Weekend reading: Your verdict on the FIRE debate

Comments on this entry are closed.

• 1 Financial Samurai January 10, 2020, 7:00 pm

  Interesting results! Makes sense to keep options open. After 8 years, I’m a FIRE failure bc of the cost of raising kids.

  But I plan to make it back by 2022!

  Sam
• 2 Dawn January 10, 2020, 7:46 pm

  FI is not about never working again, its about not HAVING to work.
  There’s a massive difference.
• 3 ermine January 11, 2020, 1:05 am

  > Only the most dedicated rat race escapee would turn down doing a little paid work they thought was both interesting and useful, surely?

  Even I as an ardent and dedicated advocate of escaping the rat race accepted bits of work if my arm were twisted enough by interest 😉 But what I don’t want to do, ever, is build it into my lifestyle. I’ve treated these as windfalls, and often gifted the windfalls over time to make people I know happy where a bit of financial easement would make a big difference to their day/week/year.

  What I learned in my final battle with The Man was never rely on selling your time for money again, it makes you a hostage to fortune.. Paying these windfalls forward saves me from that hostage to fortune trap.

  Many thanks for the link!
• 4 Far_wide January 11, 2020, 9:50 am

  I’ve never yet read an argument against FIRE I’ve found convincing. Most of them seem to me, in one way or another, either a failure to understand the point that we’re all different people or an attempt to make anyone seeking FIRE into a one-dimensional cipher determined to live on lentils from a caravan park blindly following a 4% SWR.

  For example:

  1) “Who would want the lean/grim existence of (lean)FIRE?”
  A: Someone who values and enjoys a simple lifestyle?

  2) “FIRE is a bubble, everyone has gone crazy with this long bull market”
  A: This is a bull market, yep, have lowered my SWR accordingly. Thanks for checking, though!

  3) “Who actually wants to retire in their 30’s /40’s, how miserable!”
  A: Quite enjoying it myself. Speak. For. Yourself.

  4) People forget about how expensive kids are in this”
  A) “Kids are expensive? Who knew! If you’ve forgotten to include a large financial cost in your desired FI life, you’re kinda just not doing it right I’m afraid”

  etc etc…
• 5 Far_wide January 11, 2020, 10:15 am

  (part 2) Sorry if my first post comes across a little glib/arrogant, but I do tire of people belittling a lifestyle I’m very happy with, and painting an outlook that they have (which I don’t) directly on to me, insisting I must really feel it.

  Try it the other way for size.

  “I can’t believe people seriously want to work forever at jobs they don’t like to buy crap they won’t even use. Don’t they realise that life is finite, and that their bodies will be on a downhill slope by the time they retire at 67 with millions in the bank but unable to do anything? Heck, they may not even make it to their mid-60’s.
  I sure hope they go to the gym to keep in shape to give them a chance to get there, if they have the time after their 10 hour workday without enough sleep that is. Of course, then they need a nice car to get to the overpriced gym, and need to be wearing the best gear to work out in to keep in shape. Instead of, I don’t know, just going for a run, or lifting a weight sometimes like a normal person. Bizarre.

  And have they really thought about the fact that they’ll probably be shoved out of employment in their 50’s anyway as “past it and overpaid”, pushing them then too quickly into a life they can’t yet fill without the endless toil of work and something that they can ill afford due to their wastefulness? Joblessness is at an all-time low, seems like a complete bubble to me, don’t they realise that?!”

  It’s not very nice or particularly fair is it? We’re better than this! Rant over 🙂
• 6 The Investor January 11, 2020, 11:07 am

  @Far_wide — Morning, and thanks for your comments. I have to say though:

  I can’t believe people seriously want to work forever at jobs they don’t like to buy crap they won’t even use. Don’t they realise that life is finite, and that their bodies will be on a downhill slope by the time they retire at 67 with millions in the bank but unable to do anything? Heck, they may not even make it to their mid-60’s.

