% of current portfolio, and not the more common 4% of initial portfolio value adjusted for inflation. The reason I chose to do this is that we're only 48 & 45, so we may have close to 50 years to go. None of the SWR studies go that long except for Bob Clyatt's 4%/95% study which maintains purchasing power of the initial portfolio after 40 years with 90+% probability.

You are right about having very little leeway if you need the full 4%, but if the first few years have positive results, the cushion increases. If not, the idea is that you can make up the difference by part-time work where needed. Again, we're ERing very early in life & were fully prepared to have to go back to work.

Quote:
Originally Posted by Gotadimple View Post
WnW,
.... I had a large cash cushion that let's me sleep at night.

Also set up a routine where I am taking at least one class per quarter. ....
-- Rita
Congratulations on making it to one year. I was re-balancing slowly into a falling equity portion, but stopped when the cash reserve dropped to 2 years. That's where it is at the moment, so we're not panicking.
We joined the local adult school's Spanish I class. I would recommend learning a new language - for us, it has been both challenging and enjoyable.
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