Well, it is the Thanksgiving season in the US, and one of the key
holidays of the year has come and gone. I have noticed that Thanksgiving, a
holiday dedicated to gratitude for the year, seems to be a primarily American
holiday, not in keeping with a lot of other countries. Yes, just about every
culture has a “harvest festival” where you celebrate a good harvest and the
opportunity of plenty. However, Thanksgiving in the US is more than that – its focus
is around “counting your blessings,” being with family, and acknowledging how
well we actually do have it in this life.
I know one of the key parts of my daily ritual is the Five Minute Journal, which asks you at the start of your day to write out three (3) things that you are grateful for, and at the end of the day, to list three (3) amazing things that happened to you that day. The idea is to make you realize how good you actually have it, both right as you start the day, and right before you head to bed. The result should be an increased sense of happiness and well-being, and I have to say it has helped me a lot (in addition to my readings in stoicism).
So what are you grateful for in your life?
For me, I am grateful for:
My loving wife of 33+ years, Mrs. 39
My family (Mother, brothers, sisters, nieces
My health (had a few health scares, and
know folks who are in bad shape, so very grateful for this)
My chance to earn a good living, and to
enjoy the fruits of my labor
My country (in my opinion, best country to
live in the world)
Everyone can look at their lives and find things they are grateful for,
and I urge all of you in this holiday season to look at your life and
constantly give thanks for the blessings you have.
As I noted previously, Mrs. 39 Months doesn’t trust my numbers, and
wants to get a second opinion. By involving a third party, I’ve been able to
get Mrs. 39 Months to provide more information on how she sees our FI journey
going, her spending expectations, etc. Its been well worth it in that respect. We
finished our 4th meeting with the financial advisor late last week,
and the results, to say the least, were very disappointing to me.
The “basic” plan we asked him to work up for us had me working for an
additional 4 years (instead of “retiring” at 56, assume we continue to work till
I’m 60 and Mrs. 39 Months was 62). He came back with the analysis, and it
showed us running out of our liquid assets around age 95/97. We’d still have
the fully paid off house to use as a reverse mortgage, but his analysis showed
us just barely scraping by. Sad Trombone (wah, wha!)
Well, I didn’t really take this sitting down, as I knew the assumptions
put into the analysis drove a lot of this. I’d tried to get advance copies of
his analysis (at least the base one) in advance, but I wasn’t able to. So I
started picking it apart there in the middle of the meeting. Some of his
Spending of $90K in the first year – even though
we gave him a budget of $72K (plus taxes), he had some assumptions in
there that pushed the first year’s spending to $90K
Inflation of 3.25%. Seems a little high
compared to the last ten years, but I won’t argue
Medical inflation of 6.5%. I think this
actually is good, based on the past
Yet the big assumption that pushed this out was the return on
investment of various investment classes. They got their data from Morningstar,
which is reporting the following returns, by class, to be used for planning
purposes. Note that these are total returns, including inflation:
Large Cap Growth Equity (top 1,000 of
Russel for growth): +5.02%
Large Cap Value Equity (top 1,000 of
Russel for value): +6.08%
Mid Cap Equity (smallest 800 of Russel
Small Cap Equity (Russel 2,000): 7.24%
US REITs: 7,59%
International Equity: 7.59%
Emerging Markets Equity: 7.26%
Long-Term Bonds: 3.4%
Intermediate Term Bonds: 3.69%
Short-Term Bonds: 3.48%
High Yield Bonds: 6.07%
International Bonds: 2.73%
Holy cow! The S&P500 has returned roughly 10% for the last century,
but I’m supposed to base my retirement on it only returning half that for the
next 40 years? International Equity is going to be US equity, even though its
been getting its but kicked for years now? Cash at 2.68%, even though its been
trading at crap levels for over a decade? I just don’t see the sense in these
numbers. Apparently the thought is that we’re about to head into a period of
serious investment non-performance, like the decade long period after 1929,
1965 and 2000. I’m just not sure this is correct.
I’ve asked them to re-run the analysis based on the $72K a year in
expenses. I think we are going to go round & around on the returns
assumptions in the analysis. Not sure how I’ll handle this.
We are going to have some further discussions. I’ll let everyone know
how that goes.
A very good article from Leftover Dollars on their “Year of Saying Yes.” Basically, they had a loved one who passed away after an illness of 2-1/2 years. That person had lead a rough life, without a lot of funds, and at the end, even when they had the opportunity, they chose not to spend money or time trying to experience or enjoy parts of their life that they had expressed an interest in. They maintained their “I don’t have enough money” attitude all the way up to the end.