  This is exactly the attitude that comes across from the majority of people committed to FIRE, in my experience. 🙂
• 7 Mathmo January 11, 2020, 11:08 am

  Thanks for the links this weekend, TI. Not a close follower of the FI debate over Christmas, good to see a close fought battle conducted in good spirit…

  Made it to the end of Ermine’s post this week by way of penance, and it’s a wonderful perspective for younger viewers on how views change over life. (hint: it’s not a story where everyone lives happily ever after). Ermine should have his own fairytale…

  FvLs adaptation of indeedably’s time-income-exoenditure balance is interesting but it is mistaken in considering income instead of total real return, other than that, it sits right at the heart of the Christmas Fire debate about whether time is bought or not. Furthermore it caused an interesting discussion with MrsMathmo about what are Wants and what are Needs. Needless to say these are highly subjective choices, and sit at the core of Ermine’s insights into first kettles..

  One other thing that leapt out at me this week was reading FvLs annual review of investment returns and seeing a whopping 11.2% average annual return over the past 5 years. Awocs references a similar high number is his rebalancing piece.

  I confess my mental model and asset allocation is more conservative. I’d like a bloodbath before I step up to 80:20 from 60:40 and I vaguely think of equities as 7% and bonds as 1%, meaning I expect something like 4.6% annual returns. Even 80:20, I’d expect 5.8% annual returns. How has FvL magicked up nearly double my expectations?

  I turned to Vanguard to give me a benchmark. They offer a global 60:40 and 80:20 acc fund which is a great proxy for total return (22bps cost is reasonable). Five year for 80:20 is 9.6% and 60:40 is 8.0%. It turns out my benchmark is quite a long way off based on the past 5 years. Which is not to say that there’s definitely a bit of magic (US bias?) between 9.6 and 11.2 — you double every 6 1/2 years instead of every 7 1/2 years.

  The question that lingers is that if 4% swr rate is a myth, what are we doing seeing consistent returns of nearly 10%?
• 8 Far_wide January 11, 2020, 11:30 am

  @investor , I was of course taking a deliberately provocative approach for rhetoric effect, this is not my actual view. You have a point though, it’s probably in no small part due to MMM’s cult-ish approach.
  Point is, we’re all different. FI/RE can actually cater for a wide range of people, but even then may just not be for everyone. I do tire of the simplistic criticisms it throws up, but I do also welcome thoughtful criticisms of the lifestyle and hearing about different lifestyles.
  A view not from the FIRE handbook that is actually mine – I would personally have preferred to really enjoy my career or have been able to find one that I could. I’m still young, I hope to still find some more meaningful work-like activity one day. Finding that can be be frickin difficult though, and people who have that must be perplexed at the many who don’t wanting to exit early. So I’m certainly not dismissive of those who do have that – a bit envious in fact, at times!
• 9 Far_wide January 11, 2020, 11:37 am

  Hi @mathmo

  “The question that lingers is that if 4% swr rate is a myth, what are we doing seeing consistent returns of nearly 10%?”

  Yeah, but what was the return in 2007-2009 just before this golden period?

  The other thing you may be missing is sequence of returns risk. SWR’s need to cater for those unfortunates who retire and then promptly see equities fall off a cliff. If not adequately cushioned, you might deplete your portfolio before it has time to recover. Of course, in many/most cases you end up in the happy situation of a ballooning portfolio (try firecalc.com for a good demo of all of the above).

  IMHO, 4% SWR is far too gamey at present. I’m not even sure about 3% SWR frankly, although at least CAPE is lower for a global portfolio as opposed to the US-only model often used by US investors.

  I share your perverse desire for a bloodbath!
• 10 Xailter January 11, 2020, 11:57 am

  @Far_wide – I know I’m personally aiming for a ~3.3% SWR at the moment. That might be too high. However VHYL is currently yielding 3.39% just on dividends right now and full of well established companies *shrug*

  Regarding the energy bills piece in the Guardian – I seriously can’t believe that many people are on the standard rates still. Do they really not know there’s way cheaper rates on one of your biggest household bills? Baffles me.

  And thanks for the link to FireVLondon – found someone to add to my reading list 🙂
• 11 The Investor January 11, 2020, 12:14 pm

  @Mathmo — Nice to have you recapping again! Re: Returns, haven’t the past 5-10 years been great for nearly everyone with global exposure? I’m certainly in the same ballpark as FireVLondon and AWOCS. Remember FireVLondon used leverage, which will boost things a tad. (I can’t remember off-hand if/how he accounts for this.) I think your return assumptions are more realistic for the long-term, but timing as ever is tricky. I’m certainly not as optimistic as I was a decade ago for the potential for many more years of above-average to great returns, when everything looked depressed.

