What's your FI/RE Target?

[VagabondMD]

I have reached my financial target (at age 50), and I am planning to cut back ASAP, and leave the medical practice for certain within two years. I do not want to retire, but instead, transition into a career, job, or business that gives me more control of my time and wears me down less physically and emotionally. Ultimately, in five years, my goal is to be in a location-independent position or business that involves no clinical care and might be completely outside medicine.

I have a wife (age 51) that is in a corporate position where she has a physician-like base salary, but bonuses and stock incentives that vary, sometimes wildly. This year, she will be paid like an orthopedic surgeon (woo-hoo!). She plans to work until at least age 55 (where retiree medical for employee AND spouse kicks in), and our youngest of two children is off to college. Worst case scenario is that I leave the workplace entirely, and she shoulders the load. We can live reasonably well on her income and not draw down our assets--with kids in college, we just won't be saving beyond her 401k contributions.

The bottom line is that for me, the concept of FI/RE is not to get out of working, but get out of work that I do not enjoy. Life is too short to burn out doing stuff that you no longer want to do, especially if you have the resources to make changes or leave the job entirely.

[YYjames]

Don wrote:

Just remember one thing. My net worth (unadjusted for taxes) was just shy of $5M when I was 50. Then the financial bust came and it was $2.5M two years later. Back to where I was now, but that was a) close to a decade of essentially zero progress, and b) a wakeup call about the wisdom of leaving the workforce too early. Looking at what’s happening in China and the fact that half the world is a negative interest rates, the landscape looks dangerous; I hope I won’t have to take another round trip like the last one!

Click to expand...

Question to index investors (lest anyone points at me saying why I bring this up 23942039498 times, I am genuinely interested in knowing what people think/plans to handle this)

You say you made zero progress. So isn't index investing you pretty much HAVE to wait 25+ years if financial markets collapse and your portfolio is destroyed?

If you are 65 and have 5 M and retire, in 1 year your portfolio is then halved. What is one going to do? Go back to work?

Expert opinion? Whats the verdict? keep working till eternity?

How unattractive really.

 

[VagabondMD]

YYjames wrote:

Don wrote:

Just remember one thing. My net worth (unadjusted for taxes) was just shy of $5M when I was 50. Then the financial bust came and it was $2.5M two years later. Back to where I was now, but that was a) close to a decade of essentially zero progress, and b) a wakeup call about the wisdom of leaving the workforce too early. Looking at what’s happening in China and the fact that half the world is a negative interest rates, the landscape looks dangerous; I hope I won’t have to take another round trip like the last one!

Click to expand…

Question to index investors (lest anyone points at me sayign why I bring this up 23942039498 times, I am genuinely interested in knowing what people thing/handle this)

You say you made zero progress. So isn’t index investing you pretty much HAVE to wait 25+ years if financial markets collapse and your portfolio is destroyed?

If you are 65 and have 5 M and retire, in 1 year your portfolio is then halved. What is one going to do? Go back to work?

Expert opinion? Whats the verdict? keep working till eternity?

How unattractive really.

 

Click to expand...

At the age of 65 and retired, it is my opinion that there should a healthy fixed income allocation that should buffer the portfolio and provide a source to draw assets while waiting for the equity portion of the portfolio to recover. Remember, you should not need access to all of the initial $5M all of the time, just enough to live on.

This assumes that the stock market will come back at some point in your lifetime, typically within a few years, as it has in the past. Long term investing in the stock market is built on this principle. If the stock market does not go back up again (like it has done after all of the other draw downs), you and a lot of people will be screwed.

[phw]

YYjames wrote:

Click to expand…

 

If you are 65 and have 5 M and retire, in 1 year your portfolio is then halved. What is one going to do? Go back to work?

 

 

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No, you (almost certainly) do not need to go back to work.  The (in)famous MMM explains it pretty well, if you don't like him there are lot's of others who have written about it, US News hits most of the big points such as: "Don't overspend in good years" and "Stay the course in bad years".

The simplest way I can possibly explain it is:  You're 65 and you plan on spending $200,000/year (4% of $5M) and suddenly 2008 happens again and you only have $2.5M.  Well, at $200,000/year you still won't run out of money for another 12.5 years, assuming absolutely 0% gains.  But, is that likely?  How many times in history has a conservative portfolio gone sideways or down for more than 12 years?  The (edit: not attached) attached pic is a screen shot from FIRE SIM, which will let you explore this question.  In this case, a 50/50 US Equity/Bond portfolio failed to live for 30 years 7 times out of the past 113 thirty year cycles (6.9%).  That's the historic risk.  If you're willing to be just a tiny bit flexible, such as keeping your spending to a max of 4% of portfolio value or $200,000, whichever is less, with a floor of $125,000/year (not shabby!), then the historic risk goes to 0%.  The worst you would do historically after 30 years is have a portfolio worth $2,368,918, average is $7,770,260, and if you started in 1982 you'd have $24,328,695 30 years later, see attached screen shot showing changes in spending during downturns over the past 113 thirty cycles.  The average annual spending in all of those years is about $180,000/year, that's including suffering through the Great Depression, the Great Recession, and the 1970's.  Something worse than that would have to happen for the 4% plan to fail.

