Coast FIRE planning

[couch]

First, in case the term isn't familiar.

Coast FIRE is defined as having enough money invested at an early enough age that you no longer need to invest any more to achieve financial independence by age 65 (or whatever age you define as a retirement age).

REF: https://fourpillarfreedom.com/what-is-coast-fire/

I think I am approaching the point I can Coast FIRE. The question is, what is a reasonable rate of return to use in my planning? The time period involved is approximately 10 years. My AA is 80/20. The other obvious question is what I should plan on for inflation?

I don't think I need to take the lowest sustainable number because this whole plan is based on estimates including the retirement date.

Thoughts?

 

[Markola]

Past performance is not an indication of future results, but you can plug your portfolio into the Portfolio Visualizer site for free and see how it did over the last 20-30 years.

 

[OldShooter]

... The question is, what is a reasonable rate of return to use in my planning? ... what I should plan on for inflation? The time period involved is approximately 10 years. ... Thoughts?

Well, anyone who has those numbers will certainly win the giant virtual stuffed teddy bear!

Here are a couple of charts:

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"Past performance is no guarantee of future results" Ref Taleb's Turkey: https://www.businessinsider.com/nassim-talebs-black-swan-thanksgiving-turkey-2014-11

 

[pb4uski]

First, in case the term isn't familiar.

REF: https://fourpillarfreedom.com/what-is-coast-fire/

I think I am approaching the point I can Coast FIRE. The question is, what is a reasonable rate of return to use in my planning? The time period involved is approximately 10 years. My AA is 80/20. The other obvious question is what I should plan on for inflation?

I don't think I need to take the lowest sustainable number because this whole plan is based on estimates including the retirement date.

Thoughts?

I wasn't familiar with the term but am familiar with the concept... if you save like the dickens early in your career then you don't necessarily need to save as much later.

What I would do is to enter your information into FIRECalc but under the Not Retired? tab set that you will not retire for 10 years.... what FIRECalc will do is to let that nestegg grow for 10 years before starting withdrawals in assessing if you "have enough".

 

[couch]

Past performance is not an indication of future results, but you can plug your portfolio into the Portfolio Visualizer site for free and see how it did over the last 20-30 years.

Its only planning, so I don't need it to be perfect. I looked at the Portfolio Visualizer site, a lot of stuff I don't understand but it looks like the inflation adjusted CGAR for an 80/20 portfolio is 6.65% so if I go with 6.5% that is a nice round number.

Its all guess work of course. The portfolio they used doesn't reflect mine because its US only and mine is globally diversified. I can't use my exact portfolio because it doesn't have enough history it make it worth while.

 

[couch]

Here are a couple of charts:

If I am reading this right, the return on a 50/50 portfolio is 8.9% and the inflation is 4.1%. These are both pretty far off what I was expecting.

 

[couch]

What I would do is to enter your information into FIRECalc but under the Not Retired? tab set that you will not retire for 10 years.... what FIRECalc will do is to let that nestegg grow for 10 years before starting withdrawals in assessing if you "have enough".

I've tried this in the past and it never seems to give the growth that I expected... maybe it reflects the rates that oldshooter provided...

 

[jebmke]

I don't do projections any more but when I did, I always use real returns. Real returns on bonds are around minus .5%. Have not seen forecasts for equity. If forced to wet-finger it I would probably use 4% real

 

[couch]

I don't do projections any more but when I did, I always use real returns. Real returns on bonds are around minus .5%. Have not seen forecasts for equity. If forced to wet-finger it I would probably use 4% real

This is pretty far off the 4% safe withdrawal rate... and that includes inflation.

 

[Markola]

Its only planning, so I don't need it to be perfect. I looked at the Portfolio Visualizer site, a lot of stuff I don't understand but it looks like the inflation adjusted CGAR for an 80/20 portfolio is 6.65% so if I go with 6.5% that is a nice round number.



Its all guess work of course. The portfolio they used doesn't reflect mine because its US only and mine is globally diversified. I can't use my exact portfolio because it doesn't have enough history it make it worth while.

You can search for and plug in most any security, fund or etf, including global. You often have to plug in a substitute to get the data back a few decades, such as a mutual fund equivalent for ETFs, since those haven’t been around all that long. I’m globally diversified too and can build a facsimile of my portfolio in it. It helps to register for the free account so that you can save different portfolios.