  E.g. from 2009: https://monevator.com/equities-new-bull-market/

  @Far_Wide — Cheers for the clarification. We agree far more than we disagree! 🙂
• 12 Matthew January 11, 2020, 2:27 pm

  It’s not just persuing FI, it’s a hobby of making money, it’s wanting a bit of excitement from the volatility and something to chat about that makes you different from most people, it’s also not having anything better to do with your money and believing that it is doing the most good for society when it’s invested, as opposed to given to charity (charity has it’s place, but it isnt self perpetuating)

  And as for FI itself, it’s peace of mind (although something insurance could give you), that i suppose allows you to be braver with career risks

  Btw perhaps prince Harry needs help escaping the royal ratrace
• 13 Gentlemans Family Finances January 11, 2020, 2:28 pm

  As a matter of contrast and perspective – many people who have the potential to easily become financially independent have also a lack of social constraints like the pressure to keep up with the Jones es or perhaps have sacrificed for their careers and now live far from home.
  Having it all ain’t easy.
  Look at the immense pressure Harry and Meghan are under! !!

  Perhaps I am making a virtue out of necessity but we are lucky to be in our personal position FI is genuinely within reach and I won’t need permission or lose status by doing so.

  And regarding working to 68, who wants to be buried in a gold plated coffin?
• 14 The Accumulator January 11, 2020, 2:31 pm

  @ The Investor: “This is exactly the attitude that comes across from the majority of people committed to FIRE, in my experience.”

  Have you seen the comments thread under the average mainstream media FIRE article? Obviously it’s a parade of people who despite finding their world view challenged are really excited to discover new ideas and debate them in a spirit of open inquiry. At the very least they’re really happy that the ideas are available to other people, even if the concept is not for them. And they never dismiss others with differing views as idiots, or frauds, or fanatics, or aliens.

  @ Far_wide – I agree that many of the arguments against are based on misrepresentation. For example:

  FIRE-ees have to endure 20 years of misery because for some reason they can’t change a job they don’t like while seeking financial independence, and no matter what they do, it will take 20 years.

  The whole thing is a sham because some people choose to do work of some kind after declaring independence, when they MUST not work!!! [Even though the whole movement is about doing whatever you damn well please with your time including paid work if that’s what floats your boat.]

  It’s dangerous because some people may commit to radically changing their life (and their children’s) based on reading a few articles by some clickbait blogger then screw it up, or change their minds later. [Who this unknown but presumed-to-be-massive segment of ****wits are is never clearly identified.]

  They’re a cult of fanatics who lay down holy laws and they hate and hound you if you disagree. [Notwithstanding that it’s a generally progressive community sharing a diverse range of ideas and notions, albeit connected over the internet so you’re going to come across the occasional eejit.]

  Once committed you’ve gone down an irrevocable path that you can never leave, and you gain no benefit from applying the principles for a while.

  They’re irresponsible because they should work until they’re 65 even though their employers will dismiss them without a second thought when the spreadsheet doesn’t add up.

  It’s not fair because not everybody can do it.

  It’s madness because if everybody did it the world would break.

  There is a cool debate to be had but it quickly wears thin if everyone just stays in the trenches. Happily the recent Monevator thread was generally a rip-roaring, give-and-take debate – I enjoyed it immensely.
• 15 Matthew January 11, 2020, 2:48 pm

  Fire is for people who are afraid of switching jobs, if it goes wrong. It’s rather an extreme way to tackle that risk
• 16 ZXSpectrum48k January 11, 2020, 3:04 pm

  Re: “Why longer-term bonds have greater price volatility (interest rate risk) ”

  It’s simply not that clear cut. To first order, the change in bond price, ΔP = D.ΔY, where D is the duration and ΔY is the change in yield. The issue is that bond duration tells you nothing about the magnitude or direction of ΔY. For the change in price, ΔP, to simply be a function of duration D, you would have to assume that ΔY is the same for every bond on the yield curve. Now, on a typical day the curve moves pseudo-parallel; in fact ΔY(2), the change in yield for a 2-year bond, will be slightly smaller than ΔY(10), the change in yield for a 10-year bond, and because the duration of the 2-year bond is also lower than that of the 10-year bond, then ΔP(2) << ΔP(10).

