Two lifelong friends document and share their personal journey as they seek to become financially independent and retire early (FIRE). One achieves his FIRE goal in 2020 during a global pandemic, inspiring the other to play catch-up. Whether you are new to the FIRE movement, already on your FIRE journey, or have retired early, there's something here for you. Go beyond the numbers and get the personal stories as experienced by Eric and Jason.
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What if no Spouse? Zero out the second b-day?
Great work gents. At 52 I'm very interested in joining the club. These conversations help untangle the options.
I would say that 99% are just jealous.
FI early a few years ago. How are you able to do mid-day gym classes is commonly asked. Surround yourself with those bettering themselve also.
I think what I would look for in FI would be the optionality it would give me to work as much or as little as I wanted to (assuming marketability in the market etc).
Exactly! Optionality is a huge advantage.
What car is that in the background Eric?
Are you guys take into account that you can no longer spend so much, especially in the last years of your life? I'd rather spend the money at 60 than at 92. I've read the book with zero and find the whole thing extremely exciting and sensible. My grandparents are well into their 80s and spend almost nothing anymore...they did alreday the big world tour etc..
I think even with the pension, it’s worth it to move out to the private sector. Retirement at 54 with $1M for a Gen Z? I think it’s not going to be enough.
Great show guys. Been wondering what you would consider to be a really big purchase in retirement (something fun like an expensive sports car or jewelry) and how you would feel about it after the fact (buyers r we Morse, etc). Keep up the solid. work.
I'm catching up on episodes after like a year of not checking in. All I can say is... ...RELEASE THE PHOTOS!!!
Wow if I find money in a bear market it will go straight into the market. Or use it for paying taxes on a mega Roth conversion which is a great idea in a bear market.
Is that CAPE withdrawal strategy jut for US investors? (CAPE is just for US equities?)
Thanks so much for this tool. I have been watching you guys for the last year and I personally retired 8 months ago at age 60. I have that "scarcity" mindset that Jason talked about even though when I do the math I've got the right finances and my regular withdrawal rate is maybe around 2%. Even when I go on long travel trips I don't even touch that 4% but do get close to it. This tool and knowing it factors in business cycles was a great additional piece of quantitative data to help me get over that scarcity mindset and relax a bit more on spending. A basic question here as I heard many references to variable SCR. Is the idea that as you update this tool every month or quarter - it may project a new SCR recommendation that may / may not require a spending adjustment depending now close you were aligned to the previous SCR? My first assessment of the tool was that the SCR it was projecting with 0% failure rate was a solid data point to just use going forward. I'm thinking that when we hit the next significant market downturn(I don't think it will be long before that happens) it will potentially start calculating lower SCR that I'll need to compare to current spending and decide about and adjustment? Sorry - feels like a basic question but want to make sure I understand.
My wife and I FIRE'd 11 years ago at 55. "Paying ourselves" has evolved over the years. Up until recently, we would just sell portfolio assets (while simultaneously rebalancing) 2X/ year to fill our checking account. Last fall, with interest rates higher, we've moved to more of a bucket strategy. We keep 6-12 months of cash in HY checking account and have a 5-year bond ladder of CDs/ treasuries. This ladder will bridge us to age 70 when I will start taking SS (wife started this year). Each bond will mature in the fall, which will be used to load our checking account for the following year's expenses. BTW, it took us about 5 years of RE to feel comfortable with spending more $$. Part of it was seeing that the portfolio didn't go down as much as we thought it would. The other key impetus was the realization that we needed to take advantage of the Go-Go years while we can. The future is so uncertain, and we are only one health episode (for either one of us) from not traveling (our passion), so we better do it now. The result is that we've doubled our annual spending since starting our RE and are still well within our SCR. More travel, more help for family/ charities, and more house projects that bring us joy every day (Japanese garden).
Love your podcast--love the banter! I started watching a few months ago b/c of your clear explanation of how to use the Big ERN's SWR tool. At your suggestion, I was playing around with the Case Study tab from the tool and saw that a Glidepath shows better returns for every starting year I randomly plugged in. Do you use a Glidepath approach for your portfolio? I'd love to see a future Podcast on Two Sides of FI on how to implement the equity Glidepath in retirement. Thanks!
I love listening to you both especially with your wives!
🙏
Jason are you using the cash flow assist tab in your process? Thanks for the Safe Withdrawal Toolbox series. Good stuff!!
Details here: twosidesoffi.com/toolbox/
I’m just thankful that I will have a federal pension, and I don’t have to worry about downsizing my portfolio. I plan on living off of my pension and my wife’s pension, and never drawing a penny from our investments. Fingers crossed.
Sounds great. Do you have a plan for the investments? Legacy, giving, or otherwise?