In other words, in retirement you may need to adjust your spending, and there is a small risk that it might all fall apart, but probably not....just like it is during your working years.  I like to think about balancing my risk of running out of money with my risk of running out of life.

 

edit: will only allow one attachment, so I kept the second one.

 

 

 

 

 

 

[The White Coat Investor]

The whole concept of FI/RE relies on you either hating your job now or hating it later. If you talk to the really hard core FIRE folks (go hang out on early retirement extreme or MMM forums and you'll meet some) they all hate their jobs. I guess they've managed to work themselves into a position where it is better to stay in a job you hate for a short period of time in order to not have to do anything for money later. That whole concept leaves a bad taste in my mouth. I guess I'd rather see people doing something they love for money and creating their ideal life NOW.

It just reminds me of being deployed to the Middle East to a base that was literally 1/2 mile x 1/2 mile that I was not allowed to leave, where the work was mind numbingly dull, and where I could not see nor assist my family on the other side of the planet with anything they needed. After spending 5 months doing something I absolutely did not want to do, I resolved to avoid spending another month doing what I don't want to do, much less years. FIRE just sounds to me like deploying to the Middle East for five years straight in order to never work again. Not worth it. Life is too short to spend it doing something you don't want to do. I'm sure there are people who can't be happy doing any paid work at all, but I bet there are a lot of people who could be happy if they could somehow mold their life into a sustainable model that includes paid work.

The numbers sure work better if you work longer anyway. It is dramatically easier to have $5M at 65 than at 45 for instance, as discussed here:

https://www.whitecoatinvestor.com/14-reasons-why-you-shouldn't-retire-early/

I mean, I want to be financially independent as much as the next guy, but I didn't spend a decade and a half learning to do something in order to quit doing it the second I could.

If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe you're doing the wrong work.

Just thinking out loud as I rapidly approach my original "number" ($2M in 2006 dollars).

[jfoxcpacfp]

YYjames wrote:

Question to index investors (lest anyone points at me saying why I bring this up 23942039498 times, I am genuinely interested in knowing what people think/plans to handle this) You say you made zero progress. So isn’t index investing you pretty much HAVE to wait 25+ years if financial markets collapse and your portfolio is destroyed? If you are 65 and have 5 M and retire, in 1 year your portfolio is then halved. What is one going to do? Go back to work? Expert opinion? Whats the verdict? keep working till eternity? How unattractive really.

Click to expand...

As I've stated ad nauseam in this forum, permanent loss in a diversified equity portfolio is always a human achievement of which the market is incapable. Taking the action you describe would be a choice and a very sad one at that, kind of like an entrepreneurial llama farm startup.

You don't have to speculate "what if?". Equity portfolios actually were halved in 2007. Those who were properly diversified and stuck with the plan are doing quite well today. Of course, that is assuming they had a financial plan in place for this exact eventuality so that they had dollars set aside to turn off the spigot on the portfolio when the inevitable bear ambled along.

The risk isn't the equities*. The risk is your emotions.

*assuming you have a properly diversified equity portfolio, rebalanced periodically

[VagabondMD]

^^

I think that one changes over time with experience, maturity, and perspective. There is a good chance that the way you feel about work and income now will be quite a bit different in ten years. I also see a change in myself as I approached "The Number" and exceeded it. Not only that, my job has changed in ways that make it less tolerable (forget enjoyable) than it was in the past (as it has for many).

Ultimately, you hit the hammer on the head when you analyzed your experience in the Middle East--why spend time at a job that you hate if you do not have to? For many, it is a frog in boiling water scenario, rather than a thunderclap. There was a time that I loved my job. My wife remembers me saying that I have so much fun at work that I cannot believe they pay me to do this.

Purely anecdotal but out of my fellowship class of six (and we were really close as a group), now 20 years out, one has died of a GBM and another was diagnosed with Stage IV renal cell CA. Not that the chance of a random illness, serious accident or imminent death should be top of mind every day, but it does happen...every day to someone.