  Longer-term, however, this phenomena doesn't necessarily hold true. During a hiking (cutting) cycle, ΔY(2) will tend to rise (fall) persistently with the policy rate, while ΔY(10) will tend to mean-revert more and thus move less in total. As a result, over time, the total price change of the 2-year bond may exceed that on the 10-year bond, despite it's much lower duration. So this idea that long-duration bonds are riskier than short-duration bonds is correct on a day-to-day basis but can fail over a longer-term horizon.

  In the last 30 years, yield curve behaviour has changed radically due central bank inflation targeting and falling inflation volatility (and lower term premia). In cutting cycles, long-duration bonds have outperformed short-duration bonds; yet in hiking cycles, short duration bonds have tended to underperform long-duration bonds. Ignoring the secular trend for flatter yield curves and assuming yield curves simply shift in parallel has been a shockingly expensive error.
• 17 Penelope January 11, 2020, 3:30 pm

  It was scary in the recent FIRE debate comment thread to hear the levels of abuse that one commenter (ZXSpectrum48k) and his children have been subjected to.

  I hope that Monevator readers will agree that it was totally unacceptable for Mr Money Mustache to threaten to “punch them in the mouth”.

  Let’s all try to keep this debate civilised. Every human being has value and beauty inside them.
• 18 Matthew January 11, 2020, 3:35 pm

  @zx – well noticed, I suppose base rate changes are a short term thing in themselves, so what matters is what rates are forecast to be over that longer time period
• 19 Mathmo January 11, 2020, 4:56 pm

  @TI – nice to have a little time to peruse more deeply again: amazing what you can achieve when avoiding completing a tax return…

  @ZX – mmm. deltas. I imagine that the very long end of the yield curve is somewhat anchored regardless of policy rate (but I guess not regardless of economic growth?), and saying that small movements are parallel seems to me to be analogous to saying that the Earth is locally flat. It is. But there’s a bigger picture as you point out. Nice observation. Thanks. Still don’t understand bonds other than as a place to keep wealth while I wait with @Far_wide for the sales to start.

  @far_wide – I understand sequencing of returns, but what’s odd about the 10% return is how long it has held up. Normally in a decade you’d expect some chunky drawdowns. Those of us who were invested through 2000 know what a drawdown feels like. Haven’t seen one of those since 2008 and even then it didn’t feel that bad (I think they’re both about 50%ers) and the lost decade of the 1970s seems like a long time ago now. The 30s were epically bad. 80%+ drawdowns. You’d consider it a major disaster to see 50% these days. And then for shorter periods. Complete recovery to peak within 5 years (and how “lucky” would you have to be to but at peak — thanks – I bought Worldcom at the top, so yes, I know)). Careful cash buffering could trump sequencing with such a short time with the tide out.

  Do we believe CAPE any more? US companies hoarded debt — in particular the four bigly big ones that drove all the return — which broke the CAPE ratios. Then taxation changed and the money came back and sloshed back around again. A one-off effect? Just like 10 years of governments doing GE. When we look back will we realise that this unusual decade was simply the product of two one-off policy choices rather than underlying hard work as TEA would have us believe this week?
• 20 Mathmo January 11, 2020, 5:04 pm

  @TI – on returns, my observation was more how wrong my expectation was rather than how good FvL or AWOCS was performing. From reading FvL’s post on leverage, my understanding is that is a (fortuitously timed owing to housing) source of funds for the pot, but that return is calculated on the pot, not on the net equity. If there is magick, then FvL declares a 80:20 equity target with a US bias. Frankly, betting on US equities has been a “Trump” card in the game of returns recently. My steadier 60:35:5 with an underweight US portion has still done well enough. Being invested anywhere has been a good ride.
• 21 gadgetmind January 11, 2020, 5:15 pm

  I’m now two years into retirement and the swelling portfolio means that I have far more investments than I started with despite my 4% withdrawal rate. In fact, my withdrawal rate is now < 3.5% and we could easily reduce spending if values drop, though we're 50:50 between equities and bonds, so the shock shouldn't be too massive.

  In 10 years, 2x state pensions coming in will see a far more sustainable <2.7% withdrawal rate.
• 22 The Accumulator January 11, 2020, 5:26 pm

  @ Penelope – do you mean that tongue in cheek? It’s hard to tell in writing.

