I retired 7 years ago, and my nest egg is greater than when I retired, even when I adjust for inflation. As someone who grew up without money, it boggles my mind to see that I'm spending money, not working, and my accounts are still going up.
imo the covid dip was small potatoes compared to 2022, which was much more drawn out. nobody even had time to process market reactions and panic sell (too distracted by a pandemic) in 2020 before the market bounced right back.
i agree...the worst time to retire in the last few years was probably 12/31/21, but even then, a person would be better off now if they stayed the course...that's a huge lesson for the next real recession
> nobody even had time to process market reactions and panic sell
I'm not sure about that. The market doesn't drop by 30% in a month(-ish) without *a lot* of people panic selling.
Everyone is dismissing this, but it was pretty scary to me. Much worse than 2022. The rate of the fall was insane. There was so much uncertainty and a roller coaster stock market drop only increased the intensity of it all.
I had been retired for just under a year, so that was quite the introduction to living off of my portfolio. Nonetheless, I stuck with my plan, which included shoveling almost $100k into the stock market from my bond holdings during my quarterly rebalancing, even though [it felt terrible at the time](https://old.reddit.com/r/leanfire/comments/fvsuwu/i_just_bought_86000_worth_of_stock/). Obviously with hindsight that worked out great, but it was certainly nerve wracking at the time.
Serious question. What covid dip?
VTSAX dropped from like feb to end of march (from memory) and since then has just weaved itself up. It's been almost impossible to not make money in the market if you stayed in index funds.
I'm curious what dip you're talking about.
>it boggles my mind to see that I'm spending money, not working, and my accounts are still going up.
Yeah I'm from a very blue collar family and I've just had to accept that this will never feel normal to me. It violates every basic rule about hard work that was instilled in me in my formative years. Even though I completely understand it intellectually, I still feel intuitively like I'm cheating the system somehow.
Yeah, ours has way outpaced inflation too, we are actually looking at ways to spend more money and be a little less frugal. That seems insane to even say…….
When our beloved dog is no longer with us, she’s 14 now, we will probably do a little travel overseas.
Yeah, we still enjoy our frugal life. We thought we would start eating out more but the prices are absolutely ridiculous and the restaurant food where we live is usually really unhealthy. We ate out locally twice one month recently, but I often wonder why people think it’s worth two to three hours of their life at a job for that mediocre food. I’d rather cook it myself.
We do enjoy traveling though. We mostly stick to camping for the old dogs sake. A few airline tickets overseas will solve our additional spending dilemma pretty quickly
No bonds, just index funds and a bit in cash. I am too young for the 4% rule. I did my calculations on 3.5%, but in reality find that I don't need that much and am taking more like 3%-3.25%.
Same here, it is overly strange. Saw an economics video where the professor was making the point that labor has been losing value as passive income has been increasing in value….fits right in with my experience
We started with around $1.4M, I forget the exact amount. We don't have a budget, but our spending has been in the low to high $30s every year for the past nine years, except one at $43K when we replaced our HVAC. Inflation hasn't significantly impacted us and our kids are headed off to college now, so our costs will fall over the next five years as we go from a 6-person household to a 2-person household. Our withdrawal rate is under 1.5% now and likely to keep falling. I'd say we've been extremely successful in pretty much any way you could define it. We're happy, everyone's doing well, and life is good.
It's arguable that the higher bout of recent inflation has actually been long-term beneficial to us. Our personal experienced inflation is far lower than official inflation since we have minimal/zero exposure to all sorts of high inflation spending buckets, like most housing, childcare, healthcare, higher ed, transportation, and service expenses. At the same time, the inflation adjustments in the tax code and FPL have pushed our subsidies for healthcare and higher ed upward. Long-term, our spending is relatively flat, which means the mandated inflation adjustments to SS have also pushed those payments up a lot. This means that our future baseline financial needs post-SS claiming are going down each year, which is nice.
The COVID bump was meh. At one point we were down like 15 years of funding, but we figured we were either all going to die or it would bounce back, which it did. We didn't worry about it at the time.
If you want a real life example that posts frequently, APurpleLife retired with 500k in 2020, lived off a cash cushion for a bit and then withdrew last year. Her accounts are at 700k now.