Leftover Dollar noted that the experience of watching this “played
a huge role in my FIRE journey.” Because of LD’s childhood, she was a natural
saver and very frugal, so even as things went well and money became available,
purchases and lifestyle inflation was put off, due to a fear of being broke “and
scared of the chaos that ensues when the money runs out at the wrong time.”
sure how many folks in the FIRE community pursue it due to deep emotions on
poverty and not having enough money (probably a significant portion). In this
case, LD used her loved one’s final situation as motivation to start “saying
yes” to all the things she wanted to do, but had been holding out on. She
sought out a new job because she didn’t enjoy her current one. She traveled,
visited old friend, and embraced life. “Basically, whenever an opportunity
arose that I really felt would enrich my life or satiate some longstanding
curiosity, is said yes. I
acknowledged that I could afford it and made it fit into my budget.”
Its an excellent read, and I suggest you take a
look if you have the time.
How many of us are holding back while pursuing
FI, trying to put in that last dollar into our retirement funds? How many
things have you passed up, even though you wanted to? While I definitely don’t
embrace the “YOLO” lifestyle (you only live once), Mrs. 39 Months and I have
done our share of traveling, spending and generally enjoying life. I came late
to the FIRE movement – I only got to saving 40%+ of my income in the last couple of years.
Before that, it was more like 20%.
Still, I find as we get closer, I’ve had the
urge to say “yes” to a lot more. Once we hit our FI goal (8 more months?) I
plan on saying “yes” a lot more often.
Full Time Finance and Chief Mom Officer have interesting articles out on Burnout, the idea that at certain times of your life, the issues of work, family, finances, etc. combine to push you towards the edge (and sometimes over it) – and your body and mind naturally seek ways to relieve the pressure and keep you from exploding (or dying). It is a big problem is our world, though folks have been dealing with stress and burnout for millennia. It just seems to be something new due to the fast pace of life and due to the fact that it is happening to you!
Burnout is one of the major reasons folks get
on the FIRE wagon, as they seek to escape from the stress and move towards a
better life. It is only through later reading that newcomers to our community
learn that the secret to success in early retirement is to be retiring “to”
something, not “from” something.
Chief Mom Officer laid out her four stages of
Shame and Doubt
Anyone that has been following the blog knows
that I was reaching the point of burnout at the end of last year. I was well
past #1 and #2, and pushing #3. My writing took a darker turn, and the issues I
had with my work and my boss definitely affected my home life, my writing, and
my happiness. I was seriously considering resigning from a lucrative position,
in which I enjoyed the work (just not the boss).
I was fortunate to have a supportive spouse
(one of the reasons why you should always have friends and family to talk to,
and who see you regularly – so they can tell you if you are acting
differently). Luckily, I was able to renegotiate the position, and my company
put someone above me between the problem boss and me. So far, it has worked
well, and I have continued to do well in the role.
Full Time Finance notes some of the causes for
burnout (primarily work related causes) are:
challenge (an odd one, but one he explains well)
I am sure there are others involved that folks
The key is to be on the lookout, identify when
you are suffering burnout, determine the cause and try to create the change
needed to deal with it. It is not easy, especially in our dog-eat-dog world,
but your emotional and physical health may depend on it.
Well, last night we had our third meeting with the financial advisor,
and things did not go as well as I might have hoped. I was hoping that, after
we gave him a ton of information before we even started, and answered all his
outstanding questions in sessions #1 and sessions #2, that he would have some
more concrete analysis for us to review last night. In the first session, he
showed a sample binder from another client that had a wealth of data,
spreadsheets, annual spending vs. income, etc. Several scenarios were explored.
I really wanted that 3-ring binder!
Alas, it was not to be. He had two scenarios to show us on the computer
in order to get our feedback, and to make any final “tweaks” to the income,
spending and assumptions. In looking over his shoulder at the computer, I
pointed out a few errors I thought I saw (For example, he continued charging us
for company health insurance, once we retired early – as well as charging us
for the new insurance we’d have to take out, etc.). Because I did not have
anything in front of me, I could not really correct/alter some of the data he
is going to be using.
In just the short review, it is obvious that a lot of the analysis is
based on some of the assumptions he has put in (inflation rate, rate-of-return,
etc.) and that will determine how well we do. What is funny is he started out
saying that our original plan (work four more years, take Social Security at
full retirement age of 67) fulfilled 95% of what we needed, but when we dug
into the details, we were in the black all the way to age 97/99 (our plan). Therefore,
his numbers were off somewhere.