  @ Matthew – Why can’t I aim for FIRE and switch jobs too?
• 23 Matthew January 11, 2020, 6:11 pm

  @TA – you could, but I mean the people who insist on doing the same job they dislike for decades, retiring, only to take another job, seem to me like financial independence is really just to give them the security to change rather than retire – and although they might want to retire, they sometimes really are just fed up with the niggles of their current job
• 24 The Accumulator January 11, 2020, 6:43 pm

  @ Matthew – fair enough, I appreciate that definitely applies to some people.

  Just to debate it a little, I know a fair number of people who work for the largest employer in a particular town. Their roles are specialised and similar jobs in the region are few. They can’t easily switch employers or maintain their pay without uprooting. So many people stay put, some get stuck in a rut, some get embittered. I think FIRE principles could help those people feel like they had another option and could improve their situation. That alone can improve morale a great deal, empower people to say “no” sometimes, and perhaps ironically negate the desire to retire.

  Of course, the majority have never heard of FIRE, and it’s harder still to try and explain the underlying ideas to anyone who doesn’t discover it for themselves.
• 25 Mr Optimistic January 11, 2020, 7:29 pm

  @Matmo. The 4% rule (swr) is a dangerous and lazy concept! See eg
  http://www.theretirementcafe.com/2019/09/the-prevalent-but-problematic.html
• 26 Mathmo January 11, 2020, 8:06 pm

  I’m assuming “dangerous and lazy” is a bad thing here — one can never be sure when the proprietor now puts himself in the “naughty corner” with a note of pride and a whiff of maverick. 😉

  SWR as a concept and picking 4% is a helpful placeholder. Annuity rates vary but can bobble up to around 4% (so you can cover downside risk if you wish to sell your upside).
  Want to know what that 6.99 monthly Netflix subscription is costing you in FI terms? Multiply by 300. Figuring out if it’s roughly enough? 4% isn’t a bad rule of thumb. I look after a portfolio where the retirees are drawing 6% — quite successfully at the moment — but it’s enough for me to look at it and wonder if there’s an issue in the offing.

  Similarly, I don’t think long term returns are 10%. In fact I’m not even sure they’re 7%, but if I look at a newborn and want to know what that £1,000 christening gift is worth as an income when he retires at 60, then I’ll double it 6 times and divide by 25. It’s a way of getting a feel on things. About £2,500, but that will only be worth £600 after 2% inflation… It’s a handy short-cut, nothing more.

  But this is one of the issues with the indeedably inc/exp chart (pretty though it is) — it looks at current income, not long-term risk-adjusted real returns. Similarly, one of the things that irks me about the incomistas who want a portfolio where they can live off the income: a plague of acc funds on them… Still — rule of thumb and all that — if you but FTSE100 (why would you? it’s a joke index) — and enjoy a 4.3% yield then it all feels a bit like your income is roughly your SWR etc. I think this confuses apples and oranges. They are indeed roughly the same size at the moment. But don’t put the wrong one in your negroni.

  I think there’s plenty more to be said about withdrawal *strategy* when you actually get to drawdown — SWR are particularly tricky there — do you take more earlier if the performance of the market is good? Spend it while you have the energy? Build a cash buffer? Flex spending with results? What role for annuities and state pensions? What role for gigs? But a feel that something like 25x current expenditure is something like a good figure is close enough for retirement planning in the accumulation phase.
• 27 Matthew January 11, 2020, 8:44 pm

  @TA – I can see how it must help people who are otherwise trapped, I would consider going back to uni for the pleasure of doing something more productive (rather than nicer as such because I believe that if I can earn more then it’s because I’m contributing something more valuable) – but I couldnt afford to cut work back at the moment and I wouldn’t get a 2nd student loan.

  In my mind I want to be productive even if I don’t want to be, and I want my money to be productive even if I don’t need it to be – but divesting from investments to invest in my own education is definitely less diversified and riskier, I might be most in the current job, money productively put to work, there is just a bit of a risk that health problems will boot me out, so I aim for FI for safety there too
• 28 ermine January 11, 2020, 10:23 pm

  @TA

  So many people stay put, some get stuck in a rut, some get embittered. I think FIRE principles could help those people feel like they had another option and could improve their situation. That alone can improve morale a great deal, empower people to say “no” sometimes, and perhaps ironically negate the desire to retire.

