Low Stakes Retirement Blog
07-13-2023
, 01:10 PM
Hi There,
Nice screenname.
I'm in a similar position as you... making a good wage in a job I am bored of, playing a bit of poker on the side, married with no kids, and looking forward to retirement by age 55 in about 9 years.
I'm curious as to what's driving your numbers, specifically $2.5M by age 55. Did you calculate your spending rate in retirement, your death date, and are you dying with zero or is this number based on some FIRE-ish 4% thing? I'm mixing both a bit but I've found that getting deep into the hard calculations is better the closer I get to retirement as opposed to the basic 4%.
I was just talking with a coworker yesterday about how as my assets grow, the time I spend on them becomes more valuable relative to the time I spend on work. It's an interesting evolution as you get older and hopefully richer. It's refreshing to see a person your age with a seemingly good grasp on this already. I was clueless in my 20s and 30s then got a good job and a great deal on a house which allowed me to start building. But still I value time and experiences (mostly dirt cheap ones) over money. While my goals are substantial, I fear that I will inevitably overshoot by a lot and with nobody except for a niece to pass the leftovers to.
Nice screenname.
I'm in a similar position as you... making a good wage in a job I am bored of, playing a bit of poker on the side, married with no kids, and looking forward to retirement by age 55 in about 9 years.
I'm curious as to what's driving your numbers, specifically $2.5M by age 55. Did you calculate your spending rate in retirement, your death date, and are you dying with zero or is this number based on some FIRE-ish 4% thing? I'm mixing both a bit but I've found that getting deep into the hard calculations is better the closer I get to retirement as opposed to the basic 4%.
I was just talking with a coworker yesterday about how as my assets grow, the time I spend on them becomes more valuable relative to the time I spend on work. It's an interesting evolution as you get older and hopefully richer. It's refreshing to see a person your age with a seemingly good grasp on this already. I was clueless in my 20s and 30s then got a good job and a great deal on a house which allowed me to start building. But still I value time and experiences (mostly dirt cheap ones) over money. While my goals are substantial, I fear that I will inevitably overshoot by a lot and with nobody except for a niece to pass the leftovers to.
07-13-2023
, 01:53 PM
Quote:
Hi There,
Nice screenname.
I'm in a similar position as you... making a good wage in a job I am bored of, playing a bit of poker on the side, married with no kids, and looking forward to retirement by age 55 in about 9 years.
I'm curious as to what's driving your numbers, specifically $2.5M by age 55. Did you calculate your spending rate in retirement, your death date, and are you dying with zero or is this number based on some FIRE-ish 4% thing? I'm mixing both a bit but I've found that getting deep into the hard calculations is better the closer I get to retirement as opposed to the basic 4%.
I was just talking with a coworker yesterday about how as my assets grow, the time I spend on them becomes more valuable relative to the time I spend on work. It's an interesting evolution as you get older and hopefully richer. It's refreshing to see a person your age with a seemingly good grasp on this already. I was clueless in my 20s and 30s then got a good job and a great deal on a house which allowed me to start building. But still I value time and experiences (mostly dirt cheap ones) over money. While my goals are substantial, I fear that I will inevitably overshoot by a lot and with nobody except for a niece to pass the leftovers to.
Nice screenname.
I'm in a similar position as you... making a good wage in a job I am bored of, playing a bit of poker on the side, married with no kids, and looking forward to retirement by age 55 in about 9 years.
I'm curious as to what's driving your numbers, specifically $2.5M by age 55. Did you calculate your spending rate in retirement, your death date, and are you dying with zero or is this number based on some FIRE-ish 4% thing? I'm mixing both a bit but I've found that getting deep into the hard calculations is better the closer I get to retirement as opposed to the basic 4%.
I was just talking with a coworker yesterday about how as my assets grow, the time I spend on them becomes more valuable relative to the time I spend on work. It's an interesting evolution as you get older and hopefully richer. It's refreshing to see a person your age with a seemingly good grasp on this already. I was clueless in my 20s and 30s then got a good job and a great deal on a house which allowed me to start building. But still I value time and experiences (mostly dirt cheap ones) over money. While my goals are substantial, I fear that I will inevitably overshoot by a lot and with nobody except for a niece to pass the leftovers to.