@@TwoSidesOfFI my wife and I contribute to the C fund in the thrift savings plan. It's basically an S&P 500 index. We also have a small Roth each thru Vanguard. We have two rental properties and we will both a federal pension and social security. I am eligible to retire as soon as June 29th at the age of 56.5 She has 8 years to go before she is eligible at age 57. We plan to travel as much as possible to low cost countries.
What do think of the critique of CAPE that Shiller's views on what CAPE value is a predictor of poor returns have been criticized as overly pessimistic and based on the original definition of CAPE, which fails to take into account changes in accounting standards in 1990s, which, according to Jeremy Siegel, produce understated earnings. (Right off of Wikipedia)
Karsten writes about this here (we like his thinking): earlyretirementnow.com/2022/10/05/building-a-better-cape-ratio/
What "bonds" do you own, bond funds or specific bonds associated with your timeline?
We're index investors, so own bond funds. We prefer the ease of this approach vs. laddering.
Curious, do we know the probability of failure of the values from the CAPE tab (say if you use an intercept of 1.5%)?
If you stay within the parameters of the tool, the failure rate is zero.
My wife and I both got a good chuckle with Jay's comment about Lori not wanting the details of the CAPE ratio spreadsheet. My wife says the same: "I don't want the nuts and bolts; are we doing ok?"
😂
Keep in mind that the 2% average inflation rate, and other assumptions, are for the life of your plan. Just because inflation is high today doesn't mean it will be continually high for the next 30 years.
Very true
Eric and Jason, great video. Curious, are you using an a (intercept) of 1.75% in the CAPE SWR?
Thanks! I use 1.50 as it's a little more conservative. :)
I’m also using the ERN spreadsheet and amazed at how our experiences overlapped. I was tentative at first and had to use it for a while to start trusting it. Then I increased my spend once I was more comfortable.
Thank you guys!
That opening comment from Eric about how his and Laura's relationship has changed (for the better) since she pulled the trigger on retirement was fantastic. I think for all of us considering the same path that's a great piece of validation of the "why".
Always something new to think about when listening to your podcast. Great fun as usual. Thank you. Would love to know had Jason used the standard SWR (4% rule) what would the % have been last 2 years. I am hoping to use 3.5% but thinking it might ne too close to the edge.
love your show and love Erns toolbox. I was looking for a cape based program for years before i saw some of his stuff online and your episodes really helped me understand how to use it.
Thank you for your support 🙏
I heard that comment from Eric at the end about leaving the show! I mean, understandably you may be too busy enjoying life! I keep hoping you guys will pick me for a case study in "how to do it all wrong but NOT be broke" LOL! Have all of your retirement in tax deferred accounts (traditional instead of Roth) without enough time to switch to Roth? CHECK! Have all of your assets that would have preferential tax treatment (stocks eligible to be taxed at capital gains rates) in your 401k so they are eventually taxed as ordinary income upon withdrawal while having all of your regular interest assets outside a tax advantaged account so they are ALSO taxed as ordinary income CHECK! Think you can time the market before finding the FIRE community and get out of the market at the exact wrong time while also getting back in at the exact wrong time? CHECK Pay off your 2.5% 15 year mortgage in 7 years rather than pay the minimum and invest the excess? CHECK! Overcomplicate your finances by spending an enormous amount of time tracking expenses and moving money to get every last bit of interest? CHECK! Can't figure out whether you will have plenty of money in retirement due to social security and a pension while also wondering if you will go broke and end up eating cat food and living in a cardboard box? CHECK! Seriously, it's not as bad as all of that but if you're ever looking for a case study, I'm still your gal! LOL! I did take your advice from a prior episode and changed the value of my real estate on my net worth statement from a loose current market value to purchase price. It was a gut punch to take that much value off (my house has easily doubled in value) but it was fun to see my net worth eventually come back excluding the increased real estate value.
If it’s any consolation I’ve checked a few of those off the list too. I think you have to make some mistakes along the way. The goal is to make small ones, like paying off your 3% mortgage early ✅, putting your money market cash into your taxable account ✅. And just be diligent with living modestly and saving and investing over the years. That’s actually the part that most people can’t actually put into practice.
In Flames! Yeah!! 😀
Respect! \m/
Also, I am just over 5 weeks from retirement. Watching you guys talk about your FIRE journeys for the last couple of years has been an inspiration for me.
Congrats, the countdown is on for you!
@@thurianknight Thanks so much for your support. You're in the home stretch! Best wishes to you
Re: the "morbid" process of decreasing your months-remaining-to-live on ERN's spreadsheet, what's the plan if you end up living, say, 100 months longer than anticipated?
this is why I've always picked 95 or 100. I don't have to worry about it. -J
This is often the case with people who FIRED, they are still earning income even some of them earn a lot of income. It just makes me wonder if the 4% withdrawal rule ACTUALLY works because no one is living by it 😂
Great topic. Keep up the good work.
