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01-09-2011, 07:21 AM
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#1
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Recycles dryer sheets
Join Date: Feb 2008
Posts: 78
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To FIRE now?
Currently 27 years old and single. Net worth of $340k ($350k liquid assets (cash/stocks/bonds), $10k of debt).
I have lots of interests and hobbies (music, sports, writing, reading) that I would like to spend more time focusing on now while I'm young.
I'm considering FIRE'ing now and seeing how long my money can take me and if I find I am having problems reaching my investment targets to then go back to work. I plan on spending some of my time to actively manage my money.
I calculated I need about $25,000 a year to live.
Housing $700
Transportation 200
Personal Care 50
Clothing 60
Food 300
Entertainement 100
Health 200
Misc 200
Holidays 300
Total Monthly 2,110
This means I need about a 7.5% return (after inflation) per year.
Any thoughts? I figure if I get hitched I'll just go back to the workforce as I wouldn't be able to live on just $25k anymore.
I'm just thinking why not take advantage of my youth now? I have enough money to make some sort of risk I think.
Opinions?
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01-09-2011, 07:40 AM
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#2
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Full time employment: Posting here.
Join Date: Mar 2008
Posts: 968
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You've done very well so far, expecially if none of this is inheritance. Unfortuantely, you do not have enough to live on for the rest of your life ( assuming you live into the 80's) and I would suspect you need more money for health insurance. Why not do what you have been doing, sock more away and then have the choices very early in life to retire and pursue interests. A sabattical now for a year or so, maybe, but you are perhaps going to lose a great opportunity to really lock in a great future. Really comes down to what you want now and long term.
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01-09-2011, 07:41 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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I understand the youth part...
The only comment I have.... If you are tired of working now wait till you turn 50... it gets worse. $340k net worth at 27 years old is a great start for permanent FIRE.
You sure you want to do that? Think about it for a while.
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01-09-2011, 07:49 AM
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#4
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Recycles dryer sheets
Join Date: Feb 2008
Posts: 78
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I would say some of the primary issues I am struggling with are:
1) I think older people get paid more. When I apply for jobs now I am still seen as "young" so they don't have to pay me as much. I think if I go back to the workforce when I'm 40 I would get a higher salary. I understand that generally people get paid more when they are older because they have more experience. But I also think there is some age bias.
2) We all know that the correct FIRE time really depends on statistics. There is a chance let's say it's 25% that I could actually retire at this point. 9% is a high return per year yes, but there is a possibility of reaching it. At 9% a year (assuming no change in life style), I think the numbers work.
I also think I would rather have a year off when I'm in my 20's than 3 years off when I'm in my 70's.
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01-09-2011, 07:56 AM
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#5
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
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You'll still be young at 30 or 35. If you've amassed $350k already by 27 it shouldn't take long to really build up a big pile of money, plus you'll see if you really can make 7.5% / year after inflation for a few more years.
If you get hitched, you can go back to work, but if you get really sick or have a bad accident then you'll be in a whole world of financial hurt.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-09-2011, 07:59 AM
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#6
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
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Quote:
Originally Posted by Bankerwithabrain
I also think I would rather have a year off when I'm in my 20's than 3 years off when I'm in my 70's.
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A short time off now is definitely worth considering.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-09-2011, 08:02 AM
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#7
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Recycles dryer sheets
Join Date: Feb 2008
Posts: 78
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Well in order to amass the current wealth I had to take a job where I worked very long hours and essentially had no time to even use the money.
Recently I turned down the gear and am currently working at a more reasonable hour job but with significant less pay. I don't see myself saving much more than $20k a year of my income. So my wealth accumulation is going to be a bit sluggish now.
While I'm working I also don't have the ability to manage my assets as much so I can't really say that I will be able to add to my savings the earnings from my assets (or at least that much).
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01-09-2011, 08:03 AM
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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: Feb 2007
Posts: 5,072
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We could just cheer you on...
Consider it older, wiser perspective.
In the end, it is your decision.
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01-09-2011, 08:12 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 3,229
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You didn't say what type of work you do but with some jobs it would not be easy to take years off then just decide to jump back in. I worked in IT and if I decided to come back after leaving for several years it would be very difficult if not impossible, technology just changes to quickly from year to year. If you were to talk to 'older' people many would probably say there is age bias in the workforce that is opposite to what you perceive, that younger workers have an advantage.
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01-09-2011, 08:14 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: USA
Posts: 1,050
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Depending on your career focus, if you take a break, you may start back as entry level, so your salary might not increase over time just due to age. Also, can your field change significantly that it would be difficult securing a new position.