When asked, he said, “you definitely can’t retire right now” which does
not really match my numbers, when I add in Social Security. Still, I cannot
refute him without the actual data/spreadsheets. He is saying all the things
that Mrs. 39 Months wants to hear about being cautious, so I am afraid he might
be poisoning the well in terms of achieving FI. We will see.
Still, we did make some good decisions based on our discussions:
Do the Roth conversion of $40K this year
(probably the last year we’ll be able to do it until we retire)
Stop putting money into the deferred
account at work. Go ahead and just take it as regular salary, pay the
taxes now, and invest the money. If we continue to put it into deferred,
we’ll have a major tax bite when I leave the company
Depending on the situation, consider
beginning to withdraw from the deferred account, so you can draw it down
instead of paying the big lump sum when you leave the company.
Look into benefits/risks of taking social
security later than 67. Your SS benefits will increase, but you will need
to draw down your investments more to live off for that 3 years. What is
the right balance?
I think we are getting a benefit out of this, and I am glad we are
doing it. I hope that I am passing good info along to folks. If you can think
of something, you would like me to explore with him, please comment.
I will let folks know after we have our fourth meeting (early November) how that is going. In the meantime, I hope all your plans work out.
One of the more interesting idea in the US is the idea of going “antiquing.”
This is where you go visit certain parts of the country near you that have an
abundance of antique shops, and see if there is something you might like to buy
from someone else’s leftover “stuff.”
I had the opportunity to be a “roady” again for Mrs. 39 Months at a dulcimer festival near Asheville NC. Asheville and the surrounding area is a wonderful, mountainous region, plenty of outdoor activities, fall colors, and a general “funky” attitude (lots of coffee shops, music venues, art exhibits, etc.). It is one of the areas that we are considering retiring too, especially since a lot of my family is just over the mountains in TN (2-hour drive away).
Asheville also has a large amount of antique shops/stores – big warehouses
of space with little 10’x10’ and 20’x20’ sections walled off, where dealers
have put out large collections of old items, mostly bought at estate sales and
moving sales. You would think that the advent of eBay and other on-line
purchasing systems might have put a crunch into this, but it does not appear to
It is always fascinating to walk around in these and see items that you
may have purchased in the past (especially toys) that now are listed as “antiques.”
It is fun to remember playing with the toys as a kid, reading some of the
books/magazines you had, or remembering some of the other items that were part
of your life that you happen to come across there.
It also brings out a bit of sadness/awareness when you see a family’s
prized possessions now laid out, and fetching pennies on the dollar for what
they paid for. As I walked around, I saw lots of furniture, many collectables, and
many items that you know someone spent a lifetime collecting and enjoying. Now it
is sitting in an old tobacco warehouse waiting for someone to show interest. It
made me realize again that the accumulation of “stuff” does not necessarily make
you happy, and probably is going to go fill up a landfill or sit in a
For me, I was looking for old woodworking tools to purchase cheap, fix
up, and then re-use. I figured at least that would do honor to some long-lost
woodworker who used the items. Trying to keep the old crafts alive.
As you remember, I wrote how Mrs. 39 Months does not trust my numbers, and wanted us to meet with a professional financial advisor to bounce my numbers off of and to go through various scenarios. She is very conservative and concerned that we will run out of money. Longevity runs in her family (her aunt lived to 102, and the rest of the women on her side lived into their 80s and 90s). Therefore, I understand her concern – all my planning assumes she lives to 99 (and I live to 97).
Some folks have asked about the fee we are paying for the advice. He is
a fee-only planner, though he does manage some folk’s investments for a 1% per
year fee. The fee he is charging us, for a New Jersey suburb of Philadelphia,
is a flat $2,900. When we first engaged him, the financial advisor stated that
it would be for four (4) meetings. The agenda appears to be something like:
Meeting 1: Share with advisor our info
(typically in hard copy form, though I gave him ours electronically)
Meeting 2: Clarification of numbers, budget,
situation, etc. Opportunity for the advisor to ask questions and get
answers prior to doing the work, and to share some of his planning
assumptions with us
Meeting 3: Sharing of the plan and some
base scenarios that we have asked for him to run. After review, give him
ideas for other scenarios to run
Meeting 4: Final meeting to run through
any alternate scenarios, finalize the plan, determine next steps
He has also said we could come back “every so often” to update it,
since it is already in his system. I am assuming there is a small fee for his
work, but not sure.
