Gut Check for 2013 Fire!

[Hiredgun]

I'm planning on firing in 2013 (October 1, 2013). I think I'm there but want to make sure I'm not missing something. Any advice appreciated!!!

Just hit $3.5M and should be at $3.8-4.1M by 10/1/13. Expenses are about $90K per year so I won't even need to w/draw 3%. We have had private health insurance through BC/BS for us and our employees for the last 3 years, so my wife and I can just continue paying our private health insurance. My son (14 yrs old) is also on our private insurance and can stay on it until 28 at which time he can continue his own private policy Without and underwriting (i.e. no physical exam). Good deal.

I have over 200K put away for son's college, house is paid off and we have no debt (credit cards paid off every month). 2 cars paid off, both with fairly low mileage (under 50K miles). My wife and I will be turning 45 in 2013. We have about 80% in stocks (75% US Stock Index Fund / 25% Int'l Stock Index), 25% in bonds (65% munis, 25% Vanguard Total Bond Fund and 10% REITS).

About 75% of my holdings (i.e. 2.5M now and $2.9M or so in 9 months) are outside of 401k/IRAs, so the taxes have already been paid and the capital gains are about 100K, but not terribly significant (as I also have 70K in capital losses that can be used against the gains). 25% is in 401K and IRA which we don't intend to touch until 65 or so.

I think I'm good to go. Thoughts? Comments? Suggestions? Thanks all!!!

 

[REWahoo]

You aren't just "good to go" you're "good to have been gone long ago". What the heck are you waiting for?

 

[Major Tom]

Looks like you'll be withdrawing less than 2.5% of your portfolio. Sounds good to me!

 

[Meadbh]

Looks good to go. Are you comfortable having 80% of your portfolio in stocks? How would you feel if we had another 2008?

 

[Hiredgun]

I'm okay with the 80% in stocks.

By October 1, 2013 (end date) I will have approximately 800K in Munis which I will draw off of 1st. So if there is a stock market crash, I will have almost 10 years of expenses I can draw from.

Also, I could be wrong (probably am) but Bonds have had a helluva run and I think inflation is inevitable. In fact, I've pondered the idea of buying some physical gold to further diversify, but haven't gone down this road yet. I think people who rely on bonds for safety are going to find out they are not so safe. But like I said, just my opinion.

 

[Hiredgun]

Also, my biggest concern is that we are retiring fairly early. My withdrawal rate seems reasonable but a heckuva lot can happen over what I hope is the next 40 years or so of living

 

[obgyn65]

Yes - you are good to go. I know that making the jump is not easy - same here.

 

[MichaelB]

Also, my biggest concern is that we are retiring fairly early. My withdrawal rate seems reasonable but a heckuva lot can happen over what I hope is the next 40 years or so of living

Things can go wrong. See this thread for examples http://www.early-retirement.org/forums/f28/firecalc-64419.html The important question is not what can go wrong, or change. Of all the potential catastrophes that await us, how does staying at work help minimize the consequences or make your plan better? If it is good enough now, how much better can it get? Only you can determine what another year at work means.

 

[Siestatime]

IMO you are good to go. The only caveat: you must remain ever vigilent with 80% in stocks. Also, I would not encourage buying gold at this time. I happen to be overweighted in a gold mutual fund and am torn whether to cut my losses or hang in there for a rebound.

 

[gerntz]

Wish I had 80% in stocks & 25% in bonds.

 

[jimbee]

Wish I had 80% in stocks & 25% in bonds.

 

[gerntz]

BTW, there have been a handfull or so of -80% market crashes in the last 200 years. With 80% in stocks, can you handle a -64% capital loss?

 

[utrecht]

BTW, there have been a handfull or so of -80% market crashes in the last 200 years. With 80% in stocks, can you handle a -64% capital loss?

In the US?

 

[Midpack]

In the US?

According to wiki

2) US Nasdaq 2000-2002: -82%
The second biggest collapse came from the technology-rich US Nasdaq index, which fell by 82% following the bursting of the dot.com bubble in 2000

1) Wall Street 1929-32: -89%
The Wall Street Crash that preceded the Great Depression heads the list, with the US stock market falling by 89% between 1929 and 1932. The bursting of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in in a hurry when their loans were called in.

And from a different source...though most folks probably thought the NASDAQ was overheated to varying degrees in 2000. I owned good chunks of MSFT, INTC & CSCO at the time and I knew the multiples were completely nuts before the "dotcom bubble crash"...

 

[Hiredgun]

Whoops, I meant 80% Stocks and 20% (Bonds/REITS). Thanks for the heads up on the math

 

[Hiredgun]

And thanks MichaelB: "If it is good enough now, how much better can it get?"

That puts things in perspective. I think I'm good now, I will be better (but not by much) on October 1, 2013. And things would only get incrementally better after that. (i.e. my expenses will likely remain the same whether I have $3M, 4$M, $5M or $6M, so the extra $$$ only add to peace of mind, not standard of living).

So there really is no point in working beyond that date. And life is finite. Weighing the risks, I have decided not to move my deadline any further. So I will be an official 2013 FIRE!!!

Thanks for the advice. I may up my bond/reit portion of the portfolio based on the comments here. At least to 70/30. Thanks!

 

[BTravlin]

I think a slight shift of the AA to a more conservative slant would be a good idea. It seems as if your portfolio is of a sufficient size to comfortably fulfill your needs so there is no real reason to swing for the fences when singles and doubles will do the trick without the additional risk. The 70/30 seems reasonable now and then maybe 60/40 five to ten years from now.

And the best of luck and realized plans to you!

