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 Months
- My family (Mother, brothers, sisters, nieces & nephews)
- 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.
Mr. 39 Months
I’ve included several posts about our recent meetings with a financial advisor
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 assumptions:
- 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 1,000): +6.06%
- 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%
- Cash: 2.68%
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.”
I’m not 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.
How about you?
Mr. 39 Months
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 burnout:
- Shame and Doubt
- Cynicism or Callousness
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:
- Poor treatment and neglect
- Insufficient challenge (an odd one, but one he explains well)
I am sure there are others involved that folks could name.
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.
Good luck out there!
Mr. 39 Months
It is all about the assumptions….
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.
Mr. 39 Months.
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 have.
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 warehouse.
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.
Mr. 39 Months.
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 Months)
- 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 route.
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.
Mr. 39 Months.
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 activities.
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.
Other similar links
Mr. 39 months
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 knight.”
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.
Mr. 39 months