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My Plan - Too Conservative, Sounds Right or Aggressive?
Old 12-17-2020, 10:29 AM   #1
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My Plan - Too Conservative, Sounds Right or Aggressive?

Hi again, this forum has been great and the responses have been very helpful.

I wanted to describe my situation and my plans for the near future and wanted some feedback.

My stock portfolio is at 900K (75 equities/25 bonds - stocks are mainly US (90% US)) and the plan is to take out 30K for the year (looking into a 40 year horizon). This formula would give me a 100% probability of success according to FIRECalc (barely 100%).

I am located in Asia so the taxes and healthcare are quite different. I will not need to pay for healthcare plus the cost of living is much lower than in North America. Based on my calculations, this would allow us to spend 2000 a month (after tax).

Before I FIRE, I will purchase a new home so then my mortgage would be 1000 a month while the rest would look like this:

1000 a month mortgage
100 property tax
250 car
150 for groceries/food
100 insurance/utility bills

This would leave us with 400 for any extras. Plus I will not have any extra income so all of my finances would come from investments.

Do you see any issues with that? Does this sound unrealistic? Too conservative? Too aggressive?
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Old 12-17-2020, 10:38 AM   #2
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Take out 30K each month? Surely you mean each year, otherwise I see a big problem.
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Old 12-17-2020, 10:40 AM   #3
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I think you mean 30K a year.


Be aware that firecalc uses historical US market data. If you're not invested in the US market, then firecalc's historical market & inflation data shouldn't be used. You could define your portfolio characteristics (growth & SD) if you have enough information to model your market (See firecalc's portfolio tab)
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Old 12-17-2020, 10:43 AM   #4
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Two questions:

1. Are you planning to keep your 75/25 AA in retirement? If so, are you prepared for large swings in the value of your portfolio due to future market volatility?

2. Do you have an emergency fund to handle unexpected large expenses (home repair, replacing appliances, etc.)?
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Old 12-17-2020, 10:47 AM   #5
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Originally Posted by UnrealizedPotential View Post
Take out 30K each month? Surely you mean each year, otherwise I see a big problem.
Sorry I mean 30K for the year lol
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Old 12-17-2020, 10:49 AM   #6
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The calculation looks fine if all works as planned for a 40 yr horizon. That's a long, long time so suggest you (1) confirm all the assumptions in Firecalc are representative of your situation in Asia ... someone already mentioned the investment return rates are US based for example (2) ensure you are ok living at the suggested lifestyle represented by your stated expenses for 40 yrs OR (3) decide what your backup plan is if you are unsure of that.


Your expenses are lower than what I would be willing to commit to for 40 yrs but everyone has different needs / wants.
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Old 12-17-2020, 10:49 AM   #7
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Originally Posted by walkinwood View Post
I think you mean 30K a year.


Be aware that firecalc uses historical US market data. If you're not invested in the US market, then firecalc's historical market & inflation data shouldn't be used. You could define your portfolio characteristics (growth & SD) if you have enough information to model your market (See firecalc's portfolio tab)
Sorry I should of included that information. My equities are 90% in the US market (indexes that track S and P 500 and Nasdaq).
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Old 12-17-2020, 10:51 AM   #8
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Originally Posted by REWahoo View Post
Two questions:

1. Are you planning to keep your 75/25 AA in retirement? If so, are you prepared for large swings in the value of your portfolio due to future market volatility?

2. Do you have an emergency fund to handle unexpected large expenses (home repair, replacing appliances, etc.)?

Yes I do plan on keeping the 75/25.... what is the general consensus for those who FIRE?

We do have some cash but it would not allow us to last long term (like a year on cash at best).
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Old 12-17-2020, 10:55 AM   #9
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Inflation is probably the wild card if you are outside OECD countries. I see, for example, that India's inflation rate is currently around 5%. Other countries around the world, like RSA, Turkey, and Argentina are more fun than that.

At 5% inflation, the buying power of your currency is cut by one quarter in just five years. In twenty years it is one-third what it is now.

Last week's "The Economist" special topic was worldwide inflation. The tone was optimistic but cautious but they weren't looking more than a few years out. I see the issue is behind a paywall but if you can find a paper copy it might be worth a look.
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Old 12-17-2020, 10:57 AM   #10
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Originally Posted by AvidGolfer80 View Post
Yes I do plan on keeping the 75/25.... what is the general consensus for those who FIRE?
There is no consensus for the "correct" AA in retirement, it is entirely personal. For me, 75/25 is far too volatile to allow me to sleep well at night, but for you it may be perfectly OK.

Quote:
Originally Posted by AvidGolfer80 View Post
We do have some cash but it would not allow us to last long term (like a year on cash at best).
I think that's fine, just as long as you have available funds to allow you to handle the "lumpy" expenses we all encounter from time to time.
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Old 12-17-2020, 11:08 AM   #11
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While in the accumulating phase, 75/25 is good, especially if you are more than 5 or 10 years away from retiring. Most dial it back closer to 60/40 once retired, or, say, over 50. There are a lot of personal factors involved.
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Old 12-17-2020, 12:15 PM   #12
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Originally Posted by AvidGolfer80 View Post
Yes I do plan on keeping the 75/25.... what is the general consensus for those who FIRE?