I was hopeful that, since we gave him all our data electronically in
advance, we might have jumped past meeting #2 and gone straight to #3. I wanted
to get ahold of the three-ring binder with the big plan and analysis in it! I
wanted to look at his planning and compare it to mine (and potentially share it
with everyone here). No such luck.
Our planner had been dealing with some family issues (he’s the only
child and his mother had to go to hospital for extended stay and many tests) so
he was not able to really do the analysis. He still had a few questions and
thoughts he wanted to share with us as well. So, no binder, not deep analysis.
Still, some of the planning points that he shared/we worked out:
Inflation assumption: 3.25% – a little
higher than the past 10+ years, but historically accurate in our lifetimes
Inflation for medical: 6% – very accurate
historically, and something I didn’t consider in my initial planning
No inheritance planned – my mother is well
off after a life of frugal living and excellent planning. However, we
assume we won’t get anything (again, staying conservative with Mrs. 39
Changed the life assumptions from 90 years
old to 99 and 97 (see above)
Discussed scenarios to look at, including
immediate retirement, retire on my schedule of July 2020, and retire when
I hit 60 and Mrs. 39 Months hits 62.
There were a few other clarifying questions and for the most part, we
are making very conservative estimates and plans. While I am a little more
willing to plan “to the edge” of retirement, I do not think we will go that
One of the biggest benefits to this is that it has gotten Mrs. 39 Months
to open up with her thoughts about retirement, budgets, lifestyle and plans.
Despite my prodding over the last several years, she really has not opened up
too much about it – until we started to have these meetings. Now we have
created a budget, discussed travel and lifestyle, and started working some of
the details out. Mrs. 39 Months commented to me after the second meeting that
it was a strange thought that, even in our conservative planning, retirement
was just 4 years away.
The fact that this is enabling us to discuss it this way is worth the $2,900
fee alone, even if we did not get any analysis.
I will let folks know after we have our third meeting (late October) how that is going. In the meantime, I hope all your plans work out.
For most folks in the FIRE community, part of what motivates us is the free
time we hope to have once we hit our “number.” Time to pursue other goals,
hobbies, time with family & friends, etc. We look at the future and imagine
all sorts of things we would be doing once the need for money is taken care of.
Often this involves extensive travel (both in the home country and throughout
the world). It can be very exciting.
Most folks have a long list of what they intend to do in their first
year – but what are your plans for year 2? Once you have checked off all the
immediate ideas and needs, and you are starting towards the long, daily “grind”
of being financially independent, what is your life going to look like. It is
this part of planning that many FIRE folks fall a little short of – yet it is
here where we will be spending the vast majority of our time. How do we plan
for year 2?
What are you passionate about?
One way is to ask yourself what are you really passionate about? What
gets you out of bed in the morning, gets your blood flowing when you get the
chance to do it. It may be volunteer work, working on your house or garden, a
specific hobby, or spending time with your family. Take the time to sit down and ponder/meditate on
what you are passionate about and use that as a basis to plan your year 2
Not a race, not one answer
One of the mistakes folks make when they think about this is to believe
that it is a one-time decision, and once they start down the road towards
activities for year 2+, they will be stuck in it. Nothing is further from the
truth. Almost everyone will have changing interests/passions over the next 10,
20, 30 years – as their life experiences change them. Look at what you want to
do now, but don’t beat yourself up that you might change your mind. In the
engineering world, its called “paralysis by analysis” where you keep analyzing
without actually acting. Feel free to make a decision with the full knowledge
that it isn’t going to commit you for the rest of your life.
Learn to enjoy the present
Typically, year 1 of FIRE is a frantic time, running around and doing
all the things you’ve always wanted to do. Year 2 and beyond is much more about
relaxing and enjoying the present in a more unstructured manner. Make sure that
while planning year 2, that you don’t “over-plan” year 2. Leave yourself plenty
of time to relax and just “enjoy the present.”
In the end, the primary benefit of hitting FIRE is you are given the “Gift of Time.” You should make some serious considerations of how you intend to use that time, once the initial “bloom” of retiring early is done. While you don’t need to being too crazy about analyzing it, take the opportunity to look into it.
Came home the other day from work, and Mrs. 39 Months met me with the
news. “John is in the hospital.”
John is one of our close friends in the area, and someone I have known
for almost 30 years. We are the same age, and have many of the same interests,
though lately his crafts and interests have tended to mirror more of what Mrs.
