The FIRE revolution

MaxiRobriguez

lalman wrote: »

I am currently 33, and think Mr Money Moustache is good for FIRE movement.

I have 4 BTL's now and a full time job, and worked out i need 8 before i achieve FIRE.

I have found it a lot harder in the UK to achieve FIRE than our American counterparts... it just feels they have more disposable income/ cheaper housing to achieve it quicker.

Cheaper living and a concept that has taken off this decade when the American stock market has outperformed all its peers.

I wonder how many of these people that have retired early are really set up to overcome a prolonged bear market or the usurping of the greenback though. Seems far too convenient to declare oneself independent at 25x expenditure at 4% drawdown rate, even for our US cousins. A big change in interest rate environment is going to give a lot of these people some very difficult problems to overcome which will dictate the quality of their life for the next half century.

I think 35x and 2.5% with an additional 2.5% as a constant cash buffer is a better estimate of those thinking of retiring early under FIRE principles.

bostonerimus

MaxiRobriguez wrote: »

Cheaper living and a concept that has taken off this decade when the American stock market has outperformed all its peers.

I wonder how many of these people that have retired early are really set up to overcome a prolonged bear market or the usurping of the greenback though. Seems far too convenient to declare oneself independent at 25x expenditure at 4% drawdown rate, even for our US cousins. A big change in interest rate environment is going to give a lot of these people some very difficult problems to overcome which will dictate the quality of their life for the next half century.

I think 35x and 2.5% with an additional 2.5% as a constant cash buffer is a better estimate of those thinking of retiring early under FIRE principles.

There is obviously a spectrum of independence...that sounds strange I know. There are some people who are independent with optimistic projections and those that no longer rely on stock market returns because they have such a large pot wrt their expenditure that they can manage with very conservative cash like investments or have pensions or alternative income sources like rent.

The danger is that over the last 30 years stock returns have been very good and a 4% withdrawal seems conservative to many people; it might well be, but there's always a chance of a stock market disaster, so to be really independent you need other strings to your financial bow.

C_Mababejive

Maybe a strategy is to have two taps. One on the pension barrel and one on the ISA barrel. If the pension investments drop due to a rising bear then turn that tap off and turn the ISA tap on to weather the storm? or is that rubbish?

bostonerimus

C_Mababejive wrote: »

Maybe a strategy is to have two taps. One on the pension barrel and one on the ISA barrel. If the pension investments drop due to a rising bear then turn that tap off and turn the ISA tap on to weather the storm? or is that rubbish?

....and how do you plan to have the pension and ISA invested? or by pension do you mean DB pension/annuity?

darkidoe

bostonerimus wrote: »

I retired when I was 52 with no debt and complete financial independence.....even from the stock market.

Financial independence even from the stock market? How?

You own a business? Have other sources of income?

Malthusian

darkidoe wrote: »

Financial independence even from the stock market? How?

You own a business? Have other sources of income?

Bostonmouse has the US equivalent of DB pensions if I remember correctly. And I assume there's an insurance scheme in place analogous to the UK's PPF.

C_Mababejive wrote: »

Maybe a strategy is to have two taps. One on the pension barrel and one on the ISA barrel. If the pension investments drop due to a rising bear then turn that tap off and turn the ISA tap on to weather the storm? or is that rubbish?

Not necessarily, it might be a good strategy not described very well . If your pensions and ISAs are invested in the same thing then it makes no sense. If your ISA is a cash ISA then it does make sense. It's drawdown strategy 101, spend your investments in a bull market, and stop withdrawals and spend cash in a bear market, thus avoiding pound cost ravaging (at the cost of lower overall growth on your portfolio due to cash drag).

However if that is the case, your barrels should be labelled "investments" and "cash" not "pensions" and "ISAs" because that's what makes them work.

Your strategy is a bit like saying "I'm going to have a wooden barrel and a steel barrel at my party and if I get too drunk on the wooden barrel I'll turn on the steel barrel tap instead". It makes sense only if we know that the wooden one contains beer and the steel one water.

Sir_Robin wrote: »

The FIRE communities I’ve seen are extremely frugal and advocates for diversified passive investing.
Paying for a dodgey course on trading is pretty much the last thing they’d do.

True, but the FIRE rhetoric is not that far removed from the "generate a passive income, stop working for the Man, achieve financial independence" rhetoric of the get-rich-quick industry. It was only a matter of time before they tried to piggy-back on FIRE. The only difference is in how they achieve their shared aim of financial independence. (FIRE = slash lifestyle expectations, get-rich-quick = throw all your efforts and your money into pyramid schemes.)

gm0

ISA or other cash buffers inside or outside the pension fund have a buffering affect on what happens to you when the correction hits.

Relative to the 100% equities person (the extreme case ignoring leveraged plays) you are:

- Not immediately selling equities for income into a 50% correction
- Able to trim income, live of the cash and avoid the fire sale for 2-3 years (say)
- Leaving some money on the table in the good times (lost returns and inflation impact on the cash held)

Back testing seems to suggest this is "helpful" but not a pancea as not all dips recover conveniently quickly so it is not going to "fix" wealth preservation but it can knock out some of the "failed" retirements if you are pushing your withdrawl rate close to the limit where failures start to appear.

So it is a good idea but don't fall into the trap of believing that 2 years income in a cash pot is going to fix sequence of return for you in a single step.

ChopperST

https://simplelivingsomerset.wordpress.com/2019/07/24/fire-is-for-the-few-not-the-many/

Here's a good article balancing the delirium of FIRE. I follow many blogs like MME, FIREstarter etc. but the FIRE community does ignore alot of the benefits of work (social purpose, feeling of self worth etc.).

I am fortunate to enjoy my job and the people I work with. FIRE is the opposite pole of "I wont save into a pension because I'll work till I drop." FIRE also ignores opportunity cost of not doing things when you are fit and healthy particularly travel, seeing the world etc.

You may be able to guarantee your future income but there are no guarantees in life with respect of your health so a sense of perspective is warranted.

Personally as a clinician in the NHS and a retirement age of 68 a SIPP to fill the gap 10 years before feels the right balance of a shift from full time to part time work if I choose and to allow me to pursue other work interests such as training the next generation and taking time out to teach.

veryintrigued

Anyone else thinking they're Fire resistant?

bostonerimus

darkidoe wrote: »

Financial independence even from the stock market? How?

You own a business? Have other sources of income?

I have a DB pension and rental income which cover my expenses. I bought the rental and paid off the mortgage and took a government job with a DB pension as a long term plan to generate retirement income. I also have a deferred annuity that pays 4.5% and a savings bond paying 2.1% that can be used if necessary. Everything else in in the stock and bond markets, but it is not necessary for income.