The 2.5m is admittedly a somewhat arbitrary number. Here's how I came about it. I think most people are not conservative enough when it comes to estimating expenses in retirement. The 4% withdrawal rate you mentioned is one that I see tossed around regularly, but I think if you look closely 4% is likely too high. It's hard for us humans to grasp larger picture timelines, but I am open to the possibility that the market has outperformed expectations over the last 100 years, and the true safe withdrawal rate is probably closer to 3%. Who knows what the actual safe withdrawal rate really is. I just know that I'd rather be more conservative than the average bear when it comes to financial health in retirement.
How much people need to spend in retirement is highly subjective - for me, after adjusting for inflation in ~20 years(my retirement horizon), $75,000 is my annual spend goal. 2,500,000 * .03 = 75,000. I figure if I live for the first 5 years at that 3% withdrawal rate, my 2.5m nest egg should theoretically grow as returns outpace withdrawal. This would be my ideal scenario, have a nest egg that grows over time while still providing for a very comfortable lifestyle in retirement. In this scenario, I would probably slowly up the retirement spending as I grow older. I think this is the opposite of what a lot of people do. It's somewhat common for people to want to spend more money in the first few years of retirement taking advantage of their "youth" and then living more modestly as they grow older. When you look at the impact of that kind of spending to the nest egg though, it really crushes it. I'm hoping to have a nest egg that grows, and as it does, slowly my spending grows too.
Do you have any resources you think would be helpful for me consume on this topic? Always open to learning more about financial literacy. Saving is tough stuff - thanks for the words of encouragement
07-13-2023
, 02:56 PM
Quote:
The 2.5m is admittedly a somewhat arbitrary number. Here's how I came about it. I think most people are not conservative enough when it comes to estimating expenses in retirement. The 4% withdrawal rate you mentioned is one that I see tossed around regularly, but I think if you look closely 4% is likely too high. It's hard for us humans to grasp larger picture timelines, but I am open to the possibility that the market has outperformed expectations over the last 100 years, and the true safe withdrawal rate is probably closer to 3%. Who knows what the actual safe withdrawal rate really is. I just know that I'd rather be more conservative than the average bear when it comes to financial health in retirement.
How much people need to spend in retirement is highly subjective - for me, after adjusting for inflation in ~20 years(my retirement horizon), $75,000 is my annual spend goal. 2,500,000 * .03 = 75,000. I figure if I live for the first 5 years at that 3% withdrawal rate, my 2.5m nest egg should theoretically grow as returns outpace withdrawal. This would be my ideal scenario, have a nest egg that grows over time while still providing for a very comfortable lifestyle in retirement. In this scenario, I would probably slowly up the retirement spending as I grow older. I think this is the opposite of what a lot of people do. It's somewhat common for people to want to spend more money in the first few years of retirement taking advantage of their "youth" and then living more modestly as they grow older. When you look at the impact of that kind of spending to the nest egg though, it really crushes it. I'm hoping to have a nest egg that grows, and as it does, slowly my spending grows too.
Do you have any resources you think would be helpful for me consume on this topic? Always open to learning more about financial literacy. Saving is tough stuff - thanks for the words of encouragement
How much people need to spend in retirement is highly subjective - for me, after adjusting for inflation in ~20 years(my retirement horizon), $75,000 is my annual spend goal. 2,500,000 * .03 = 75,000. I figure if I live for the first 5 years at that 3% withdrawal rate, my 2.5m nest egg should theoretically grow as returns outpace withdrawal. This would be my ideal scenario, have a nest egg that grows over time while still providing for a very comfortable lifestyle in retirement. In this scenario, I would probably slowly up the retirement spending as I grow older. I think this is the opposite of what a lot of people do. It's somewhat common for people to want to spend more money in the first few years of retirement taking advantage of their "youth" and then living more modestly as they grow older. When you look at the impact of that kind of spending to the nest egg though, it really crushes it. I'm hoping to have a nest egg that grows, and as it does, slowly my spending grows too.