39 Months enjoys making.
John has been married for 20+ years, and while it has its difficulties,
you can tell he loves his wife. Unfortunately, her health has deteriorated over
the last five years to the point that she can barely walk for any length of
time. This precludes a lot of activities and forces John to do a lot more work
around the house, just to take care of her. She is under a doctor’s care for
her ailments, and she does work to get better, but it is a struggle. John is a “giver”
and while he complains about it at time, I think he enjoys the role of “white
Recently John’s allergies kicked up and got rather bad. He ended up
overextending himself, and in the end, had to go to the hospital because he had
come down with a severe case of bronchitis. This left him so weak he could
barely move, and at the same time, he was not around to take care of his wife
(her daughter assisted a bit).
We took the opportunity to go visit him for a couple of hours last
night. He was still weak, and was probably going to be in the hospital for at
least 2-3 more days. He knew he needed to rest, but worried that when he went
home, he would end up exhausting himself with taking care of his wife. All we
could do was volunteer to help, and let him know we were there for him.
It is interesting, as you get older. You realize that friends and
family are the most important thing in your life. With FI, you can try to find
more time for them, especially if they need it.
A lot of ink has been spilled over the last 10 years on the state of
the United States’ social security program. For those outside the US, this is
the base retirement investment program, which takes 6.2% of someone’s salary,
and another 6.2% of the salary from the employer, and uses this tax to pay for
current retirees. Most folks think they are paying into an “account” for
themselves, but it is actually sort of a giant Ponzi scheme, where current tax money
is used to pay off outstanding bills. For folks in the FI community, Social
Security is a part of the program, but probably not a major part.
Like so many Ponzi schemes, it is predicated on getting more and more
people/taxpayers to pay into it in order to keep it rolling. Unfortunately, the
folks in the US have not been having 3+ kids to help defer this, and the bill
for the “Baby Boomers” is coming due. The taxes taken in are now not enough to
pay current beneficiaries, and so the system is spending up the excess it has built
up over the past decades. Depending on which accounting system you use, the
year it goes “belly up” is around 2032. Unless something is done, benefits will
be cut to 75%, which could be very serious for the ones who most depend on
This happened previously, and the two sides of the political aisle got
together in the 1980s and came up with a series of items (extend retirement
age, tax benefits, etc.) to fix it, at least for the next several decades.
Well, we are fast approaching the time when we need to do something similar,
but both sides of the US political aisle seem to not want to even discuss it.
Probably because it has been called the “third rail” (i.e. the electrical rail
for trains) for politics – to touch it means death.
Which is sad, because the closer we get to the magical date, the more severe the changes that will need to be made in order to keep it solvent. I recently read a report from the Society of Actuaries (an accounting field that specializes in longevity, insurance, etc.) on potential fixes, and what percentage they could go to in fixing the problem.
Raise the retirement age to 70. Life expectancy is longer, but it could be hard on people with physically demanding jobs or who are disabled. +68% of fix
Reduce the cost-of-living-allowance (COLA) by a certain percentage. A congressional commission felt the consumer price index (CPI) was overstated by 1.1%, meaning the COLA was too high. However, these would be cumulative, so as retirees get older, they fall further behind in purchasing power. +37% fix
Reduce benefits by 5% for future retirees: Puts everyone in the same boat, but would hit low income the hardest. +26%
Increase the number of years used to calculate average wage from 35 to 40 years. This would encourage people to work longer, but would hurt folks who work less than 40 years, especially mothers. +24%
Affluence test: Reduce benefits for those whose total retirement income exceeds $50k/year. This preserves the benefits for most, but discourages savings and encourages people to hide assets. It also changes Social Security from a universal, “all in this together” program, to one of need. Would hurt support for program. +75%
Raise payroll taxes from 12.4% to 13.4%. Would not hurt because real wages are going up, but we may also have to increase Medicare payroll tax (it is in even worse shape) so total taxation would be burdensome. +53%
Increase wages to social security tax: Currently capped at , this would make Social Security a worse deal for higher incomes, further eroding universal support
Invest 40% of Social Security Trust Fund in private investments. Could boost returns with less risk to individuals, but this would be 5% of private market. Stock voting and selection could be politicized. +48%
While there does not seem to be one single answer, the best way to do
this is with a series of 3-5 of these, and this will get us over the 2032 “hump.”
All we have to do is have the political will to do it.
That is the problem.
Sorry to be a bit of a bummer, but we all need to be planning on our
financial future, and for those in the US, this is an important part of it.