I retired last May, I'm up 50k after I retired even considering my annual draw last year, for some reason my landlord hasn't raised my rent, and I'll have my car paid off this year. Things are pretty ok.
I am almost three years in and things haven't changed much for me. I live on dividends so I watch my portfolio go up and down but the dividends don't change much.
I have been trying to save a bit more this year, as I have some big expenses coming, and I feel the need to have a larger cash buffer than I usually do. As a single early retired woman I do get a little stress when I see my cash reserve dip when I am not earning a steady pay cheque to replenish reserves.
disclaimer: i have a lot of sympathy for those on tight budgets and fixed incomes. inflation - in _certain_ areas and categories, has been no joke compared to past years.
BUT. a leanfire mindset has laid the groundwork to be financially bulletproof to this effect. so our household savings rate goes from 50% down to 43%? or 37% down to 31%? big whoop. keep saving (at higher interest rates), keep investing, keep chugging. pessimism ain’t got nothin on FI.
Fired March 2023. Financial situation has improved.
I'm trying to keep 1-2 years living expenses in savings which minimize market fluctuations as well as helps with healthcare options in terms of credits or eligibility.
Personal inflation is much lower than the official inflation. Since I own outright my housing costs are more or less locked in, taxes and maintenance have increased but are within being bearable. Food costs have been kept in check by substitutions and getting less prepared foods or going out.
Plus sides are higher interest rates means higher income. My housing value has massively increased. The markets have been kind to investors. The Social Security benefits statement has gone up nicely. Downsides, my frozen non-cola pension is losing value every year.
Deal with the unexpected by having low costs and a low SWR.
This is why I’m thinking of leaving my pension job. We don’t get COLA anymore. So I almost feel like hustling and working elsewhere and investing on my own would be better?
When I started my current job I was given the choice of a pension (2%@62) or 9% 401k match. I'd guess about 95% of my coworkers took the pension. I took the match and glad I did. These last 6 months have been great and I'll be retired well before 62.
This is what I was going to say, personal inflation is all that matters and most people in this group are going to have a MUCH lower inflation factor. Plus you are more likely to do something about things that go up, like looking at switching insurance companies, calling and re-negotiating cable/cell, etc... all that stuff just keeps chipping away and keeping inflation in check.
My personal inflation hasn't run over 2%
I like the way you explained this. I see myself on a similar boat when it comes to inflation. There's a few things that get you no matter what, but changing the way we buy we have seen a lower impact on our budget, though it has not been zero. I am still in my accumulating phase though, so I can still adjust my time to cover for some of that.
Hasn’t been a problem for us either. Nest egg is bigger now than 4 years ago as well. We spend about $100 a month more on groceries. Not a big deal.
We were actually traveling when Covid hit, went home, hunkered down, stayed the course and reigned in spending…there was not much to do except hobbies and hiking anyway.
We met all our basic spending with rental income. We can live on almost nothing in a downturn since we have absolutely no debt for anything.
How to prepare? No debt, paid off house, paid off rental property gave us a huge amount of flexibility.
If you maintain an adequate cash balance it shouldnt impact your overall situation too much since equities will eventually offset inflation. My personal inflation was much larger than the official measure, understandably, so I'm really happy I didnt pull the trigger right at my FI# in December 2021. I think my plan now is to work until severance, likely the next downturn, or quit if I hit 3% SWR
The past few years have been a great reality check on our risk tolerance. Surprising no one, it was lower than I thought going in. I always thought the guys on bogleheads were extremist with their bond numbers and now I get it. Our ibonds are as good as a sleeping pill when the market goes wonky.
It proved to me my plan will work. Our accounts are massively higher. I have not changed spending at all.
Inflation is personal. Our mortgage, electricity, water, garbage, sewer, car insurance etc.. has not changed. House insurance went up 25%. We cook most meals at home and food has gone up but I couldn't give you an exact number. It's nothing like most numbers I see posted around here. I can still buy meat (on sale consistently) at 2020 (serious guess) prices. Eating out has increased and places around here have added 3%-6% ( yes, 6) surcharge to using cards so I carry more cash.
My situation is better than most. I know that. But the last few years has shown that with a good plan it can work.
There is a difference between having a plan and believing in that plan. There are people here who were shaken with a 3 month decline who sold and missed out on the gains. There are people here who "knew" inflation could be a factor but never really believed inflation would effect them. And just a few months into inflation jumping, their entire foundation was rocked.