🙏
I'm interested in your tax spreadsheet. I'm still accumulating but I try and estimate quarterly with some assumptions during decumulation.
Here's the spreadsheet I mentioned in the video: bit.ly/taxspreadsheet
Congratulations on rediscovering each other, Eric and Laura. I've noticed (2 months pre launch) that we have a new energy and perspective that IS like dating again.
Thank you! The countdown is on for you...congrats!
Great show fellas. All of our rental income just flows into our checking account and then we put anything left over in a High Yield SA and then when it builds up we just buy ETFs. I guess it's the opposite for us than for those who have money in different types of accounts.
Thanks Jeff...makes perfect sense for your AA heavily weighted towards RE.
Did not expect the blancolirio reference. I also watch all of his videos :)
he's great, right? too bad we cut out the part where we exchanged our respective imitations of Juan Browne
+1 for blancolirio - discovered his channel and yours during lockdown, and remain a firm fan of both.
Very helpful! Thank you
Nice discussion, as always! I know you guys love your spreadsheets but I'd love to see a video on ProjectionLab, it's a tool that I've been using for a while and think you'd enjoy it.
We've definitely considered it...what do you like best about it?
@@TwoSidesOfFI good question... I'm not sure it's just one thing per se, but I've tested most of the others tools and calculators and felt it was the first one that replaced my custom spreadsheet. And visually, it's way more fun to play with than a spreadsheet.
Hi Jason. Have you looked back to compare where your portfolio would be using a 4% swr as is instead of a cape-based strategy? I know its still a small sample size, but curious to know how they stack up against each other.
In flames 0:52 🤘 Nice! Super happy for her
\m/ jesterhead \m/
Great topic and fellow Karsten SWR sheet user. Question on the Target Withdrawal (%pa) result on the CAPE-based rule sheet. If you leverage the Cash Flow Assist tab fully (income/expenses populated) do you view that earlier result (%pa) as wiggle room in being able to spend more, x%? My results fortunately have a small 1-2% positive value there after I full leverage the Cash Flow Assist tab. thanks and enjoy the channel!
Do you have a video or more info on the cape?
yes! check out kzread.info/dash/bejne/nYSXmtCgY9a_cpM.html and if you'd like even more background on the tool and how we use it, you can find all SWR content and links to related information at twosidesoffi.com/toolbox/
Time freedom is a beautiful thing.
100%
I thought I would closely track my spending, but I have only been casually tracking my cash accounts. I had an idea how much I needed each year and after 3 years I have been spending a little less than that. I update my net worth statement annually, which lets me know if I'm staying on track. It's been a big change from how nerdy I was being before retirement.
The unloading of that employment related stress that most of us don't even recognize is on us, is a HUGE relief. For the first time in our lives we begin to understand the meaning of "peace of mind".
100%
Have been seriously considering retiring for that reason But want to be sure money is there to support the family long term Looking out 30 years is impossible
Some manual updates for the Budget in Google Docs could be automated. For example the remaining number of months can be a formula (hypothetical end date minus Today in number of months). For example =DATEDIF(TODAY();$D$10;"m")
We harvest dividends in taxable accounts. Then pull enough money from an IRA account for our needs/plans but minimize taxes based on stacking of capital gains and ordinary income.
Where are you keeping things such as sinking funds for large items like a new roof or new a/c unit? I'm having trouble segregating emergency funds, long terms sinking funds and accounts for large dollar deductibles like homeowner's insurance.
Larger, long term sums are kept in money market funds in my brokerage acct, while shorter term expenses are kept in checking. I keep the latter organized in my budget (I use YNAB) as separate line items.
@@TwoSidesOfFI thanks! I think because my pot of money is so small, keeping them in cash or money market funds puts me over a 5% allocation to cash LOL!
That was going to be my follow up question for Jason @twosidesoffi which is: are all of your sinking funds a portion of your 5%? Meaning maybe 2-3% of cash is earmarked (but not usually spent) and the other 2-3% is just for monthly checks? I’m sure you’ve seen Karsten’s thoughts on buckets just being an illusion, so the only real need is to avoid rebalancing more often.
@@likethesky none of my sinking funds are a part of my 5% cash allocation. I also don't follow a bucket strategy.
@@TwoSidesOfFI hmmm, I don’t understand. Isn’t a bucket strategy any allocation to cash? (Other than monthly or quarterly cash raising from “whichever side (bonds or equities)” is needed to return you closer to your desired asset allocation, or equal from each if AA hasn’t shifted due to market?)