FIRE without the Stock Market?

[crazy connie]

Free and clear housing with low property taxes, a do it yourself fixit mindset, a good size garden, hunting and fishing for protein. Toss in a modest pension and healthcare and you've got it made. Simple wants, needs and finances. That is what my parents were able to do.

[ziggy29]

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Originally Posted by crazy connie Free and clear housing with low property taxes, a do it yourself fixit mindset, a good size garden, hunting and fishing for protein. Toss in a modest pension and healthcare and you've got it made. Simple wants, needs and finances. That is what my parents were able to do.

True. But to tie this to another thread, in this day and age young folks can't count on getting the deal many of their parents and grandparents got, particularly where retiree health care and pensions are concerned.

[JustNtime]

Military retirement pay for last 7+ yrs has been more than sufficient for our needs and allowed us to continue to save for the future. I keep our stock market exposure limited (less than a third of our $$). Including annuitized value of my cola'd pension and our home value, our stock market exposure would be less than 5% of total net worth. So we are currently doing it w/o aid of stock market and I doubt we'll ever really 'need' the stock market to stay retired. (Our home and car are paid for and our only debt is zero % CC balances which could be easily paid for with available cash)... We're comfortable and still frugal - yrs of practice. Perhaps some future small inheritances and/or SS will challenge us to find ways to spend more and break some life-long habits.

[rec7]

I guess you could go four ways between CD's, Gold, Real estate and oil. That would get you FIRE without the stock market.

[Independent]

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Originally Posted by CATAMAN Seems like a simple question - How many of you have made it to early retirement by saving in fixed income vehicles; without the aid of the Stock Market? I ask because I wonder if it is possible to save enough money to retire early by only saving in fixed instruments. In these uncertain times I feel the urge to go "all fixed" and leave the Stock Market uncertainty once and for all. The market bounced back a bit up until last month and now it seems to be headed for another roller coaster ride. I am currently 60/40 (market/bonds) with hopefully nine years to retirement. Will this ever end or are we in for what Japan has been experiencing for the past ten or so years?

Depends on what you mean by "early" and what you mean by "possible to save".

The math is easy. If you can earn inflation + 2.5% on your fixed income investments, your money doubles in 29 years.
Each year while you are working, make sure that your savings equal your spending. (e.g. you spend $30k and you save $30k). In this case, you can retire in 29 years with a perpetuity equal to your spending. (Your saved $30k doubles in 29 years, so you withdraw half and leave the other half to double again.)

Note that "spending" does not include FICA taxes or P&I on mortgage, since they will be gone when you retire. But, you do have to adjust for health care and Social Security.

Most people find it "impossible" to save as much as they spend. We did it for a few years before the kids started college.

[CATAMAN]

My original post was prompted by my recent uneasyness in the stock market. I'm afraid that having gone through the past few years of terrible returns, precisely at a time when I felt like I was making some serious headway toward saving for early retirement has me a bit rattled. Just as my account was approaching a tolerable rebound, the market seems to have turned south again, losing several pecentage points recently. I guess I was hoping for a magic bullet that would bring safety and modest growth. After reading all of your replies, it seems that the potential return that stock market risk ofers is the only way. As I originally mentioned, my asset allocation is currently 60/40 and that needs adjusting as I need to rebalance to 50/50. That being said, I guess I was luckier than most during the recent down turn due to my limited stock market exposure.
I guess I need to read some "good. positve news" rather than the uncertainty and doom and gloom in the press. I try to listen to, what I consider levelled headed thinkers (Kudlow, Brinker etc...) but for every "bull" there seems to be a couple "bears".

[FIREdreamer]

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Originally Posted by CATAMAN My original post was prompted by my recent uneasyness in the stock market. I'm afraid that having gone through the past few years of terrible returns, precisely at a time when I felt like I was making some serious headway toward saving for early retirement has me a bit rattled. Just as my account was approaching a tolerable rebound, the market seems to have turned south again, losing several pecentage points recently. I guess I was hoping for a magic bullet that would bring safety and modest growth. After reading all of your replies, it seems that the potential return that stock market risk ofers is the only way. As I originally mentioned, my asset allocation is currently 60/40 and that needs adjusting as I need to rebalance to 50/50. That being said, I guess I was luckier than most during the recent down turn due to my limited stock market exposure.

I understand your dilemma. I used to have 65% of my portfolio in stocks and after having recouped all my losses during the recent rally, I reset my asset allocation to 50/50 stocks/bonds & cash. But I found out that I do not feel much more at ease when my portfolio becomes bond heavy. The reason is that all investments have risks, and fixed income investments are not immune: interest rate risk, reinvestment risk, inflation risk, call risk, etc... By being bond heavy, you are escaping certain kinds of risks but introducing others. That's why I think diversification is important. You never know which asset is going to blow up in your face next.

[superdave]

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Originally Posted by FIREdreamer all investments have risks, and fixed income investments are not immune: interest rate risk, reinvestment risk, inflation risk, call risk, etc... By being bond heavy, you are escaping certain kinds of risks but introducing others. That's why I think diversification is important. You never know which asset is going to blow up in your face next.

Exactly.

[Independent]

This guy Warren Buffett - Wikiquote seems to have done pretty well. He says:

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And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.

[template]

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Originally Posted by CATAMAN How many of you have made it to early retirement by saving in fixed income vehicles; without the aid of the Stock Market?...

Many forum members are/were heavily invested in the stock market, but you don't have to be.

Most of my money was in CDs and bonds when I retired in 2001 with about $900K. I arrived there chiefly through LBYM (saving a large part of each paycheck throughout my career).

I held a few stock mutual funds, but the amount was between 10% and 20% of my money assets. I lost more than I made in stock market mutual funds before I retired. I was (and remain) skeptical of the financial industry.

CD interest rates are pitifully low now and 2 of my banks have failed in the past month. On the other hand, my CDs are FDIC insured. My net worth was down only 4 to 5% at the stock market's lowest dip and I have been blessed with more money now than when I retired.

There are lots of other factors besides fixed income vs. stocks. In my case:

- LBYM (i.e., spending a lot less than I earned)
- thrifty wife who still works
- no children
- have a pension (but, no COLA)
- good health

[Koolau]

After the '74/75 stock market mini-crash, I thought I'd try going to all "cash" in my 401(k). So I used the "stable value" fund offered by the plan. It did "OK" for a cash type fund and I saved prodigiously. However, the reason I was able to retire was that my plan only matched with company stock and didn't allow me to sell the stock or transfer it to another fund within the plan (that changed late in my c@reer.) And here is the ironic part (and a round about way of answering "probably not!" to your original question.) My company's stock became something like 80% of my 401(k) plan before I finally was allowed to take most of my winnings off the table. I probably would still be slaving away at my old j*b if it weren't for the "stock market".

I DO NOT recommend this as a plan, but I DO recommend being lucky instead of good. Worked for me.