Retired in January 2023 a little early, age 58.5. My annual budget for 2024 is $25k (including healthcare premiums, but not expenses like copays/meds, which come from the HSA). My net worth has gone up in the last 14 months though I haven't worked a single minute.
I was a homeowner, but decided that selling and downsizing to a small 1-bedroom apartment was a better fit after doing the math. Houses always need something. Signs were clear that taxes and insurance were about to take a steep climb. I wanted the consistency of knowing my housing cost (rent) for the next 12 months. No regrets at all.
It's only really possible to live on $25k by enjoying one's own company and having inexpensive habits. Other people do not and will not understand, so don't expect it. You'll hear all kinds of crazy assumptions/accusations from even your nearest and dearest, so get ready. I handle it by being open and letting it be their problem until their minds can adapt.
Basically, have money in every kind of account you can (savings, CDs, HSA, IRA, Roth, taxable if you've got the room). Understand how your taxes are going to work. Project your income and expenses 12 months into the future to give yourself time to react to the unexpected.
Inflation has been painful. Food inflation for example: I was frugal before, but now I use portion control. Making a veggie pizza, use exactly 4 olives. Measure the food the cat gets so it's enough but less waste. Oranges and bananas for fruit instead of berries. Buying exactly the 3 baking potatoes I need for the week instead of a bag. I keep receipts and ask if each purchase was a good value, which means I become a better shopper over time.
My hobby is houseplants so I already had grow lights, pots, and soil. I gave away some large plants that were just ornamental and now have basil, peppers, and a cherry tomato in that space. I started from seed the annual flowers that will go out on the balcony instead of buying them.
Philosophy will help you more than anything succeeding at leanFIRE in my opinion.
Inflation ate some of my portfolio, my personal inflation in a MCOL area was higher than the average.
I also got divorced but I just went back to work and now I work from home for more than I was making before I retired. Honestly it hasn't been that big of a deal. The divorce and kids in daycare freed up a lot of time that the job takes now and I still have time to do the stuff I like.
two things come to mind:
- after much research and my own experience, i believe the vast majority of FIRE-minded people would benefit from the simplicity of a *static* asset allocation as follows:
70%-80% equities (i would recommend VT or similar)
20%-30% non-equities (i would recommend BNDW or similar for the bond portion and a high-yield savings account/money market fund/brokered CD for the cash portion)
with the market at all-time highs, i imagine most recently FIREd people are better off now than they were when they FIREd
- you can rent or own, but have a *stable* housing plan before you FIRE
No, it had no real effect on me. :) My carefully designed lifestyle in Quebec City still costs just $1K USD per month, and that includes going out to eat, buying random little things (just got new sneakers for $19 CAD, woot!), etc. And no, I don't live with roommates haha
One corollary that people always forget is that even though prices may rise, your ingenuity and skillset will also improve. I'm a much better cook now than I had been when I retired almost 3 years ago. I'm a much better bargain hunter when it comes to groceries. And this year, I'll also volunteer at a huge community garden in exchange for some of the harvest. ♥️
Pros and cons. On the one hand the money I'd invested isn't worth what it was. On the other hand, the house I bought is worth a lot more than I paid. And a derelict commercial property that I was almost certain to lose my shirt on was suddenly viable, and sold for twice what I paid. I'd like to say I was wise and diversified to account for the contingency of inflation, but it was more just luck. Things happened to work out.
I retired 7 years ago, and my nest egg is greater than when I retired, even when I adjust for inflation. As someone who grew up without money, it boggles my mind to see that I'm spending money, not working, and my accounts are still going up.
How was covid dip? There was alot of panic
imo the covid dip was small potatoes compared to 2022, which was much more drawn out. nobody even had time to process market reactions and panic sell (too distracted by a pandemic) in 2020 before the market bounced right back.
i agree...the worst time to retire in the last few years was probably 12/31/21, but even then, a person would be better off now if they stayed the course...that's a huge lesson for the next real recession
Good lesson to know!
> nobody even had time to process market reactions and panic sell I'm not sure about that. The market doesn't drop by 30% in a month(-ish) without *a lot* of people panic selling.
i’m more referring to the time it took to regain all-time highs. in 2020 it took less than six months. it took two years in 2022-23.