Do you have any resources you think would be helpful for me consume on this topic? Always open to learning more about financial literacy. Saving is tough stuff - thanks for the words of encouragement
The only advice I can offer on the retirement spending topic is to run the numbers both backwards and forwards. In other words, track your expenditures and meticulously run a budget (forwards) as well as use the 3% rule or whatever you want as an estimate (backwards). Resources are glaringly lacking on this topic, probably because as a culture we've gotten used to running our lives with no planning whatsoever and nobody can really answer these things for us but in reality the numbers have to be crunched in order to actually get anywhere.
08-01-2023
, 01:06 PM
New Portfolio Update
This is not financial advice.
As promised, I am beginning a new portfolio. Here's the steps I have taken:
1) Sign up for Robinhood(RH) and upgrade it to RH to Gold to receive 4.9% return on cash balance for $5/mo. Probably not worth initially, but I'm just doing it now so it's done, I can check it off the list, and be more minimal with my tasks. Done.
2) Set up monthly deposit of $500 on the first of every month.
3) Set up monthly recurring purchases on the second of every month. Here's how I decided to allocate this $500 recurring investment.
Probably could have streamlined the process more and consolidated to two steps, but again I'm just getting things done without investing time in them. Checking the boxes and moving on.
I am creating this portfolio with the intent of leaving it in the market without considering selling any of it for at least 10 years, probably closer to 15. Because I get 4.9% return on cash, I plan to slowly migrate funds to this account and accumulate that return on cash balance, as it is significantly higher than my banks cash balance return. So intent with cash deposited in this account is also to let it sit and accumulate 4.9% with no risk. Only exception to withdrawing prior is if this account grows to exceed the FDIC ensured amount of $250,000. Should I be so lucky to have this problem!
Strategy I am employing is simple. Lock up an amount that I can afford each month, set it to recurring so this happens automatically. Done. Diversify the amount into reputable Vanguard ETF's without overthinking it. Done. We could debate for weeks the correct strategy here. I don't really care, the point to me is to lock the money up, average into the market over time into a diverse set of stocks. Adjusting these distributions as my risk tolerance changes. All done. Now I can consider this complete. I intentionally am not purchasing individual stocks. I want to invest as little as possible mental energy into this portfolio, and still reap the returns.
This is not financial advice.
As promised, I am beginning a new portfolio. Here's the steps I have taken:
1) Sign up for Robinhood(RH) and upgrade it to RH to Gold to receive 4.9% return on cash balance for $5/mo. Probably not worth initially, but I'm just doing it now so it's done, I can check it off the list, and be more minimal with my tasks. Done.
2) Set up monthly deposit of $500 on the first of every month.
3) Set up monthly recurring purchases on the second of every month. Here's how I decided to allocate this $500 recurring investment.
Probably could have streamlined the process more and consolidated to two steps, but again I'm just getting things done without investing time in them. Checking the boxes and moving on.
I am creating this portfolio with the intent of leaving it in the market without considering selling any of it for at least 10 years, probably closer to 15. Because I get 4.9% return on cash, I plan to slowly migrate funds to this account and accumulate that return on cash balance, as it is significantly higher than my banks cash balance return. So intent with cash deposited in this account is also to let it sit and accumulate 4.9% with no risk. Only exception to withdrawing prior is if this account grows to exceed the FDIC ensured amount of $250,000. Should I be so lucky to have this problem!
Strategy I am employing is simple. Lock up an amount that I can afford each month, set it to recurring so this happens automatically. Done. Diversify the amount into reputable Vanguard ETF's without overthinking it. Done. We could debate for weeks the correct strategy here. I don't really care, the point to me is to lock the money up, average into the market over time into a diverse set of stocks. Adjusting these distributions as my risk tolerance changes. All done. Now I can consider this complete. I intentionally am not purchasing individual stocks. I want to invest as little as possible mental energy into this portfolio, and still reap the returns.
08-01-2023
, 01:12 PM
Quote:
10-4 on all of this. I think $2.5M is a good number. Does that include the wife's spending and is your home value included as well? I'm just asking for the sake of benchmarking a bit for my own knowledge. I'm aiming for $1.3M invested plus ~$2M home value with an option to liquidate some of that home value significantly. Neither includes my wife, but she gets to live rent free.
