One of the benefits of a major stock market correction…

A lot of folks have been bemoaning the drop in the market, talking about the billions of $ that have been lost, and how the market seems to been in danger of a major correction. The doom-and-gloom people have been out in force. Still, most folks in the FIRE community have taken in all in with a “grain of salt” because of our long-term outlook and our financial knowledge. We all remember that it’s all paper losses, until you sell.

One of the major benefits of a market drop is the potential to buy things “on sale.” If we truly believe that the long-term trend of the market is up, then this sudden drop gives us the chance to purchase something we wanted. I know most folks in the US flock to sales like crazy (especially around Christmas), but seem to shy away from “sales” on stocks. Seems odd, doesn’t it.

This has an added benefit when you find yourself with some excess funds, for some reason. Mr. 39 Months company paid out their bonus for 2017, and since the company did well, I got a decent amount of money. With the timing the way it is, I can drop that into the market and buy some items on sale at the equivalent of a 4.1% discount (based on Jan 31 prices). Also, since I put 100% of it into my deferred account, I am able to put that money into the market without paying taxes on it (I did have to pay Social Security and Medicare taxes).

The result was a nice bump in the money that I can access when I retire early, as part of my draw down strategy.

Find any bargains out there?

 

Mr. 39 Months

Woodworking with a legend

Roy Underhill has been showing traditional woodworking on PBS for 37 years. He was a master carpenter and Woodwright for Colonial Williamsburg in Virginia before he started. He has concentrated on traditional 18th/19th century tools and woodcraft, and has been a prime mover for the rebirth of hand-tool woodworking in America. Roy has a definite, almost manic style of presentation, both on TV and in person. Always a joker, He keeps it light while helping to explain the intricacies of using a 19th century tool to come up with accurate results.

About ten years ago, he opened up a school for woodworking, where folks can come and attend classes, see and use the tools (he has a host of them available if folks don’t have their own) and purchase tools to take home if they’d like (there is a separate store, owned by Ed Lebetkin, upstairs). The schools is in a store front in the quaint town of Pittsboro, NC.

I’ve taken classes there on hand tool use, and a special one on wooden molding planes. Last week I took a class with Will Myers and Roy at his school, where we built a great “portable” workbench. This one is based on a bench that Will found in the Moravian museum in North Carolina, which they believe is a design built around 1800. As most woodworkers know, a good bench is strong, sturdy and heavy, so it can withstand the pounding without moving or breaking. This one breaks down into six major parts, the heaviest of which is the 4” think workbench top (around 100 lbs.). It’s fairly portable, but sturdy when you set it up.

There is something really enjoyable about doing all the work by hand. Every cut is hand-sawn, every hole is hand-drilled, and every joint is cut out and fitted. By the end of five days, we were able to take home a workbench that was 85%-90% complete, including a great front vise. The remaining work that needed to be done is relatively easy (I’ve already gotten about half of it done over the last 2-3 days, in the evenings).

I would greatly recommend to anyone that if they have hobbies, don’t wait till you retire early. Take the opportunity to explore them now, if only to confirm it is something that you’d like to do for a long time.

 

What new skill would you like to try out?

 

Mr. 39 Months

Update to draw down strategy – Mar 2018

After going through the health care analysis earlier, I (like so many others) have had to adjust my retirement plans and drawdown strategy to account for Obamacare and changes to it. Like so many others, as well, I will have to continually monitor the situation and make changes. In addition, Mrs. 39 Months looks like she wants to continue to work after we hit FI, but her job probably wouldn’t provide benefits.

The key issue is the provision for subsidies for individuals that do not make more than 4X the poverty level (the poverty level was around $16,000 for 2017). Thus, if your income, before deductions, is $64K or less, you can be eligible for subsidies. This may mean the difference between paying $1,400 a month and $600 a month for the same level of healthcare. Needless to say, if the situation remains the same, I’ll either need to make $64K, or $74K (the $10K necessary to pay the additional medical). I know many folks in the FIRE community knew this, but I thought it was $64K after deductions, not before.