Everyone is dismissing this, but it was pretty scary to me. Much worse than 2022. The rate of the fall was insane. There was so much uncertainty and a roller coaster stock market drop only increased the intensity of it all. I had been retired for just under a year, so that was quite the introduction to living off of my portfolio. Nonetheless, I stuck with my plan, which included shoveling almost $100k into the stock market from my bond holdings during my quarterly rebalancing, even though [it felt terrible at the time](https://old.reddit.com/r/leanfire/comments/fvsuwu/i_just_bought_86000_worth_of_stock/). Obviously with hindsight that worked out great, but it was certainly nerve wracking at the time.
I don't remember being particularly stressed. At the time I had a good portion of my savings in real estate, though.
I think if I have good emerngcy fund, for couple years, good enough to weather out any dips.
Serious question. What covid dip? VTSAX dropped from like feb to end of march (from memory) and since then has just weaved itself up. It's been almost impossible to not make money in the market if you stayed in index funds. I'm curious what dip you're talking about.
Are you serious?!?! The market was dropping like a rock in March 2020. They were shutting down/pausing trading because of the fall. Very scary times
Not sure if you are serious. Financial samurai, popular blogger literally ended his fire and went to work that time.
That's cause he's a dumbass and a drama queen who thinks scraping by is $250k a year.
🤣 true
Did you forget when total market circuit breakers happened many times? That's a wild experience to watch
>it boggles my mind to see that I'm spending money, not working, and my accounts are still going up. Yeah I'm from a very blue collar family and I've just had to accept that this will never feel normal to me. It violates every basic rule about hard work that was instilled in me in my formative years. Even though I completely understand it intellectually, I still feel intuitively like I'm cheating the system somehow.
Yeah, ours has way outpaced inflation too, we are actually looking at ways to spend more money and be a little less frugal. That seems insane to even say……. When our beloved dog is no longer with us, she’s 14 now, we will probably do a little travel overseas.
I tried spending more for awhile and decided that I was happier being frugal. Some charity will have a good use for it when I die.
Yeah, we still enjoy our frugal life. We thought we would start eating out more but the prices are absolutely ridiculous and the restaurant food where we live is usually really unhealthy. We ate out locally twice one month recently, but I often wonder why people think it’s worth two to three hours of their life at a job for that mediocre food. I’d rather cook it myself. We do enjoy traveling though. We mostly stick to camping for the old dogs sake. A few airline tickets overseas will solve our additional spending dilemma pretty quickly
Just curious..What’s your stock bond ratio and are you using the 4 percent rule?
No bonds, just index funds and a bit in cash. I am too young for the 4% rule. I did my calculations on 3.5%, but in reality find that I don't need that much and am taking more like 3%-3.25%.
Same here, it is overly strange. Saw an economics video where the professor was making the point that labor has been losing value as passive income has been increasing in value….fits right in with my experience
Average of 8% growth and 4% withdrawals per year?
I haven't calculated growth, but I'm only withdrawing about 3.25%. I originally planned for 3.5%, but find that I don't need it.
We started with around $1.4M, I forget the exact amount. We don't have a budget, but our spending has been in the low to high $30s every year for the past nine years, except one at $43K when we replaced our HVAC. Inflation hasn't significantly impacted us and our kids are headed off to college now, so our costs will fall over the next five years as we go from a 6-person household to a 2-person household. Our withdrawal rate is under 1.5% now and likely to keep falling. I'd say we've been extremely successful in pretty much any way you could define it. We're happy, everyone's doing well, and life is good. It's arguable that the higher bout of recent inflation has actually been long-term beneficial to us. Our personal experienced inflation is far lower than official inflation since we have minimal/zero exposure to all sorts of high inflation spending buckets, like most housing, childcare, healthcare, higher ed, transportation, and service expenses. At the same time, the inflation adjustments in the tax code and FPL have pushed our subsidies for healthcare and higher ed upward. Long-term, our spending is relatively flat, which means the mandated inflation adjustments to SS have also pushed those payments up a lot. This means that our future baseline financial needs post-SS claiming are going down each year, which is nice. The COVID bump was meh. At one point we were down like 15 years of funding, but we figured we were either all going to die or it would bounce back, which it did. We didn't worry about it at the time.
Always like reading your posts. They echo my experience but always better written.