We do have some cash but it would not allow us to last long term (like a year on cash at best).
AA is a very personal thing. I thought I'd be good at 80/20 then 70/30 but I wasn't. I am good with 60/40 though. Looks like you have 7 years in fixed income, so you'll probably be good as long as you can sleep at night when the market plummets. Another thing that helps me sleep better is making sure a good chunk of that FI is in very high quality bonds.
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Old 12-17-2020, 12:38 PM   #13
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Your high level math (3% SWR) should work fine, although the equity allocation looks a bit high to me for someone in ER. That said, the expense categories seem like you may not be considering some things you'll likely have expenditures on including:

- Charities & Donations
- Entertainment (movies, books, DVDs, Netflix, Streaming, etc)
- Food & Dining - $150/mo seems pretty light, although maybe due to your location
- Gifts
- Out of pocket health expenses (over-the-counter meds, deductibles, co-pays, etc)
- Other house expenses beyond mortgage (insurance, property tax [if any], repairs, maintenance, services, etc)
- Lawn & Garden - this is a huge expense for us..fertilizer, sprinkler maintenance, lawn cutting, tree service, etc. not sure what you have in Asia if any
- "Lumpy" / unexpected spending - there are ALWAYS big expenses that pop up in ER..highly suggest you allocate a good chunk of $$/mo for this. We budget $1K/mo and came in ~$4K under the $12K budgeted this year.
- "Misc" - I have roughly 50 miscellaneous categories in my Quicken list..everything from Streaming Services, online services, memberships, Holiday spend, credit card fees, park passes, postage, you name it..
- Personal care - haircare, things like toothpaste, mouthwash, floss, etc..
- Pets (if any) - we don't, but still spend ~$100 every quarter or so on bird food
- Shopping - clothes, things for the house - bedding, curtains, rugs, electronics, software, jewelry, appliances, office supplies, tools, etc
- Taxes
- Travel
- Utilities - no idea what they cost in Asia, but our Utilities are a fortune here in the upper midwest. YTD, we're over $7K for cable TV, internet, cell phone services, electric, gas, home phone and water.

Anyway..hope that helps..it does seem unless you've tracked your expenses in detail for years that it's not uncommon to not really fully realize all the gazillions of things you spend $$ on every day. Fortunately, I've tracked for years and years so knew with pretty good confidence before ER where we would come in on our yearly spend.
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Old 12-17-2020, 04:39 PM   #14
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A bit aggressive IMHO. How solid are the expense estimates? How confident are you in equities returning anything in the future? Normally I poo poo the group on the forum as being too conservative regarding pulling the trigger. However in your case there are too many assumptions for me to give an opinion.
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Old 12-17-2020, 05:10 PM   #15
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You will definitely get mixed opinions on this so here are just a couple of my thoughts:


- The house purchase creates uncertainty on the expense side as owning home requires constant upkeep.


-The AA really comes down to your own level of comfort with volatility. The volatility with a high stock allocation is the "fee" you pay for excellent long term returns.
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Old 12-17-2020, 07:52 PM   #16
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Will the OP also receive any old age pension (like US Social Security retirement?)
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Old 12-17-2020, 08:49 PM   #17
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Will the OP also receive any old age pension (like US Social Security retirement?)
no pension.... just living off investments forever
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Old 12-17-2020, 09:26 PM   #18
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Your projected expenses seem like they might be a bit incomplete. 24601NoMore lists a lot that you should consider. Some threads here discuss having 4-5 years of expenses in a cash like account. This allows you to avoid selling in a market dip when the dip happens, but you have to replenish the fund after the dip (presumably from market gains). I wouldn't be comfortable executing your plan...but you might be. Good luck.
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Old 12-17-2020, 10:38 PM   #19
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no pension.... just living off investments forever
Big red flag IMO. The reality is, almost all of the people posting here are to some extent SIRE (secure income retire early) rather than purely FIRE and that's a big deal when talking about SWR and time horizon. You only have one leg of the traditional "3 legged stool" - portfolio, pension, social security. Multiple streams of income would allow more aggressive portfolio WR. Add in a fairly aggressive allocation, an extended time horizon, a single country bias in portfolio and I personally wouldn't be comfortable.

My solution would be to dial back the allocation and the WR. Or perhaps annuitize part of the portfolio. Probably not a popular idea. I am pretty aggressive with my own portfolio WR, but portfolio income is less than 1/2 my anticipated spending and I'm not likely to live more than 30 years.
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Old 12-18-2020, 09:14 AM   #20
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The OP should fear inflation, but his equity allocation, which fights inflation is "too high for some".

Obviously it is a tightrope. But inflation for sure needs to be addressed as does currency fluctuations if as I assume OP is incurring expenses in non-US currency.

What is the strategy or thinking there?
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