Our initial budget post-retirement, was going to be about $72K, in order to pay for everything, including medical. This would provide for all bills, some travel, and $1K a month each for Mrs. 39 Months and myself in “fun money”/personal expenses. That would push us over the $64K figure. In addition, if Mrs. 39 Months works (earning around $24K), it adds a level of complexity. So how do I “square this circle?”

When we hit FI (27 months from now), we should have the following amounts.

  • Savings: $132K (can spend without having to pay taxes)
  • Deferred Income from work: $179K (when paid out, have to pay taxes on it)
  • Brokerage Account: $94K (can spend about $60K of it without paying taxes. The rest, will be taxable.
  • Inherited IRA from my father: $137K (taxable when we take it out)
  • 401K/IRAs: $546K (taxable + penalty)
  • Roth IRAs: $257K (non-taxable)
  • Total: $1,345K liquid assets
  • House: $298K (not depending on it unless absolutely necessary, i.e. no reverse mortgage)

Complications

  • Mrs. 39 Months making $24K/year. Have to start from there
  • Inherited IRA will force us to take around $6K a year
  • When I leave company, I have to start taking my deferred amount. I believe I get to stretch it over 5 years, but that still winds up as a minimum of $36K a year

As you can see, I’m already up to $60K, without the ability to alter it. How do I get to $72K of income, without going over the $64K of taxable income?

Options

  1. Use the money in my brokerage account by selling some of the stocks there. I would only have to pay for any capital gains on it. Since it looks like about 2/3 of money in it will be basis money, I could take out $12K, and it would only show as $4K of income.
  2. Use some of my Roth IRA money, which is not taxable, to make up for the shortage. Even though I would only be 56 when I hit FIRE, I can still withdraw the money I put in, tax free. However, I am loathe to do this.
  3. Get myself a side gig/part time job to keep myself from going crazy from retirement boredom and pay for the additional medical costs. We will have to see about that.

What is my current plan? I’m going to plan for option 1, and if I get really bored in retirement, I’ll probably shoot for #3, with the understanding that I will be working half of my time just to pay for medical. Like so many others in the US, medical is driving the train!

Of course, all this could change over the next 27 months as we move forward.

So, any changes to your drawdown plans, folks?

 

 

Mr 39 Months
 

Great chart at “Four Pillars” on how long it will take to reach FI at certain income and spending levels   

I think the chart below is excellent. Its from FourPillarFreedom.com (a blog I’ve got to start reading now) that was linked to by The Simple Dollar. It shows, at certain income and spending levels, how many years it will take you to reach FI (assuming the 4% rule and a 5% interest after inflation). I believe it also takes into account taxes, etc. in the annual spending (i.e. your annual spend should include your taxes)

Many folks find it difficult to explain to people why they should save so much, and how it takes effort and sacrifice to reach our financial goals. This chart makes it a little easier to explain to people how long they would have to work in order to retire/reach FI.

Four Pillars has a lot of other tools (listed under his “Visuals” area) that help to show many of the FI concepts.

Check him out.

 

Mr. 39 Months

Interesting philosophical question on Root of Good…

What do you do if you have reached FI, but are scared to “pull the trigger.”

What do you do when you’ve been diagnosed with a terminal disease that might mean your death in the next 5 – 10 years – but you are still scared of leaving the workforce?

Should you retire early if you only have five years to live?

I think this is close to many FIRE folks big nightmare. They work and scrimp and save, only to have something come up right as they are heading out to their new life.

I hope your thoughts and lives are doing better than this!

Mr. 39 Months

Dealing with depressive thoughts as you close in on FIRE

Sorry the posting has been a little late. I’ve been on the road traveling (11 hours in the car on Wed, 7 hours yesterday) so it was a little difficult to get posting up.

I’m traveling down to North Carolina to take a woodworking class (You’ve got to have hobbies!) and took the opportunity to stop off and see family in Knoxville TN on the way (Mom, Brother, other folks). It’s always great to have the opportunity to see family, especially when you are living 11 hours away by car.

