A worthwhile piece by someone who’s done it.
The Trouble with FIRE
Financial independence is a means to an end, not an end in itself
https://rationalreflections.substack.com/p/the-trouble-with-…
Quote:
I am not going to suggest a rigid alternative to the four percent rule, but I will say that in a world of low returns on bonds and high equity valuations, it would be prudent to consider a withdrawal rate of three percent or less.
That’ll irritate some people.
I just came across this article as well:
https://www.travelawaits.com/2745831/how-to-find-purpose-in-…
Sense of purpose and disillusionment.
I have to confess, my whole purpose is not to work anymore. Financial independence. Do I have productive plans? No. We’re scheduling some travel, and planning on more. 1poorlady is in her garden a lot now. I’m here (TMF and now canonian’s discord boards), occasionally putter around the house (have to replace the spring in a door handle), and play games or watch TV (e.g. The Expanse is much better without the year-long breaks between seasons).
Some would regard that as a waste. But I like not having to commit to a charity, or a business, or anything. My time is my own. I’m sure I’ll find other stuff to keep me occupied, also. I’ve heard good things about Philip Jose Farmer…have some of his books, so should probably crack one of them open. I do try to help 1poorlady in the garden, but that is mostly her “thing”. And after all we’ve been through the past three years, I think it’s probably therapeutic for her as well.
1poorguy
Some decompression time is needed, I’m sure.
You’ll probably want to do something productive after a while.
I expect I will, if I ever pull the plug…
Enjoyed The Expanse. Reading the first book in the series it’s based on right now. Book is good.
Finished Seveneves a couple weeks ago - did you rec that, or maybe someone else on AF? Was good.
Welcome to the club albaby1
BHM:
Can you explain to me how a board with 26 posts over the last 26 months managed to escape the massive board closing process?
The title of the board may technically qualify as finance related, but the Gobi desert of activity makes such a determination seem silly
BG
BHM:
Can you explain to me how a board with 26 posts over the last 26 months managed to escape the massive board closing process? - BG
Short answer: NO, I can’t.
TMF operates in mysterious and inscrutable ways. Sometimes it appears they themselves are not sure of why some of their actions are undertaken.
Hopefully, the camaraderie many us have enjoyed will continue on Discord. See ya’ on the other side.
I just came across this article as well:
https://www.travelawaits.com/2745831/how-to-find-purpose-in-…
Sense of purpose and disillusionment.
I have to confess, my whole purpose is not to work anymore.
Yeah, I totally get that. I’m not quite there yet.
I read the article. Quite thought provoking. Thanks for posting it.
The last 6 years I’ve averaged 30h/week billable, 25 the last 3 years.
Going in the right direction, not sure I want to go to zero yet.
1. What Activities Do You Engage In That Make Time Disappear?
Confession: my work does that.
Confession: my work does that.
Retiring early isn’t for everyone. Some people love their work. Which is a great situation to be in.
I used to really like my job, but now I see it as more of an obstacle to living. They’re pretty rigid about vacation, and we want to travel more. Not the loftiest of ambitions, but that’s what we want to do for at least part of the year. I’d like to see the aurora from Iceland or Scandinavia.
I’m not getting any younger, and I’ve racked-up a few surgeries that I didn’t plan on (and I likely will never be as I was before them). At some point I won’t be able to do much traveling.
As they say, life is something that happens to you while you’re making other plans. I had planned to be strong when I’m 70, but I realize now there is no assurance I’ll even reach 70.
1poorguy
Sense of purpose and disillusionment.
After 18 months of not having to work for money, I have not yet hit any downside. I increased some volunteer stuff (mentor program, church board member), but have been enjoying reading and catching up on new and classic movies (Netflix, Prime, etc.). I was asked to teach at the local trade school, but the pay is so bad that it indicates a lack of respect for the staff. And despite being FI,I don’t want to trade my time for that little money…realizing that one hour of work also means having to get ready and travel there and back.
I don’t want to trade my time for that little money…realizing that one hour of work also means having to get ready and travel there and back.
“Trading your hours for a handful of dimes.”
-Jim Morrison, Five to One
I may volunteer eventually. Right now I see that as work without getting paid. Not what I want. I also am taking in some movies and TV shows I missed (like Humans…so far it’s pretty good). Slowly getting projects done (like replacing our RO faucet). Yeah, that’s also work, but it’s different if it’s my home.
When I say that optionality is almost always a good thing, what I mean is that you have to have an answer for the question of “what’s next?” or that optionality can become a path to aimlessness rather than happiness. And an aimless life can eventually lead to misery just as easily as a life full of work that you dislike.
I have been retired for 4 years now. I do agree with much of what the author says, however based on my experience here are two points of disagreement:
2)The author provides no proof on why a 3% withdrawal rate is more prudent than 4%.
What’s next…
Kinda a two-edge sword. It is freeing not to have obligations, or a rigid schedule. On the other hand, it can make for boring days if you don’t have plans.
I’m sort of in that situation. I consult with my company as-needed, but a lot my days are free now. We’re starting to plan trips, but it is difficult since COVID restrictions go on and off in various places unpredictably. Some countries even require “COVID insurance” (which I had never heard of). Airlines are canceling dozens of flights without warning. Makes it tricky to plan anything.
And other than puttering around the house, we mostly wanted to see the world.
1poorguy (just installed a bidet seat in the MIL suite; yesterday didn’t do much at all)
2)The author provides no proof on why a 3% withdrawal rate is more prudent than 4%.
The 4% rate was based on the Trinity study https://en.wikipedia.org/wiki/Trinity_study The study was focused on not running out of money for a 30 year withdrawal timeframe, since that was a typical planning timeframe for those retiring at 65 and planning until 95. The study found that by starting with 4% withdrawal for the first year of retirement and increasing the withdrawal by the inflation rate each year, there was never a 30 year historical timeframe where you would run out of money before the 30 years was up. However, there were cases where you ended up with $0 (or close enough to it to that the balance was not enough to make another full withdrawal). If you start with a 3% withdrawal rate and adjust it up by inflation each year, the first historical period where you might run out of money was more than 50 years out.
So if your retirement may be longer than 30 years (like if you’re retiring at 55 and expect to live until 95), you may run out of money after 30 years with the 4% rule, but wouldn’t if you used a 3% rule. Therefore, a 3% rule is more prudent than the 4% rule, if you are planning for a period of longer than 30 years.
That said, more often than not, if the markets stay within their historical patterns, you’ll actually end up with more money than you started with at the end of 30 years if you strictly follow the 4% rule. So it all depends on how much risk you want to take that you will run out of money - risks being that markets could deviate from historical patterns, or that you could retire at the beginning of a period that follows a historical pattern where you will run out after 30 years. My crystal ball is a bit cloudy on that forecast, though.
AJ
“2)The author provides no proof on why a 3% withdrawal rate is more prudent than 4%”
I suspect that the proof is simple math.
3% withdrawal is less than 4% - therefore is more “prudent”.
You can propose a scenario in which any withdrawal rate greater than zero can fail.
You can state that a zero withdrawal rate is an implicit failure - in other words you
have failed to retire or have not utilized your funds.
But a 3% withdrawal is inherently more conservative - and thus more “prudent” - than a
4% withdrawal.
Howie52
Withdrawal rates would not be a problem for financially independent retirement.