Why do Financial Advisors discredit the FIRE Movement?

By now, many of you have heard about the Susie Orman interview by , where she denigrates the FIRE movement, and claims that you need $5M to $10M in order to even think of retiring.  While she has walked back some of those comments since the interview, she still appears to believe the FIRE movement is not ready for prime time.

She isn’t alone. Major finance sites like Barrons, Investment News and Market Watch have all published articles lately casting “shade” on t he FIRE movement. Heck, even Broke Millennial has issues with the movement. Yet all of their arguments appear to follow the same pattern – them emphasize the “RE” and not the “FI” portion of the argument. From my readings of the FIRE blogs, the “FI” portion is really what motivates folks and gets them moving.

Typically, the only folks I see in the movement working on the retirement portion of this are folks, like me, who are in our late 40s/50s and who have been able to check out a little early. Almost all the folks in the 20s, 30s and 40s of the FIRE movement are writing about what they are doing now that they’ve hit FI – and they aren’t standing still. Most have taken their side hustles and made them the focal point, and others have chosen other career paths that they enjoy. Some have taken foreign travel, and after a period of time, they’ve settled down to other work.

In reading through all the criticisms, it seems the key point these people make is that folks don’t know what the future holds, and so they shouldn’t just “check out” and assume everything will be OK. Health issues, the economy, global war, etc. – all these could impact the future over the next 40+ years.  FIRE folks should continue to work & save “just in case.”

These critics are missing the point. As Joseph Dominguez and Vicki Robin discussed in their epic book (and FIRE bible) Your Money or Your life,  it really is about how much life energy are you willing to expend to acquire something. FIRE folks have made conscious decisions about what matters, and what matters to them is Freedom. Since this is different for everyone, you don’t necessarily need $5M to achieve that Freedom, and you don’t have to stop working at age 35 when you hit FI.

So when you hear folks “Poo Pooing” the FIRE movement, just stop listening – because they just don’t understand (or are unwilling to understand). If folks go into this with full awareness, take control and make conscious decisions on what matters to them, then other folks opinions just don’t matter.

FIRE on folks!

Mr. 39 Months

The benefits of “Stay the Course”

Checked out the S&P 500 this morning. It’s a typical bellwether on how markets are doing, and many people have their investments tied to it, via an S&P500 Index fund. So it is a good judge of how I’m doing with my investments.

As you remember from numerous postings, I have not really let 2018’s market downturns affect my investing strategy. The idea was always to “stick  to the plan” and continue to invest via dollar cost averaging. This has been shown in numerous studies to be the most effective investment strategy.

Well, in checking the S&P 500, what did I find? In Feb 2018, the S&P 500 was as $2,619.55. One year later, the same index is at 2,728.40. Yup, up 4.15% over the last 12 months. Thus, the S&P500 finally dug itself out of the hole it dropped into early last year. By staying the course (and buying a lot of investments “on the cheap” back in 2018) I was able to recover. This also doesn’t take into account the dividends that my investments paid over this same time.

Other posts are dealing with market declines

Mr. 39 Months

Goals/Objectives for 2019

I’ve done the goal setting posts before and gone over my 2017 and 2018 goals in previous posts. For 2018 it was a mix, but overall I believe I made real progress on a number of financial and non-financial goals. I learned a lot last year, most especially that the non-financial goals were actually the ones that became the most important to me. I guess as the FIRE gets you, you end up with a lot of the finances on auto-pilot, and then you really start to concentrate on what really matters.

For 2019, I kept my finance and business goals fairly similar (just bumping up some of the numbers) and kept many similar personal goals (just added a few). Since I’m under 18 months till I hit my FI date, I need to keep the process moving and keep improving, so that I’ll be ready when I hit the magic number!

Finance:

  • Save $75K in tax-advantaged accounts (saved almost $81K in 2018). 401K, Roth IRA, etc. Dropped this down a bit, due to a need to plus up my savings/emergency fund. Key part of this is using my company’s deferred savings account to push money out till I hit FI. Since the deferred account money will have to be withdrawn (and taxed) when I leave, it actually is a pretty cool FIRE solution for saving.
  • Save $5K in regular accounts (compared to $9K in 2017). This will go into my brokerage account. I withdrew a hunk of this to do my ROTH rollover (part of the “power of zero” philosophy). But I still have some bucks here. I have to take about $5K from my father’s IRA every year, so I just move it from there to my brokerage account instead f spending it).
  • Increase dividend income from all accounts to $27K/year (compared to 26K in 2018).
  • Passive income covers 40% of base living expenses in retirement (it was38% in 2018). My long-term goal is to get my dividend/passive income up to where it covers over 100% of my expected retirement living expenses, so my investments can continue to grow.
  • Beat net worth growth rate of 6% (it was -1.9% in 2018). This is my historical growth rate for the last 10+ years, so I want to beat my average.