  Eh? I was that guy. Once you got your FIRE ticket to ride in a situation like that, use the bugger. There’s no upside to not retiring (in that situation). Don’t just load the gun. Pull the trigger.
• 29 ZXSpectrum48k January 11, 2020, 11:15 pm

  @Mathmo. The last decade can distort your view on risk-return. The sheer amount of monetary easing, both conventional and unconventional, is unprecendented. Central banks have put policy rates at (or below) the zero bound for a whole decade. The’ve expanded their balance sheets hugely. The’ve suppressed asset volatility. All great for safe assets such as govt bonds. Risk assets (equities and HY bonds say) were at very attractive levels a decade ago having been beaten into a pulp in 2008. The impact of lower bonds yields gave that recovery in risk assets a huge tailwind. You also have had positive suppy-demand factors: vast share buybacks, low govt bond issuance, regulatory changes forcing banks, insurers etc to buy bonds.

  To be honest though this is just an extension of a multi-decade rally in all asset prices. The end of Bretton-Wood led to a surge of inflation in the 70s/80s that slammed asset prices down. As inflation fell back in the late 80s and onwards, it left real yields at historically high levels. All assets were cheap. You could have made 9%/annum investing in long-duration Gilts over the last 30 years. So really if you haven’t been making 10%/annum, you’ve underperformed the risk-free curve. Initially, it was smoother in bonds and property, and, of course, the S&P had a horrible 2000s. So this decade it was time for some equity market catch-up.

  The issue is that real economic growth has been poor, productivity has fallen, aggregate demand is weak, deflation is more likely than inflation. Nothing good. At this point the divergence between asset prices and the real economy hasn’t been this large since the end of the Gilded age. Probably not sustainable and mean-reversion to the norm will be painful, so caution is justified. Nobody, however, really knows when the elastic band will snap.
• 30 Mr Optimistic January 11, 2020, 11:49 pm

  One clear problem with swr is that it implies you set up a system and stick to it over may be 30+ years without adjustment to what transpires. Like me driving from London to Manchester at a steady 30 mph irrespective of what is in front of the car ! Anyway, Dirk Cotton explains it better than me over many blogs, the last one about the limits of p(ruin), the parameter used to set the maximum swr.
• 31 Mathmo January 11, 2020, 11:58 pm

  @zx – that is a tremendous summary. Thank-you. And slightly unnerving before bed.
• 32 Matthew January 12, 2020, 12:03 am

  @zxspec – was the collapse of Bretton woods basically a symptom of Keynesian economics at the time? Which I think might be the root of the inflation back then – as an example things like (in this country anyway) building lots of council houses at a loss basically handed out cash which caused inflation itself, in addition to more gilt issuings
  I can only see such inflation again if we had another bout of Keynesian economics (although I do think we could potentially have rather difficult to control inflation)
• 33 The Accumulator January 12, 2020, 10:48 am

  @ Ermine – the negate the desire to retire bit applies when FU options mean a person no longer feels trapped and their new found empowerment wins them new respect/opportunities in the workplace. Perhaps they tell management that they’re now only prepared to work 3 days a week, or aren’t prepared to take on certain projects etc. As I understand it, that didn’t apply to you due to deteriorating workplace conditions, but other FI types have talked about how they renegotiated terms to suit them once they had options.
• 34 E&G January 12, 2020, 11:01 am

  I started to think about FI/RE a couple of years ago (at 32) and my planning has so far been based on retiring at 60. Realistically I’ve no chance of retiring in my 40s or early 50s due to having kids, high housing costs and a fairly average household income to support them (particularly as my partner works part-time). And I won’t have the benefit of a bull run to accelerate my plans. However, since then I have watched my workaholic 65 year old dad slow down and realise he’d rather spend the years he has left with his grandkids and wife than on the road and at work. I have also watched my 50-somerhing in-laws affected by I’ll health. And watched relatives in their 80s more that content with a bit of lunch with the family and their feet up in front of the box while living off a state pension. Which together makes me question just how much I need to live on to have a lifestyle I’d be quite content with in my 50s and beyond – which is really enough to pay any remaining housing costs, fund a couple of cheap holidays abroad and a couple of city breaks a year, a Chinese and a few beers on a Friday night, to see my football team on a Saturday and the cost of running an old motor and a couple of dogs. So I’m now trying to find the balance between making sure I/my family don’t miss out while we are young and healthy with ensuring I’ll have an income floor that can meet those needs by 55. So a bit more to the mortgage, to an ISA and to living and a bit less to pensions for me now. If I can get to 60 without having to access it and can have a bit more breathing space and luxury in life then great.
• 35 The Accumulator January 12, 2020, 11:03 am