[phw]

The White Coat Investor wrote:

The whole concept of FI/RE relies on you either hating your job now or hating it later.......I guess I’d rather see people doing something they love for money and creating their ideal life NOW.

 

Click to expand...

I'll offer a counter to this.  The whole concept of FIRE actually relies on deciding that you don't want your chosen occupation to dictate what you do every day or how much money you have available to spend.  You are assuming that people stop working when they FIRE, but this is IRP, and is false.  My wife will never stop working as a surgeon, ever, it's not in her genes.  But it's also not in her goals to keep any kind of "normal" surgeon's schedule for any longer than she needs to, so she will FIRE.  I want to FIRE because I already achieved my dream career, been there done that, got all the accolades in my industry I could ever want.  I'm ready to try lots of other careers once I FIRE, but I'm not willing to risk our finances right now to quit a really well paying job before we are financially secure.  Then I can have real fun, do what I really love (at that moment) for whatever money it pays (about 1/10th what I make right now).  In other words, we are ARE creating our ideal lives now by getting free of day to day financial concerns as early as possible.

"If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe you’re doing the wrong work"

or, maybe: "If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe your preferred line of work doesn't pay enough money to be financially secure and you're a pragmatic person who will do what needs to be done in order to have both security AND a fulfilling job."  just sayin'....

[VagabondMD]

"The whole concept of FI/RE relies on you either hating your job now or hating it later."

 

I think this is a false dichotomy. You can like it now and hate it later, and you can like it now and like it later but like another job or lifestyle better.

[Hatton]

I think it is possible to love your job, love your patients but get tired of the constant change in health care. It seems to be turmoil every 6 months about something. I hit my number and I quit Ob so I am not sure what the complete retirement trigger will be

[Zaphod]

phw wrote:

The White Coat Investor wrote:

The whole concept of FI/RE relies on you either hating your job now or hating it later…….I guess I’d rather see people doing something they love for money and creating their ideal life NOW.

 

Click to expand…

I’ll offer a counter to this.  The whole concept of FIRE actually relies on deciding that you don’t want your chosen occupation to dictate what you do every day or how much money you have available to spend.  You are assuming that people stop working when they FIRE, but this is IRP, and is false.  My wife will never stop working as a surgeon, ever, it’s not in her genes.  But it’s also not in her goals to keep any kind of “normal” surgeon’s schedule for any longer than she needs to, so she will FIRE.  I want to FIRE because I already achieved my dream career, been there done that, got all the accolades in my industry I could ever want.  I’m ready to try lots of other careers once I FIRE, but I’m not willing to risk our finances right now to quit a really well paying job before we are financially secure.  Then I can have real fun, do what I really love (at that moment) for whatever money it pays (about 1/10th what I make right now).  In other words, we are ARE creating our ideal lives now by getting free of day to day financial concerns as early as possible.

“If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe you’re doing the wrong work”

or, maybe: “If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe your preferred line of work doesn’t pay enough money to be financially secure and you’re a pragmatic person who will do what needs to be done in order to have both security AND a fulfilling job.”  just sayin’….

Click to expand...

I know this gets into the "what is retiring" argument. But youre not really FIRE if you simply are FI but still working, just not as much as possible. Thats just being FI, and just making your work fit your life and goals as opposed to the many that want to retire early because they do not like it at all.

For many physicians, Im sure after becoming more FI, being able to transition to a niche or lifestyle of working that is fulfilling in the way they will be an alternative to simply quitting. Even though I sometimes thoroughly dislike many aspects of my job, the further I get on the road to FI the less they bother me, but I started by making sure Im trying to mold my practice to me from the start and keep doing so.

Everyone should have an amount of money they would take to not do whatever theyre doing for work. They dont call it besttimeever, they call it work for a reason. I have a number for sure, also a gazillion outside interests though, so that helps.

[phw]

Zaphod wrote:

But youre not really FIRE if you simply are FI but still working,

Click to expand...

Define "working".  If a surgeon stops making $700k/year at a hospital job and instead starts making $70k/year as a doc with an NGO in a developing nation because they can, are they "working"?  If I quit my $120k/year engineering job and become an avalanche observer at $12k/year for the USFS, did I retire?  I say I did, because I'm living a luxurious lifestyle that is supported by work that I did, and I no longer do...I stopped doing it, I retired.

[The White Coat Investor]

Zaphod wrote:

phw wrote:

The White Coat Investor wrote:

The whole concept of FI/RE relies on you either hating your job now or hating it later…….I guess I’d rather see people doing something they love for money and creating their ideal life NOW.