Business:

  • Continue attending regular meetings of my local real estate investors association. They hold a regular monthly meeting, a monthly meeting for new investors, and a monthly meeting for my specific county. All three could be interesting, and it’s free for a paid member. Last year I attended, but it was spotty.
  • Double the number of blog visitors in 2019. Last year it was a little over 6,000. I want to get at least 12,000 this year, so I need to put myself out there more (i.e. comment) and write interesting topics. My thanks to everyone who stopped by, and I try to return the favor, and comment as well.
  • Write/publish a book on finance.  I wrote one for new graduates in 2017, but I have identified an area of the community which hasn’t been served as well in the past. Hopefully I can assist with something here.  I’ve got the first five chapters outlined/partially done, but still have a ways togo.

Personal:

  • Increase weight lifted by 10% from 2018. Due to my illness, I didn’t make much progress beyond that, but I’m back to full strength now, and lifting what I was in September 2018.  I want to continue to improve my strength as I get older, instead of just wasting away
  • Average 2 hours of cardio per week (currently averaging about an hour). Again, want to improve my fitness. Based on my lifestyle, I don’t think I can push it past 2 hours per week
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles). Didn’t do this last year, but really want to try.
  • Backpack over 100 miles on AT (did around 80 miles in 2018). Other aspects of life interfered with my ability to get on the trail. Really want to push it this year.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this.
  • Reduce weight by 20 lbs. from Jan 2019 (lost 2 lbs. in 2018). Again, I want to get in better shape as I get closer to financial independence
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading.

Travel:

  • Visit a national park (visited two in 2018)
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Need to get up to see my brother in Vermont.
  • Take a week at the shore and just relax. Too many of our vacations are spent running around. I want to see if I can go somewhere (in this case the beach) and just sit and relax.
  • Visit Ellis Island. Wanted to do this in 2018, but didn’t make it. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it
  • Go on an international trip. Not sure which one (Canada, Caribbean, etc.) but I’d like to get out this year.
  • Visit the Asheville NC area. It’s one of the areas that we are considering retiring to (close to my old home in Tennessee, interesting crafts, shops & outdoor sports, etc.). Trying to learn more about the area (we’ve been there a couple of times).

So those are my somewhat ambitious goals for 2019. I am going to do my best to hit them, so wish me luck.

What are your goals for 2019?

Other Bloggers on their 2019 Goals

Mr. 39 Months

Just Like a YoYo

Wow, you go away for a week and the market goes nuts. Down an unprecedented 600 points the day before Christmas? Up 1,000 points the day after Christmas? What is going on?

In my opinion, the market is still unsure of where the economy is going to go in 2019, and there are a lot of scared people running out of the market right now, trying to find safety. This is forcing mutual funds to sell at a prodigious rate, often times having to sell their winners in order to generate sufficient funds. It’s almost a self-perpetuating drop, as each new drop pulls the next group after it. The overall drop was around 20% from the market high, which brought us into “bear” territory. Time to panic and sell?

The problem is, as was just demonstrated with today’s 1,000 point jump, you not only have to get out before it drops and you have to get back in before it starts going back up again! Or you can do what so many good investors do, and don’t worry about it.

Stick to your plan. Invest regularly. Dollar Cost Average. Diversify. Take advantage when folks panic and sell at bargain basement prices to pick up some deals. The mutual funds that folks have shed will be there, ready to jump back up again shortly.

In a previous posting, I talked about the P/E ratio. The P/E ratio had dropped down on Dec 24th to 18.03 – still higher than its mean of 15.73. This was back below its Jan 2014 number. Still higher than its mean though, so we could have more to go before we get back to an average market.

I still have over 18 months to go before I hit my FIRE date. The typical market downturn is 12-24 months, which is why they tell you to have 1-2 years in savings bucket, to weather that storm. So I intend to stay with the plan, and keep investing.

How about you?

Other Bloggers on the topic:

Mr. 39 Months

How to stand out and excel in life

One of the things that I was talking about with Mrs. 39 Months last night was the lack of drive or inquisitiveness of many people at work or in their life. It seems that both of us have a hard time understanding why people don’t question more, ask more, attempt more as they go through life. I don’t think either of us could work on one of the old fashion assembly lines where you do the same thing, over and over, for 8+ hours.

Yet there are many people who are perfectly happy & content with that kind of work life. They have a set structure, steps 1-7 that they do over and over, and they can do it in their sleep. They don’t stress out or have to keep their minds focused because it is routine. It is only once they leave their work that they truly start to “live.” Then they get to focus on their friends, parties, hobbies, and time away. Cue Drew Cary’s funny exploration of the song “Five O’Clock World”.

I can’t tell which type of person the FI community falls into. The typical FI person is very focused and able to work towards the goal, while exploring new options for enhancing that path. Yet, so many FI folks you read are trying to get away from the current job, similar to the second class of folks.

I do see a lot more FI articles from folks who have reached early retirement prodding people to look at what their life will be afterwards, and to plan for that. We need to be moving towards something and working on being our best as we strive towards FI.