 

[RetireBy90]

FWIW, when I was tracking progress to FI, I used 6% return for my 70/30 AA and I use 3% for inflation. In past 10 years I have always exceeded 6%. Just one answer to OP.

 

[mrfeh]

Its only planning, so I don't need it to be perfect. I looked at the Portfolio Visualizer site, a lot of stuff I don't understand but it looks like the inflation adjusted CGAR for an 80/20 portfolio is 6.65% so if I go with 6.5% that is a nice round number.

Its all guess work of course. The portfolio they used doesn't reflect mine because its US only and mine is globally diversified. I can't use my exact portfolio because it doesn't have enough history it make it worth while.

If you believe that current P/E affects future returns (not everybody does; google Robert Shiller), the returns the next 10 years will be muted.

For 80/20, to be conservative, I would estimate 3-4% real returns.

 

[Markola]

If you believe that current P/E affects future returns (not everybody does; google Robert Shiller), the returns the next 10 years will be muted.



For 80/20, to be conservative, I would estimate 3-4% real returns.

Not to start a holy war, but I take comfort in owning about 1/3 international funds because of such mediocre outlooks for domestic returns.

 

[mrfeh]

Not to start a holy war, but I take comfort in owning about 1/3 international funds because of such mediocre outlooks for domestic returns.

1/3 of our equities are also in ex-US.

 

[The Cosmic Avenger]

I don't get Coast FIRE, but then I never really got having a hard target or magic number. I set a LBYM budget in the retirement planners, and then when our prodigious saving gave us a 100% in FIREcalc and a 150 in Fidelity's planner, I added in what at the time felt like very generous travel and entertainment budgets. Now we're pretty much on target for that number, and I figure we could dial back on the saving, but our incomes have been increasing at a rate that we've been able to max out our retirement contributions and still gradually increase our discretionary spending. If we and the market keep up at this rate in the long run, I just figure we'll have more room for possible medical expenses, charitable donations, or maybe even a very small scholarship or foundation.

I suppose if you set a real stretch goal and all your projections say you could stop saving now and still reach it just on compounding, then sure, but plans can change, and so can projections, so I'd rather risk being overprepared than underprepared.

 

[GravitySucks]

FWIW, when I was tracking progress to FI, I used 6% return for my 70/30 AA and I use 3% for inflation. In past 10 years I have always exceeded 6%. Just one answer to OP.

6 and 3 were also my go to numbers.
5 and 3 if feeling cautious.

 

[Sunset]

......

I suppose if you set a real stretch goal and all your projections say you could stop saving now and still reach it just on compounding, then sure, but plans can change, and so can projections, so I'd rather risk being overprepared than underprepared.

+1
If a person is at "Coast Fire" (which I thought was going to be about California fires), with a 10 year time frame, then a person is close to FIRE.

I personally would be looking at how many more years of saving would be needed so I could retire.

I'd rather work 6 more years, saving for retirement then retire.
Instead of work 10 more years but get to spend everything I earned during the 10 years.

 

[purplesky]

First, in case the term isn't familiar.

REF: https://fourpillarfreedom.com/what-is-coast-fire/

I think I am approaching the point I can Coast FIRE. The question is, what is a reasonable rate of return to use in my planning? The time period involved is approximately 10 years. My AA is 80/20. The other obvious question is what I should plan on for inflation?

I don't think I need to take the lowest sustainable number because this whole plan is based on estimates including the retirement date.

Thoughts?

The U.S. stock market and global economy are a house of cards at this point so good luck with future market return projections? lol

All savers and investors at age 30 should just hope for the best at this point regardless of their portfolio balance.

The world is going to look much different in 30 years and many people in this community will be retired underground or close to death in a retirement home.

Its kind of ridiculous to ask a baby boomer or Gen x about the future considering baby boomers have destroyed the future. A **** sandwich awaits you!

The build wealth game will be much different in 30 to 40 years so do not take advice from people who will be dead. lol

Also stay away from blogs that use $1 million as a example of wealth. trust me $40k a year is a joke to live off unless you live in a paid for mobile home in a southern state.