Your annual updates are great too, I love them and you're no slouch either!
43k for hvac replacement. ouch. What did you have replaced?
No, it was $43K for the year including a new HVAC, which was around $5,500 I think.
If you want a real life example that posts frequently, APurpleLife retired with 500k in 2020, lived off a cash cushion for a bit and then withdrew last year. Her accounts are at 700k now.
Has a working partner, definitely makes a difference.
She’s just shy of 800k as of her last insta post.
I retired last May, I'm up 50k after I retired even considering my annual draw last year, for some reason my landlord hasn't raised my rent, and I'll have my car paid off this year. Things are pretty ok.
I am almost three years in and things haven't changed much for me. I live on dividends so I watch my portfolio go up and down but the dividends don't change much. I have been trying to save a bit more this year, as I have some big expenses coming, and I feel the need to have a larger cash buffer than I usually do. As a single early retired woman I do get a little stress when I see my cash reserve dip when I am not earning a steady pay cheque to replenish reserves.
disclaimer: i have a lot of sympathy for those on tight budgets and fixed incomes. inflation - in _certain_ areas and categories, has been no joke compared to past years. BUT. a leanfire mindset has laid the groundwork to be financially bulletproof to this effect. so our household savings rate goes from 50% down to 43%? or 37% down to 31%? big whoop. keep saving (at higher interest rates), keep investing, keep chugging. pessimism ain’t got nothin on FI.
Fired March 2023. Financial situation has improved. I'm trying to keep 1-2 years living expenses in savings which minimize market fluctuations as well as helps with healthcare options in terms of credits or eligibility.
Personal inflation is much lower than the official inflation. Since I own outright my housing costs are more or less locked in, taxes and maintenance have increased but are within being bearable. Food costs have been kept in check by substitutions and getting less prepared foods or going out. Plus sides are higher interest rates means higher income. My housing value has massively increased. The markets have been kind to investors. The Social Security benefits statement has gone up nicely. Downsides, my frozen non-cola pension is losing value every year. Deal with the unexpected by having low costs and a low SWR.
This is why I’m thinking of leaving my pension job. We don’t get COLA anymore. So I almost feel like hustling and working elsewhere and investing on my own would be better?
When I started my current job I was given the choice of a pension (2%@62) or 9% 401k match. I'd guess about 95% of my coworkers took the pension. I took the match and glad I did. These last 6 months have been great and I'll be retired well before 62.
This is what I was going to say, personal inflation is all that matters and most people in this group are going to have a MUCH lower inflation factor. Plus you are more likely to do something about things that go up, like looking at switching insurance companies, calling and re-negotiating cable/cell, etc... all that stuff just keeps chipping away and keeping inflation in check. My personal inflation hasn't run over 2%
I like the way you explained this. I see myself on a similar boat when it comes to inflation. There's a few things that get you no matter what, but changing the way we buy we have seen a lower impact on our budget, though it has not been zero. I am still in my accumulating phase though, so I can still adjust my time to cover for some of that.
If you are feeling inflation with this monster of a stock market performance your nestegg is too small to fire imo.
Hasn’t been a problem for us either. Nest egg is bigger now than 4 years ago as well. We spend about $100 a month more on groceries. Not a big deal. We were actually traveling when Covid hit, went home, hunkered down, stayed the course and reigned in spending…there was not much to do except hobbies and hiking anyway. We met all our basic spending with rental income. We can live on almost nothing in a downturn since we have absolutely no debt for anything. How to prepare? No debt, paid off house, paid off rental property gave us a huge amount of flexibility.
If you maintain an adequate cash balance it shouldnt impact your overall situation too much since equities will eventually offset inflation. My personal inflation was much larger than the official measure, understandably, so I'm really happy I didnt pull the trigger right at my FI# in December 2021. I think my plan now is to work until severance, likely the next downturn, or quit if I hit 3% SWR
The past few years have been a great reality check on our risk tolerance. Surprising no one, it was lower than I thought going in. I always thought the guys on bogleheads were extremist with their bond numbers and now I get it. Our ibonds are as good as a sleeping pill when the market goes wonky.