  @ Mr Optimistic – I’d like to qualify ‘dangerous and lazy’. As ever people should do their research when the rest of their lives are on the line. You gotta understand what you’re buying into, not take the headlines at face value, understand the levers you can pull and what to do if it goes wrong. Certainly I wouldn’t use the vanilla 4% rule as advertised by the lifestyle types, but I’m happy using an SWR that applies to my circumstances, and I have a back-up plan or two. Dirk Cotton’s stuff is great but often the alternatives proposed are unaffordable or inapplicable. I can’t eliminate all risk but at least I can know the risks I’m taking.
• 36 Mr Optimistic January 12, 2020, 11:50 am

  @TA. It occurred to me seconds after hitting the submit button that you had recently posted a couple of articles about swr and whether 4% was right. My concern is that although we can identify risks, we can’t know, in advance, as to whether we can navigate around them or not. We can be prudent, at least in our own eyes, but never sure. Then there is our tendency to justify expenditure; who wouldn’t want to think that it is ok to spend 4% rather than just 1% say, with all the parsimony the latter might bring? As a rough budgeting tool on a periodic basis, subject to review, perhaps. The mechanisation is what I think is dangerous. Though, to be fair, I suspect I am becoming a miser and getting too fond of counting the money rather than spending it :).
• 37 The Accumulator January 12, 2020, 1:33 pm

  Yes, good point on the mechanisation. I guess I’d think of that as obliviousness, or self-deception.
  Interestingly, many of the US retirement researchers say that worries over SWR failure are overblown because most people don’t keep spending automatically when they see their retirement accounts come under pressure. They naturally put the brakes on well before the cliff edge, and cut their cloth to suit. Anecdotally I think you’re right, the miser syndrome is more common – retirees tend to spend conservatively and die with too much in the bank. Lucky beneficiaries!

  I do know someone on a Safety-First strategy for whom it was a great relief to be put on an annuity and get a defined income to spend. Sorry to bring my mum into it again 😉
• 38 old_eyes January 12, 2020, 1:51 pm

  I wanted to enjoy the FIRE debate, but I felt that in the end it collapsed into ‘angels on the head of a pin’ territory. People are different. Who knew?

  For me, both FI and RE are continua.

  FI ranges from “I don’t need to do that extra shift/take on that extra job” all the way through to “I have so much money that there are no circumstances under which I would ever have to do paid work again”. Most of us are in the middle. We want enough to support our desired lifestyle in what we believe is the likely future both for society and our projected lifespan.

  I am FI under that definition, but have nowhere near the level of wealth required to defend me from natural disasters, confiscatory governments, hyperinflation, and possibly even Brexit if it goes badly wrong. Almost none of us are secure against all possible futures.

  RE has the same spread and is based on individual hopes, desires and personality. I have friends who like the structure of paid work. The value not having to think too hard about what to do each day. It gives them mental space for medieval re-enactment, singing in a choir, being in a band, designing computer games, or whatever other activity they are passionate about (all real cases). They are quite happy with the bargain they have made. We might look at it and say – well if you sorted yourself out and went FIRE you would have more time and resources for the things you want to do – but they are not bothered by the 9-5.

  I have other friends who, as far as I can see, are congenitally unable to take orders from anyone. The compromises of a conventional ‘job’ drive them nuts and they either find a niche in a larger organisation where they are largely left alone to do what they want, or end up in some form of self-employment.

  Again, I am somewhere in the middle. I loved the work I did, but periodically it would get frustrating. I learned that 12 months of not fitting in and not being able to make things happen was enough to push me to find somewhere more congenial. It happened three times in 36 years, so I guess I am fairly laid-back (and probably very lucky).

  For me, FI was always a goal, RE (in the sense of turning my back on paid work entirely) less so. I do a mix of paid and unpaid work together with interests. I work with other people on their problems less than I did and more on my own projects. Projects only, no long-term commitments.