The above is based on concerns from SAHMs that I interact with. They take a few years off of work to raise their child to school age and get disappointed with career opportunities when trying to return full time.
I would suggest delaying for a few years and revisit your options.
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01-09-2011, 08:15 AM
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#11
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
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Quote:
Originally Posted by chinaco
We could just cheer you on...
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Absolutely.
I actually know 2 couples who have done something similar. Both couples were teachers, so very marketable skills.
One couple are very good friends from college and at about your age or younger they sold up and spent 3 years living abroad - far east I think. When they had spent up they came home, the wife re-started her teaching career, the husband switched career and became a driving test examiner. They also then started their family and had 3 children. (This is in the UK so no concerns ever about health insurance).
The other couple we know are cousins of DW and older than us but in their early 30's they went to China teaching english as a 2nd language and realized that they could earn enough in 6 months to keep them all year, so worked 6 months on, 6 months off for a few years, and traveled all over the far east.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-09-2011, 08:24 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: USA
Posts: 1,050
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Agreed. I think it would be great and cheer you on.
Thinking back to my late 20's/early 30s and the unknown bumpy road (unexpected family health and relocation) in my late 30's, I'm glad we accumulated more $$ as it helped tapping savings vs. loans.
Quote:
Originally Posted by chinaco
We could just cheer you on...
Consider it older, wiser perspective.
In the end, it is your decision.
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01-09-2011, 08:28 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: USA
Posts: 1,050
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Quote:
Originally Posted by Bankerwithabrain
I calculated I need about $25,000 a year to live.
Opinions?
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Can you snag a part time or consulting gig to cover your expenses? This would allow you time to maintain your skills, professional networking, maintain knowledge, etc. while gaining more time for your non-work passion.
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01-09-2011, 08:56 AM
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#14
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Recycles dryer sheets
Join Date: Feb 2008
Posts: 78
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Thanks for all the comments.
I think Chinaco that you are right and only I can make this decision.
I definitely need to do a lot of soul searching. It's just a matter of weighing all the choices.
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01-09-2011, 08:58 AM
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#15
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Recycles dryer sheets
Join Date: Feb 2008
Posts: 78
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My field by the way is corporate finance (banker). I think some things could change. But I would continue to stay attuned by investing in the stock market.
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01-09-2011, 09:00 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Posts: 1,934
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There is a lot of wisdom in this thread!
Quote:
Originally Posted by bizlady
you are perhaps going to lose a great opportunity to really lock in a great future.
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That is the big risk you are taking by leaving the w*rkforce now. Don't imagine that there is no risk.
Quote:
Originally Posted by chinaco
If you are tired of working now wait till you turn 50... it gets worse
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100 times worse! Think hard about that.
Quote:
Originally Posted by Bankerwithabrain
There is a chance let's say it's 25% that I could actually retire at this point
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There is almost NO chance that a 7.5% withdrawal rate will last 30 years, let alone 50. Go run the numbers on any retirement calculator. Sorry.
Quote:
Originally Posted by Bankerwithabrain
While I'm working I also don't have the ability to manage my assets as much
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Then you should definitely keep working! If you're investing in stocks, and doing it right, the less you "mangage your assets," the higher your return will be.
In your situation, long vacations or sabbaticals are fine. But don't try to retire yet. Stick it out a while longer until you can exit with a sustainable withdrawal rate.
__________________
And if I claim to be a wise man, it surely means that I don't know.
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01-09-2011, 09:10 AM
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#17
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by Bankerwithabrain
Any thoughts? I figure if I get hitched I'll just go back to the workforce as I wouldn't be able to live on just $25k anymore.
I'm just thinking why not take advantage of my youth now? I have enough money to make some sort of risk I think.
Opinions?
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Yeah, you may have already considered the below issues but you haven't really addressed them in your post. It's possible that you're missing a few basic steps.
Overall, have you considered calling this a "career change" instead of "ER"? The four interests you mention can all lead to fulfilling (and quite lucrative) income streams if you have the time to devote to them. Maybe the problem you're trying to solve is "different career", perhaps "less career", not "no career". Instead of going ER cold turkey your plan may be much more achievable if you set a target of enough part-time work to bring in $10K/year.
Now about those finances:
First off, why are you carrying $10K of debt? If it's a low-interest student loan then it may make sense, but only if everything else in your portfolio (including bonds & cash) is earning more than the debt is costing you. In your position, without any guaranteed income from a pension or an annuity, anything over 2% interest is probably a drag on your portfolio. Admittedly a small drag, but if you haven't considered this effect then it's tough to tell what other bigger factors may have been overlooked.
