View Poll Results: What is your annual spending / net worth?
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negative
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0 |
0% |
<100%
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1 |
1.22% |
<50%
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3 |
3.66% |
<25%
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7 |
8.54% |
<10%
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14 |
17.07% |
<5%
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11 |
13.41% |
<4% (FIRE)
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20 |
24.39% |
<3%
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17 |
20.73% |
<2%
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7 |
8.54% |
<1% (hi intercst!)
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2 |
2.44% |
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01-04-2007, 11:33 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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FIRE ratio 2007
OK, I'm curious on this number.
Take your 2006 annual spending number from this thread:
http://early-retirement.org/forums/i...?topic=11335.0
and your 1/1/2007 net worth number from this thread:
http://early-retirement.org/forums/i...?topic=11354.0
Divide the first by the second and check the first box that applies to you.
2Cor521
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01-04-2007, 01:08 PM
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#2
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Full time employment: Posting here.
Join Date: Nov 2006
Posts: 548
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Re: FIRE ratio 2007
Quote:
Originally Posted by SecondCor521
[snips]
Take your 2006 annual spending
and your 1/1/2007 net worth
Divide the first by the second and check the first box that applies to you.
2Cor521
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DOH, messed up your poll. I thought it was going to be spending vs annual income, so I put in "less than 50.%"
Since it is actually NW, I should have selected "less than 5%."
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01-04-2007, 01:26 PM
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#3
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Re: FIRE ratio 2007
I'll nitpick first.
We track our spending based on our ER portfolio instead of our net worth. That way we don't have a false sense of security from counting the kid's college fund, my longboard money, or transient illiquid home equity.
But either way the result is less than 4%.
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Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
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01-04-2007, 01:31 PM
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#4
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Gone but not forgotten
Join Date: Aug 2006
Posts: 6,924
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Re: FIRE ratio 2007
If the house value is thrown in: 1.8%
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
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01-04-2007, 01:55 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Re: FIRE ratio 2007
IMHO home equity is the biggest bugaboo in a calculation like this, so I'm not surprised that it came up. I think most say it should be excluded from the calculations, but it can be pretty easy to go down a rat hole with this.
Personally I calculate my FIRE ratio on everything except my home - I include my mortgage payments but exclude my home value because I expect to own and live in this size house after retirement. I also include both the kids' college funds and the NPV of my contribution to their college expenses because I believe I would defer retirement to pay for their college.
I'm not sure what longboard money is or why you would exclude it, but to each his own.
My chief aim with the poll was to normalize the net worth poll according to spending and maybe give the board a sense of where people are in relation to hitting FIRE.
2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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01-04-2007, 03:18 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Re: FIRE ratio 2007
I am assuming that many of the > 4% and perhaps many of the 4% represent people who are not retired, or who are perhaps not counting their pensions and possible other entitlements.
In another thread there is a card from Sam Zell emphasizing the worldwide scramble for yield that is going on, and the resulting outpouring of product made from securitizing formerly relatively illiquid income generating assets.
Many of us have had very good years on the portfolio appreciation front. (Unfortunately this does not include me to any great extent.) It might be good to remember that a better index of what we will be able to withdraw and spend over time is not what the portfolio is valued at, but how much cash flow it produces.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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01-04-2007, 04:58 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Posts: 5,381
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Re: FIRE ratio 2007
Quote:
Originally Posted by HaHa
It might be good to remember that a better index of what we will be able to withdraw and spend over time is not what the portfolio is valued at, but how much cash flow it produces.
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Except for the many cases where this isn't true:
1) Zero coupon bonds withdraw > cash flow
2) Zero yield equities withdraw > cash flow
3) 4% yield equities withdraw <=> cash flow
3) Fixed rate bonds withdraw < cash flow
4) TIPS withdraw = cash flow
5) Commodities withdraw > cash flow
__________________
Retired early, traveling perpetually.
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01-04-2007, 05:46 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Re: FIRE ratio 2007
Quote:
Originally Posted by 3 Yrs to Go
Except for the many cases where this isn't true:
1) Zero coupon bonds withdraw > cash flow
2) Zero yield equities withdraw > cash flow
3) 4% yield equities withdraw <=> cash flow
3) Fixed rate bonds withdraw < cash flow
4) TIPS withdraw = cash flow
5) Commodities withdraw > cash flow
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I think I may not have been clear enough.
1) Zeros have an accrued cash flow. IMO, it should be adjusted for experienced cpi in the year.
2) I don't consider the payout of the equity as important as the underlying FCF of the company. So even where there is no payout, as for example Berkshire, one can estimate the FCF accrued to one's own holding. In fact Warren does this for equities held by Berkshire.
3) I don't understand this one.
4) TIPS are easy- the coupon payments are what should be counted, as we are trying to deal with real returns. IF bought at a discount to par, you can adjust for that.
5) Commodities are not investments. You buy corn, you sell corn. You either make a profit or loss. The securitization of things like commodities is what Sam Zell is talking about.
Ha
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"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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01-04-2007, 10:10 PM
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#9
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Recycles dryer sheets
Join Date: Nov 2006
Posts: 321
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Re: FIRE ratio 2007
Okay, I did the calculation and posted the results (6%) but it isn't really an SWR number because I used the traditional net worth calculation and included non-spendable assets, i.e. house and cars.
If I remove those non-spendable assets from the equation I come up with 10%. Not too shabby and not quite half-way there yet either for this not-so-young dreamer.
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