  For some people, I am fabulously wealthy and for others, I am ignoring some critical future risk that keeps them building their pile and which will surely leave me in penury.

  For some people, I am sham retired as I still do things for money, and for others, I am a butterfly dancing from flower to flower and not doing anything serious.

  What can I say?
• 39 ZXSpectrum48k January 12, 2020, 3:02 pm

  @matthew: the Bretton-Wood system was associated with a loosely Keynsian approach. Like most economic systems, however, imbalances build. Keeping a fixed exchange rate to the USD (backed by Gold at $35/ounce) imposed a need to keep the current account flat which often was not domestically desirable. It forced discrete devaluations (such as those the UK did 1967) to fend off speculation. Moreover, the US was simply not able to able to maintain USD convertability to Gold in the face of a balance of payments crisis and rising debt to pay for the Vietnam war.

  The failure of Bretton-Woods, leading to a fiat currency system, allowed those imbalances to disippate, but at a cost. The USD was very overvalued vs. physical commodities and needed to weaken. Other currencies, being fixed to the USD, also needed to weaken. Basically “money” was overvalued vs. “real things”. The Oil price shock of 1973 is often considered to a rapid rise in the oil price but perhaps is better considered a rapid devaluation in money. Monetary devaluation appears as inflation. The shame is that many people still assign the blame to what happened economically in the 70s to the political parties in power at that time. The reality is that it was never under their control; they were simlpy in the wrong place at the wrong time.
• 40 Matthew January 12, 2020, 5:59 pm

  @zx – thank you for details on bretton woods, I think although it might not directly be the parties of the 70’s responsable, Bretton woods looks like the problem of socialist style price control, where money doesnt represent true value (like food in the ussr being undervalued but unavailable) – ultimately creating supply problems. They could have allowed arbritage speculation I suppose, to correct the imbalance naturally, rather than fighting it

  I think spendful policies probably hastened the demise – like you say the war in vietnam, but other spending too
• 41 ermine January 12, 2020, 9:09 pm

  @TA > no longer feels trapped and their new found empowerment wins them new respect/opportunities in the workplace.

  Intriguing. Maybe I’m an all or nothing guy, but I found it was like a flawed sword, once it fails you you never trust that kind of thing. Yes, I gained better respect and less aggravation once I deployed the skill that carried me the last three years, hell they even said I went out on a high at the end. If only they knew 😉 I kept the hammer down to clear that, because once the mainspring has broken, its broken IMO. Never a hostage to fortune in that way again.
• 42 The Investor January 13, 2020, 8:50 am

  I kept the hammer down to clear that, because once the mainspring has broken, its broken IMO. Never a hostage to fortune in that way again.

  @ermine — I think I finally get it. You’re a failed work-romantic! 😉 You sound like me with relationships. Or, more neutrally, Richard in the Joni Mitchell song Last night I saw Richard.

  I recognize the flaw in the work you reference. However I’ve swapped employers (/people who hire me as a freelance) many times as a result of it, left a start-up I co-founded when the politics wasn’t working out, and switched industries twice.

  As always not saying you did wrong for *you* but there are other paths.

  (Also, forget to say on the other thread that as I mentioned in the debate I think the ‘retirement’ part of FIRE makes a lot more sense at 60 at 40. I’m not insensitive to the eras-of-life aspect to this, which you’ve written about so well over the years. It’s the ‘early’ part of RE that I’m skeptical about.)

  (Also, also, do I still have your email address? I’ve been thinking we should have that much postponed drink sometime while we’re both still around… 🙂 )
• 43 Ecomiser January 13, 2020, 4:10 pm

  @old_eyes (38) If you take natural disasters, confiscatory governments, and hyperinflation into consideration, nobody is “I have so much money that there are no circumstances under which I would ever have to do paid work again” FI. A properly confiscatory government would have us all back at work.

  When I FIREd at 58, having never heard the acronym, I knew that at age 65 I would be getting a guaranteed income greater in nominal terms than that which I had been getting for the previous 17 years of part-time work, in addition to whatever I drew from investments. I didn’t know about SWRs either, I just knew than in any likely scenario I would have much more money available over 40+ years than I was used to spending, and I wasn’t going to worry about the unlikely ones.

  Even after some unlikely events my net worth is growing, perhaps I need to switch out of miser mode 🙂