Family has always been important to me, or at least I think so – but you couldn’t tell by my life choices. Mrs. 39 Months had a mother who wasn’t in the best of health, so we ended up moving to a place a little closer to her (3 hours) than my family. Even then, we would see her side maybe twice a year. Mine I would see, if I was lucky, about once a year. We always complained that nobody came to visit us, that we always had to be the ones traveling – but we also didn’t have any children to draw the grandparents to us.

Visiting my old homestead, where I lived for 18 years and was formed (and which I still feel is my home state) brings up a lot of memories. I see the choices I made growing up, and think about what could have been, had I made a different decision. I see places I enjoyed as a youth, and it brings back memories of old friends, lots of fun, and sadness at the passing of time. I have a tendency to be morbid about the past at times (something that Mrs. 39 Months chastises me about), but its part of my character. It doesn’t last very long, and typically I return to my usual upbeat self after only a short time.

That is why I have embraced stoicism with some vigor. The teaching help me deal with these feelings, as they show that what is past is gone, never to return. The decisions made then have gotten you to where you are now, but all you can control are your decisions now. It is useless to spend time and emotion on something you can no longer control. I know the logic behind it, but still have moments.

I also have been reflecting on what I’m going to do once I hit FI. I believe this is a topic that many folks explore vaguely, or in their first couple of years. They do all the things they have wanted to do all their lives (travel, hobbies, etc.). Then they look in the mirror, after a decade of pushing like crazy to reach FI, and see that they no longer need to push. They have to alter their personality, and it’s tough. That is probably why some of my favorite blogs to follow are those folks who have reached FI, and what they are doing now – years afterward.

I am still working that out.

Additional Reading on subject

Mr. 39 Months

Frugal Tip – Bad Movie Night with Friends

A lot of folks are looking for things to do for fun that aren’t going to cost them an arm and a leg.  The amount typical Americans currently spend on dining out and entertainment  is something much talked about in the FIRE community, and many folks discuss ways to reduce their entertainment/dining out costs dramatically.

For Mrs. 39 Months and I, we just had a pot luck dinner at our friends house (we brought desert, others brought sides, and the host had the main course). Total cost for us was less than $10, the most was probably $15 for the hosts for the ingredients for the main course.

For entertainment, we all gathered round the TV and watched a pair of really bad movies. For many folks who are old enough, they remember a TV show called “Mystery Science Theater 3000” where a group of characters would play a bad movie, and snipe at it from the side. It was incredibly funny, and stayed on the air for many years (I think they may be trying to recreate it now).

The original team has re-united and has started a series called “Riff Tracs” where they pretty much do the same thing, on special nights. You’ve got to go to a movie theater to see it, but its very funny. You can also see it online a little later (Netflix I believe).

For last night’s viewing, we watched the Rifftrax take off on “Plan 9 from Outer Space” – one of Tim Wood’s movies and often considered the worst movie ever made (It makes Sharknado look like high cinema). After that, we watched “Amazon Women on the Moon” a movie similar to “Kentucky Fried Movie” and “the Goove Tube” – takeoffs on early 80s television shows & commercials, rater R with some nudity and adult situations.

In the end, it was a lot of fun, and a pretty cheap night out. I’d recommend it.

 

Mr 39 Months

 

Ya Gotta Have Hobbies! Part 4

I’ve talked before about hobbies, especially in terms of finding things to do once you achieve FI. One of my major interests in woodworking.

Most hobbies or interests, no matter what, have some sort of professional/amateur show, where folks who are interested can gather, take classes, purchase materials, etc. Heck, even the FI community has Camp Mustache, Chataqua, etc. For me, there is a show that travels the country called “the woodworking show” that goes throughout the US. It has about 100 different vendors, runs about 30 different classes, and enables you to be around, talk with, and generally mingle with your woodworking “tribe.”

As you come onto floor. Look at all the vendors!

Vendor selling a wide variety of materials (sanding paper, hand tools, etc.)

Classroom on floor

Wife knitting, while her husband was out having the time of his life. This is how Mrs. 39 Months would pass the time, if she had come.

It was a lot of fun, and I encourage everyone to seek out these sort of events for their particular interest. You will be amazed at how much you learn, and how much fun you will have.

 

Mr. 39 Months