 

[tdv2]

Congratulations!!! Numbers look real good to me. For me I'm struggling with when to pull the trigger...just turned 49. My numbers are good but I'm just not quite ready to throw in the towel......maybe another 6 months to a year.

 

[SumDay]

#humblebrag

I won't weigh in on your plan, but let me just say how impressed I am with your financial independence at such a young age, and also that I am

Way to go for you & yours!

 

[gerrym51]

I'm planning on firing in 2013 (October 1, 2013). I think I'm there but want to make sure I'm not missing something. Any advice appreciated!!!

Just hit $3.5M and should be at $3.8-4.1M by 10/1/13. Expenses are about $90K per year so I won't even need to w/draw 3%. We have had private health insurance through BC/BS for us and our employees for the last 3 years, so my wife and I can just continue paying our private health insurance. My son (14 yrs old) is also on our private insurance and can stay on it until 28 at which time he can continue his own private policy Without and underwriting (i.e. no physical exam). Good deal.

I have over 200K put away for son's college, house is paid off and we have no debt (credit cards paid off every month). 2 cars paid off, both with fairly low mileage (under 50K miles). My wife and I will be turning 45 in 2013. We have about 80% in stocks (75% US Stock Index Fund / 25% Int'l Stock Index), 25% in bonds (65% munis, 25% Vanguard Total Bond Fund and 10% REITS).

About 75% of my holdings (i.e. 2.5M now and $2.9M or so in 9 months) are outside of 401k/IRAs, so the taxes have already been paid and the capital gains are about 100K, but not terribly significant (as I also have 70K in capital losses that can be used against the gains). 25% is in 401K and IRA which we don't intend to touch until 65 or so.

I think I'm good to go. Thoughts? Comments? Suggestions? Thanks all!!!

instead of you asking us we should be asking you

 

[Hiredgun]

Thanks MelBay!

We have worked very hard and luckily this lead to success for our small business. One of the key factors in being able to FIRE has been to keep our expenses relatively low instead of trading up like many of our friends have (i.e. huge home, European vacations, expensive clothing, etc). Not judging, just explaining why we can Fire.

If the market took a big hit, we could chop $20K off our expenses without feeling much pain (i.e. mortgage paid off and no other debt), so that provides further peace of mind.

Also, my wife and I have both had health scares within the last year. Luckily nothing too serious, but issues we did not expect to face until late into our 50s. So this definitely provides perspective. The bumper sticker is true that says "Getting old is not for wimps."

Getting feedback from the members on this board was a necessary step in my process of letting go. The "one more year"-itis is real and it's hard to pull the plug on a money machine that can't be restarted. So I appreciate the positive comments, encouragement and guidance from all of you on these boards. It is a big help with the "mental" portion of FIRE, which is just as important as the means part. Thanks all!

 

[SumDay]

We are debt free also, and just got started a little later than you did. We're getting there, but I agree, the "mental" portion of this whole thing is proving to be as tough as the actual financial perseverance. This is a great resource, isn't it? My husband is going to grow weary of me quoting things I read on this board...

 

[traineeinvestor]

Financially you look very good to go.

A couple of questions (which I am sure you have already thought through):

1. you mention a couple of "health scares" - presumably if there is any possibility of these recurring they will be within the scope of your health insurance?

2. you mention that you run your own business - I'm assuming you will either sell it or shut it down when you FIRE? Have you considered whether there may be any possibility of some residual liability coming back to haunt you afterwards?

3. you've only asked about the financial aspects so I assume that the non-financial aspects are well in hand in terms of things to do after you FIRE?

 

[Hiredgun]

1. Health Insurance - Yes, I injured my back about a year after we decided to go with the private insurance policies, so it is covered. I was in great shape and injured it at the gym ironically. Now have chronic back pain and just have to deal with it as best I can. Wife is also fully covered, her issue initially seemed serious but turned out not to be, so we are very lucky. But we have no preconditions not covered by our insurance.

The only threat would be is BC/BS somehow figured out a way to cancel the policies (which we and several thousand other private individuals hold) which I imagine is possible. We also received a notice this year that the policies are grandfathered and will not be affected by Obamacare's requirements. I'm not sure what the implications of this are (good/bad??), it's something I will have to research in the upcoming months. But now that Obamacare is law, I figure we can always fall back on that if something happens with our current policies.

2. Business Insurance - I have specific insurance (tail coverage) that we will keep in effect (probably for 5 years) which will cover any claims. We've never had a claim and don't expect one, but I am prepared.

3. Non-Financial - We have expanded our hobbies (i.e. especially boardgaming with groups of people this year) throughout 2012. Right now we are actively seeking out ways to expand our hobbies and interests and looking for new ones. I'm sure it will be a major adjustment, but I figure for the first six months we can relax, get in better shape and start to fully explore the possibilities.

We've even floated the idea of other business ideas (i.e. Landlord, reselling on Amazon, etc.) as a hobby that brings in a small amount of income every year. But we want to take at least a year off before pursuing another business endeavor.

 

[ERhoosier]

Congrats on your success in achieving FI. Sounds like you've put some good thought into things. Few more issues to consider (and you may have already)-
1. Mental/emotional preparation. Are you psychologically ready to go from "business owner" to "retiree"? Might you be happier easing into retirement by working part-time?
2. Short term cash- Most planners I know rec having 6+mo of living expenses in cash (or equivalents) so you are not forced to sell equities into a market downturn. Did not see cash mentioned in your asset allocation.
3. Activities- Do you have enough non-business stuff to keep you from getting bored over next (hopefully) 40+yrs?