The only advice I can offer on the retirement spending topic is to run the numbers both backwards and forwards. In other words, track your expenditures and meticulously run a budget (forwards) as well as use the 3% rule or whatever you want as an estimate (backwards). Resources are glaringly lacking on this topic, probably because as a culture we've gotten used to running our lives with no planning whatsoever and nobody can really answer these things for us but in reality the numbers have to be crunched in order to actually get anywhere.
The only advice I can offer on the retirement spending topic is to run the numbers both backwards and forwards. In other words, track your expenditures and meticulously run a budget (forwards) as well as use the 3% rule or whatever you want as an estimate (backwards). Resources are glaringly lacking on this topic, probably because as a culture we've gotten used to running our lives with no planning whatsoever and nobody can really answer these things for us but in reality the numbers have to be crunched in order to actually get anywhere.
10-01-2023
, 09:58 AM
Market is in a really interesting spot these days. The scale of AI's innovative disruption has had the eye of wall street. Semiconductor's boomed, retail tried to short NVDA without success, all the while inflation has been on the precipitous decline. 9 months into the calendar year, market seems to be exhibiting some risk-on behavior. BTC price has risen, tech seems to be front running the market. Here's a chart of SPY. I drew a line of support, that seems to show more accurately why I think we are in an interesting spot.
The above image is SPY weekly. I left the sharp decline at the onset of COVID in for reference. We are hovering just over a line of support that has yet to be invalidated. There's a camp of people that think if we breach this line, the market may be in for another sharp decline, somewhat similar to the COVID decline in scale. Others, think that if this line of support holds, we are just in a larger bull cycle that is continuing. To be very clear, I have no idea what the market will do. This is not financial advice. I am sharing my thoughts, and backing that up with my actions in my portfolios. If I had to pick one of those two scenario's(1)breach support and sharp decline or 2) bounce off support and continue to new highs), I'd favor the bullish scenario. It seems so easy to sell fear to the retail lizard brain. While I maintain an open mind to the bear case, especially if some of the moving averages turn into resistance, I just don't really see it all that likely from a range of outcomes perspective.
So, this seems like a great time to be averaging into the market. As you all know, I had to spend all of my cash position on some back taxes a year or so ago. I have been slowly recouping that cash position, and am moving it into the RobinHood account listed above. Although from my perspective it seems to make sense to buy stocks now, my cash position still isn't large enough relative to my other investments(real estate, IRA, liquid stock). Because of this I am still holding off from averaging into the market more aggressively than I already am. Ideally, I would have batches of cash position that I can dispense into the market during times like these. The lesson learned I am taking from this is that I need to have a significantly larger cash position for all kinds of reasons. Significant expenses do come up from time to time that require liquid cash. It'd be great to have the extra cash now so I could indeed average into the market when I think it is a good time to. I wonder how others in the community manage their cash position relative to liquid stocks? It is important to note I have my cash position in my RobinHood account, and it is accumulating 4.9%APY.
I'll have a fresh post with my asset break down in the near future as well as replies to comments
The above image is SPY weekly. I left the sharp decline at the onset of COVID in for reference. We are hovering just over a line of support that has yet to be invalidated. There's a camp of people that think if we breach this line, the market may be in for another sharp decline, somewhat similar to the COVID decline in scale. Others, think that if this line of support holds, we are just in a larger bull cycle that is continuing. To be very clear, I have no idea what the market will do. This is not financial advice. I am sharing my thoughts, and backing that up with my actions in my portfolios. If I had to pick one of those two scenario's(1)breach support and sharp decline or 2) bounce off support and continue to new highs), I'd favor the bullish scenario. It seems so easy to sell fear to the retail lizard brain. While I maintain an open mind to the bear case, especially if some of the moving averages turn into resistance, I just don't really see it all that likely from a range of outcomes perspective.
So, this seems like a great time to be averaging into the market. As you all know, I had to spend all of my cash position on some back taxes a year or so ago. I have been slowly recouping that cash position, and am moving it into the RobinHood account listed above. Although from my perspective it seems to make sense to buy stocks now, my cash position still isn't large enough relative to my other investments(real estate, IRA, liquid stock). Because of this I am still holding off from averaging into the market more aggressively than I already am. Ideally, I would have batches of cash position that I can dispense into the market during times like these. The lesson learned I am taking from this is that I need to have a significantly larger cash position for all kinds of reasons. Significant expenses do come up from time to time that require liquid cash. It'd be great to have the extra cash now so I could indeed average into the market when I think it is a good time to. I wonder how others in the community manage their cash position relative to liquid stocks? It is important to note I have my cash position in my RobinHood account, and it is accumulating 4.9%APY.