Second, have you run your numbers through FIRECalc? Keep in mind that FIRECalc doesn't have enough history to guarantee you a solid success forecast for a 60-year ER, but if FIRECalc has a problem with your portfolio and your expenses then you'll know you're not going to make it. FIRECalc may not be able tell that you'll always succeed, but it will clearly tell you where you're gonna fail.
Third, have you run Monte Carlo calculators to test the effect of a variability of returns on your portfolio? Sure, you might get 7.5%/year, but that doesn't account for volatility. The risk you take to get 7.5% includes a huge slug of volatility that could crash your assets below recovery in one year. Or try a couple years of double-digit inflation. You can read about what Volcker had to do with that in the late 1970s/80s.
Fourth, assuming FIRECalc and Monte Carlo don't puke all over your portfolio have a problem then you need to read Otar about "red zone" retirements and whether it's worth annuitizing a bare-bones level of income-- say $15K/year. I can't tell whether it's a good idea or not but you're already riding the razor's edge of ER capitalization-- without a safety net.
Fifth, what are you doing for health insurance? A high-deductible policy and an HSA might work for you if you're not already doing so. You'd also want to be very confident that your family genes don't have a history of anything that would be interpreted as a pre-existing condition. Again, a comprehensive and thoughtful ER plan would have probably mentioned something about this issue in your first post to this thread. You may be way ahead of me here but if you haven't fully considered this then the rest of your plan may be full of Swiss-cheese holes.
You're essentially following the paths of Greaney & Greenspun, although both started out with a much higher asset level (and perhaps a somewhat older age) than you're contemplating. You might want to review their websites (RetireEarlyHomePage.com and Philip Greenspun's home page). I think Phil continues to bring in part-time income from his photography interests.
Finally, you might want to run your numbers by Jacob Lund Fisker at EarlyRetirementExtreme.com. I say this because you might actually be able to pull it off with the right kind of dividend income. But if you want Jacob and the others on that forum to take you seriously then you're going to have to address the debt.
Your comment about "age bias" is interesting. While you're gazing longingly at the older workers with higher pay, they're looking at you and wishing they had a higher probability of greater continuity of employment. There are a number of national networking organizations intended specifically to help those over 40 find a job, any job, after being laid off. So perhaps the human capital works out about the same-- your years of steady work at lower pay contrasted with an older worker's higher pay but greater likelihood of "interruptions". Sometimes that greener grass is just a leaky cesspool.
It's worth considering how you'll feel at age 45, having found a life partner and perhaps contemplating starting a family, about those years of not building the savings/portfolio to enable you to move to a new stage of life. Because if you have nearly two decades of "self-employment" on your resume in your mid-40s, I'd speculate that your prospects as a paid employee will only be minimum wage. Entrepreneurial efforts will have a near-zero chance of attracting startup capital, and you won't have the savings to fund your own startup expenses. It's worth considering how many hours/week at $7.25/hour you'd need to guarantee enough income to support a family.
But if I got this advice at your age from someone of my age then I'd ignore most of it. Not because it's bad advice or coming from a suspect source-- but because I was blissfully ignorant.
__________________
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Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."
I don't spend much time here— please send a PM.
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01-09-2011, 09:13 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 6,258
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Quote:
Originally Posted by Bankerwithabrain
I also think I would rather have a year off when I'm in my 20's than 3 years off when I'm in my 70's.
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I quite agree. Without Health Insurance (and all of the advantages that brings to the table) you are surely correct. Barring that, however, a healthy 70-year old knows so much more than any 20-something in leisure-time use... the least of which is how to enjoy it.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
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01-09-2011, 09:30 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
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Quote:
There is almost NO chance that a 7.5% withdrawal rate will last 30 years, let alone 50. Go run the numbers on any retirement calculator. Sorry.
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Heed and beware.
__________________
I have outlived most of the people I don't like and I am working on the rest.
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01-09-2011, 09:42 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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I do not think your plan is workable long term andthere would be significant risks to bailing out and coming back if you need to after an absence of years. Realistically, I think you have two options:
- Keep working and saving to build up a large enough stash to realistically sustain you.
- Find some kind of work or small business that at least pays your expenses and might be less stressful/aggravating than your present career. That way your stash can keep growing.
I am 10 years older but in a similar career path. I was laid off from my bog dollar finance job in the summer of '08 and ended up at a lower stress, lower pay spot at a quasi-public entity. I made a bag of wonga earlier in my career, so now I am simply putting the icing on the cake while I grind out the last few years. In about 3 years (estimate), the family and I will be relocating to a lower cost area and finding a low stress job or small business to cover expenses for a few years while the portfolio continues to grow. Eventually, it will be big enough that we can simply stop working.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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