I’ll leave you with something that has stared buzzing around the interwebs lately, the writing of Coach George Raveling (who Michael Jordan just calls “Coach”).  His article “23 life choices you are in control of” is a good read.

  1. Be YOU, not them.
  2. Do more, expect less.
  3. Be positive, not negative.
  4. Be the solution, not the problem.
  5. Be a starter, not a stopper.
  6. Question more, believe less.
  7. Be a somebody, never a nobody.
  8. Love more, hate less.
  9. Give more, take less.
  10. See more, look less.
  11. Save more, spend less.
  12. Listen more, talk less.
  13. Walk more, sit less.
  14. Read more, watch less.
  15. Build more, destroy less.
  16. Praise more, criticize less.
  17. Clean more, dirty less.
  18. Live more, do not just exist.
  19. Be the answer, not the question.
  20. Be a lover, not a hater.
  21. Be a painkiller, not a pain giver.
  22. Think more, react less.
  23. Be more uncommon, less common.

 

Timing

In light of the poor performance of the US stock market in 2018, many folks are talking about the danger  of planning your retirement based on average returns (or worse, the improved returns of the last 9 years) only to run into a sustained “bear market” where their returns to match the expenses they planned for when they retire. The industry has a name for this – “Sequence of Return Risk.”

The fact is that the market returns you get in the first 10 years of retirement have a dramatic impact on the overall performance of retirement funds. If you get stuck in a bad market at the start, it is very difficult to climb out of it. For those who have recently retired, this 10 months could  be devastating, especially if this market continues. Forbes as a good article on ways to manage sequence of return risk.

We are still 19 months away from FI, and since the typical time it takes for a market to get back to where it was is 18-24 months, I think we’ll be OK. For right now, I comfort myself with the idea that right now, there are a lot of stocks “on sale” that I am dollar-cost averaging in my purchases, while I continue with the plan. Hopefully you all have the fortitude to stick with your plan as well.

Other articles about Sequence of Return Risk

Mr. 39 Month

Sorry for my light posting….

Like so many others in the United States, I’ve been busy with the Thanksgiving holiday. Mrs. 39 Months and I traveled south to visit my family for the weekend, so I’ve been offline a great deal.

For many folks, the holiday is a time to meet again with our loved ones,  to argue and revisit old feelings and emotions, and generally to eat well. Afterwards, the American tradition is to run out and spend massive amounts of money (and sometimes to go into debt) to over-consume on “sales items” that are for sale on black Friday. In the end, for a member of the FI community, it is a very interesting time.

One thing that always amazes me is the key word for the holiday, “Thanksgiving”, seems to be forgotten by so many people. One of the pillars of the Stoic philosophy, and the FI philosophy is to be grateful for what you have, and to not be envious of others.  For envy is a real killer of peace and contentment in life, and a real obstacle to achieving your FI goals.

So in the interest of readers, I’d just like to list a few of the things I am grateful for during this Thanksgiving season. I am grateful for:

  • A loving wife, Mrs. 39 Months, who has been married to me for over 32 years
  • A loving mother who still lives, who I can continue to visit and gain wisdom from
  • A great family, with brother’s, sisters-in-law, nieces and nephews that I love and care for
  • A great country that lets me take advantage of the skills and abilities I have, and to profit from my hard work
  • A chance to learn new skills and hobbies, which will enable me to grow

So what are you grateful for?

 

Mr. 39 Month

Image of Thanksgiving from EGuide Magazine

Well, I took the plunge….

If you remember in some of my previous posts on draw-down strategy and the Power of Zero, I talked about using money from my “fun money” value investing account to do a Roth conversion on a significant portion of my regular IRA funds. The objective would be to reduce my 401K amount and reduce my Required Minimum Distributions from them by transferring money to Roth’s now, while the tax rates are so low.

I’ve been bouncing back & forth on this because of my job situation (somewhat sketchy) and the potential impact of getting let go. If let go, I would be due a significant (six-figures) deferred payment, which would shoot me past the 24% tax rate. I’d rather not hit that.

Now that it seems secure, I traded in my two value stocks, Gilead and Cia Saneamento Basico – both of which were in negative numbers for the year. I’ll be able to offset some other stock gains, get out of the value investing business (which I apparently suck at) and convert money to the Roth. A triple win!

Mrs. 39 Months has her regular IRA & Roth at Troweprice, and I have mine at Vanguard. Both of them make it relatively easy to convert money from their regular IRA to their Roth IRA with a few clicks of the mouse. I rolled them right into the exact same index funds that they had previously, so hopefully, no harm/no foul.

The one issue for both of them is the default is that you want taxes taken out of the money you shift over (rather than paying the taxes separately). This would cause you both to lose the money from your IRA and potentially force you to pay a 10% penalty due to early withdrawal before age 59-1/2. Make sure if you do this that you pay attention to the questions you are asking and don’t pay your taxes out of the money you are transferring.

I think I may do this one more time, in 2019, based on the job situation. Then I’ll be in pretty good shape as I cruise to my FIRE date – July 2020!

Mr. 39 Months