I'll have a fresh post with my asset break down in the near future as well as replies to comments
10-01-2023
, 10:16 AM
Quote:
Hi There,
Sorry for dropping out. I don't regularly read these forums.
Just a couple of thoughts as you're doing your investment portfolio...
1. Have you looked into the tax implications of your strategy and what happens when you retire early? Since reworking our financial plan I had a keen advisor note that I was f*cking myself with my prior portfolio (mostly a generic Chase bank "managed" fund and 401k) due to taxes and lack of planning for early retirement since I was using a generic plan set up for people to retire at 65+ whereas optimal tax strategies for early retirees focus on low turnover and fees in current funds plus partial Roth 401K conversions at retirement.
2. What is your end goal? Do you or will you have kids? Will you pass your wealth onto them? Will you donate all the leftovers to starving Ethiopians? Will you spend it all on hookers and blow? I am just curious as the spending rate you mentioned of 3% is likely going to make your net worth last forever.
Sorry for dropping out. I don't regularly read these forums.
Just a couple of thoughts as you're doing your investment portfolio...
1. Have you looked into the tax implications of your strategy and what happens when you retire early? Since reworking our financial plan I had a keen advisor note that I was f*cking myself with my prior portfolio (mostly a generic Chase bank "managed" fund and 401k) due to taxes and lack of planning for early retirement since I was using a generic plan set up for people to retire at 65+ whereas optimal tax strategies for early retirees focus on low turnover and fees in current funds plus partial Roth 401K conversions at retirement.
2. What is your end goal? Do you or will you have kids? Will you pass your wealth onto them? Will you donate all the leftovers to starving Ethiopians? Will you spend it all on hookers and blow? I am just curious as the spending rate you mentioned of 3% is likely going to make your net worth last forever.
Hey no worries! Thanks so much for any participation
1) I do need to do more research with this. Thanks for this suggestion. My current calculations involve not touching my IRA until the latest possible time, so most conservative scenario. Utilizing liquid stock until then. I will actually take an action to discuss this the next time I speak with a financial professional.
2) Another great question! And one that I probably won't fully know the answer to for some time. No kids yet, I suspect the wife may reevaluate her desire not to have kids in a few years. I'm fine without them, and if she decides to maintain the no kids stance, it'll just be her and I. I'm super lucky to be with her, and am loving the prospect of sharing the rest of my time with her. We both have plenty of extended family that need financial support. So if we don't have kids, plan is to support the next generation of our brothers and sisters' kids that are growing up in less than ideal financial situations. There's already an awkward tension at family gatherings as she and I are well off relative to our brothers, sisters and cousins.
I think the end goal is to have the time and money to be able to do whatever I want with a relatively capable body. The idea that I can live a life doing the things I want to do without letting financial struggle at all enter into my headspace is incredibly appealing to me.
12-07-2023
, 02:59 PM
RH portfolio update:
After beginning with $500 in February, this portfolio is now >8k. In addition to my recurring monthly purchases outlined earlier, I have been funneling poker profits from my micro stakes endeavors into it. Have been primarily focusing on increasing my cash position, but added onto a few ETF's as well. I look forward to continuing to add to this cash position at about a 1:1 money invested:cash rate(currently 4k stock: 4k cash). Just holding for the long run, will not be selling any stocks for a while. Goal is to grow this to 200k one day! On my way
After beginning with $500 in February, this portfolio is now >8k. In addition to my recurring monthly purchases outlined earlier, I have been funneling poker profits from my micro stakes endeavors into it. Have been primarily focusing on increasing my cash position, but added onto a few ETF's as well. I look forward to continuing to add to this cash position at about a 1:1 money invested:cash rate(currently 4k stock: 4k cash). Just holding for the long run, will not be selling any stocks for a while. Goal is to grow this to 200k one day! On my way