 

Click to expand…

I’ll offer a counter to this.  The whole concept of FIRE actually relies on deciding that you don’t want your chosen occupation to dictate what you do every day or how much money you have available to spend.  You are assuming that people stop working when they FIRE, but this is IRP, and is false.  My wife will never stop working as a surgeon, ever, it’s not in her genes.  But it’s also not in her goals to keep any kind of “normal” surgeon’s schedule for any longer than she needs to, so she will FIRE.  I want to FIRE because I already achieved my dream career, been there done that, got all the accolades in my industry I could ever want.  I’m ready to try lots of other careers once I FIRE, but I’m not willing to risk our finances right now to quit a really well paying job before we are financially secure.  Then I can have real fun, do what I really love (at that moment) for whatever money it pays (about 1/10th what I make right now).  In other words, we are ARE creating our ideal lives now by getting free of day to day financial concerns as early as possible.

“If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe you’re doing the wrong work”

or, maybe: “If there is an amount of money someone could hand you that would cause you to quit doing your work, maybe your preferred line of work doesn’t pay enough money to be financially secure and you’re a pragmatic person who will do what needs to be done in order to have both security AND a fulfilling job.”  just sayin’….

Click to expand…

I know this gets into the “what is retiring” argument. But youre not really FIRE if you simply are FI but still working, just not as much as possible. Thats just being FI, and just making your work fit your life and goals as opposed to the many that want to retire early because they do not like it at all.

For many physicians, Im sure after becoming more FI, being able to transition to a niche or lifestyle of working that is fulfilling in the way they will be an alternative to simply quitting. Even though I sometimes thoroughly dislike many aspects of my job, the further I get on the road to FI the less they bother me, but I started by making sure Im trying to mold my practice to me from the start and keep doing so.

Everyone should have an amount of money they would take to not do whatever theyre doing for work. They dont call it besttimeever, they call it work for a reason. I have a number for sure, also a gazillion outside interests though, so that helps.

Click to expand...

Work is so awful they have to pay you to do it.

[The White Coat Investor]

YYjames wrote:

Don wrote:

Just remember one thing. My net worth (unadjusted for taxes) was just shy of $5M when I was 50. Then the financial bust came and it was $2.5M two years later. Back to where I was now, but that was a) close to a decade of essentially zero progress, and b) a wakeup call about the wisdom of leaving the workforce too early. Looking at what’s happening in China and the fact that half the world is a negative interest rates, the landscape looks dangerous; I hope I won’t have to take another round trip like the last one!

Click to expand…

Question to index investors (lest anyone points at me saying why I bring this up 23942039498 times, I am genuinely interested in knowing what people think/plans to handle this)

You say you made zero progress. So isn’t index investing you pretty much HAVE to wait 25+ years if financial markets collapse and your portfolio is destroyed?

If you are 65 and have 5 M and retire, in 1 year your portfolio is then halved. What is one going to do? Go back to work?

Expert opinion? Whats the verdict? keep working till eternity?

How unattractive really.

 

Click to expand...

I think this is part of the problem. I'm not sure you understand how "index investing" works. No wonder it looks like such a terrible option to you. A typical Boglehead-style index fund investor has his assets spread across various asset classes, classically stocks and bonds. Even in a terrible bear market, your portfolio only drops in a amount equivalent to about half of what is in stocks. So an 80/20 portfolio drops 40%, a 50/50 portfolio drops 25%, a 20/80 portfolio drops 10% etc. Because of this "sequence of returns" problem, a typical retiree can only spend ~ 4% of his portfolio each year, indexed to inflation. So he needs 25 times what he's spending each year to retire. But the fact that a bear market hits in the year he retires doesn't change that fact at all. He can just keep on withdrawing 4%, and as long as the future resembles at worst the worst 30 year periods we've seen in the past, he'll be fine.

[Zaphod]

phw wrote:

Zaphod wrote:

But youre not really FIRE if you simply are FI but still working,

Click to expand…

Define “working”.  If a surgeon stops making $700k/year at a hospital job and instead starts making $70k/year as a doc with an NGO in a developing nation because they can, are they “working”?  If I quit my $120k/year engineering job and become an avalanche observer at $12k/year for the USFS, did I retire?  I say I did, because I’m living a luxurious lifestyle that is supported by work that I did, and I no longer do…I stopped doing it, I retired.

Click to expand...

I would say you retired, which is why this is difficult to pin down. But someone who chooses to do better hours, less call, no more night shifts, a day or so less in the same exact situation they were before are not retired but scaling back to what they can tolerate because they can. Working for an NGO is more of a passion/charity type thing that I would consider retired and furthermore charitable.

Totally changing your focus and purpose of work, maybe that is a better definition of retiring. But I bet its not worthwhile to define it because it is super slippery.

I like that quote though wci.