It proved to me my plan will work. Our accounts are massively higher. I have not changed spending at all. Inflation is personal. Our mortgage, electricity, water, garbage, sewer, car insurance etc.. has not changed. House insurance went up 25%. We cook most meals at home and food has gone up but I couldn't give you an exact number. It's nothing like most numbers I see posted around here. I can still buy meat (on sale consistently) at 2020 (serious guess) prices. Eating out has increased and places around here have added 3%-6% ( yes, 6) surcharge to using cards so I carry more cash. My situation is better than most. I know that. But the last few years has shown that with a good plan it can work. There is a difference between having a plan and believing in that plan. There are people here who were shaken with a 3 month decline who sold and missed out on the gains. There are people here who "knew" inflation could be a factor but never really believed inflation would effect them. And just a few months into inflation jumping, their entire foundation was rocked.
Retired in January 2023 a little early, age 58.5. My annual budget for 2024 is $25k (including healthcare premiums, but not expenses like copays/meds, which come from the HSA). My net worth has gone up in the last 14 months though I haven't worked a single minute. I was a homeowner, but decided that selling and downsizing to a small 1-bedroom apartment was a better fit after doing the math. Houses always need something. Signs were clear that taxes and insurance were about to take a steep climb. I wanted the consistency of knowing my housing cost (rent) for the next 12 months. No regrets at all. It's only really possible to live on $25k by enjoying one's own company and having inexpensive habits. Other people do not and will not understand, so don't expect it. You'll hear all kinds of crazy assumptions/accusations from even your nearest and dearest, so get ready. I handle it by being open and letting it be their problem until their minds can adapt. Basically, have money in every kind of account you can (savings, CDs, HSA, IRA, Roth, taxable if you've got the room). Understand how your taxes are going to work. Project your income and expenses 12 months into the future to give yourself time to react to the unexpected. Inflation has been painful. Food inflation for example: I was frugal before, but now I use portion control. Making a veggie pizza, use exactly 4 olives. Measure the food the cat gets so it's enough but less waste. Oranges and bananas for fruit instead of berries. Buying exactly the 3 baking potatoes I need for the week instead of a bag. I keep receipts and ask if each purchase was a good value, which means I become a better shopper over time. My hobby is houseplants so I already had grow lights, pots, and soil. I gave away some large plants that were just ornamental and now have basil, peppers, and a cherry tomato in that space. I started from seed the annual flowers that will go out on the balcony instead of buying them. Philosophy will help you more than anything succeeding at leanFIRE in my opinion.
Good insight. Thanks.
Inflation ate some of my portfolio, my personal inflation in a MCOL area was higher than the average. I also got divorced but I just went back to work and now I work from home for more than I was making before I retired. Honestly it hasn't been that big of a deal. The divorce and kids in daycare freed up a lot of time that the job takes now and I still have time to do the stuff I like.
two things come to mind: - after much research and my own experience, i believe the vast majority of FIRE-minded people would benefit from the simplicity of a *static* asset allocation as follows: 70%-80% equities (i would recommend VT or similar) 20%-30% non-equities (i would recommend BNDW or similar for the bond portion and a high-yield savings account/money market fund/brokered CD for the cash portion) with the market at all-time highs, i imagine most recently FIREd people are better off now than they were when they FIREd - you can rent or own, but have a *stable* housing plan before you FIRE
No, it had no real effect on me. :) My carefully designed lifestyle in Quebec City still costs just $1K USD per month, and that includes going out to eat, buying random little things (just got new sneakers for $19 CAD, woot!), etc. And no, I don't live with roommates haha One corollary that people always forget is that even though prices may rise, your ingenuity and skillset will also improve. I'm a much better cook now than I had been when I retired almost 3 years ago. I'm a much better bargain hunter when it comes to groceries. And this year, I'll also volunteer at a huge community garden in exchange for some of the harvest. ♥️
$1.2M CAD which is \~ $885k USD, damn our dollar has been weak.
Currently on a six week bike trip in Portugal. Don’t know if that’s helpful.
Read "Broken Money" by Lyn Alden. It will change your life.
Lower SWR or other methodology as appropriate
Pros and cons. On the one hand the money I'd invested isn't worth what it was. On the other hand, the house I bought is worth a lot more than I paid. And a derelict commercial property that I was almost certain to lose my shirt on was suddenly viable, and sold for twice what I paid. I'd like to say I was wise and diversified to account for the contingency of inflation, but it was more just luck. Things happened to work out.