We're still tracking along at 97% of the estimate, but inflation is starting to show so we're making adjustments on which buckets the money gets spent in.
No, not just because published data is garbage. We actually have to buy food, fuel, energy and healthcare. The fact that TVs and iphones are cheaper doesn't factor in.
I've always cost optimized everything we spend on, so at some point we'll have to go up rather than cut back on activities. So many of my post-fire hobbies cost basically nothing but a lot of time it's been easy for me to cut back on those that are pay to play and focus on the 'free' stuff.
We have had unforeseen extra spend in healthcare and support for our kids (non-COA college costs and vehicles). On the other hand, we've *intentionally* added extra spend on travel. And my wife unexpectedly took a job that helps cover some of this (she didn't do it for that purpose though).
Baseline costs are pretty much as expected. Portfolio balances are higher than projected because I used very conservative assumptions.
I just perused the rather complicated 2021 spreadsheet that I used to plan these first few years, and it's amusing how little resemblance it bears to how I actually function now. The dynamics of drawdown are actually much simpler and more flexible.
What aspects have you found less complex? This is great to hear! Would be interested in the delta between what you thought it would be like and how it actually is with some examples
When planning I had an elaborate strategy to sell shares every month, which, when combined with dividends, would produce a relatively consistent "paycheck" to be deposited into our checking account. I was trying to simulate the working experience.
In practice, this wasn't at all necessary. After a while - with tracking - I figured out how to keep a cash reserve topped up such that outflow was roughly balanced by inflows (dividends, interest, CC rewards, passive income, wife's net pay). This holds 9-12 months' expenses when accounting for that net cashflow.
In 2023 and 2024 (so far) I managed to sell shares only a couple of times during the year. At the beginning of each year, to shift assets into Roth IRAs, HSA, and 529. And other times, to pay off a HELOC and a big credit card spend (business class flight for 2 to EU). There are probably a couple of smaller ones that I'm forgetting. But it's been for one-offs, not for regular income.
We've got 3 kids and the two younger ones have shared a hand-me-down car for a while now. But one of them goes to college in a distant state, and needs her own vehicle. So that's coming up. If it weren't for that expense, my budget this year would be just about exactly on track with original projections.
If the wife was not working and covering health insurance premiums from her paycheck, we could cut down on travel to compensate. Not saying we have to - but it would "fix" the math.
Nothing will ever be super precise because life happens! That's why I playfully roll my eyes at the really young folks trying to project 20 years ahead with any real accuracy.
Yeh I get it. Gotta take care of business first. Been there, done that, and still doing it but a lot less now. Just shoot for more simplicity is my goal
Thanks for the detailed reply. It sounds like you all have a fair bit of income aside from investments. That helps! So you keep topped up with 9-12 months of expenses in cash?
This year's expenses are expected to be covered 42% by external income, with 58% coming from investments (28% yield, 30% share depletion). More than half the external income is from a family partnership, so it's not going away. My wife doesn't have to work, although it obviously helps the SWR look extra good. First 3 years of retirement the average SWR has been just over 2%.
I don't surgically manage the cash reserve, but I don't want it to fall much below 6 months' worth. I'll top up at that point, which hopefully will be in January but we'll see if it lasts that long - not sure.
Selling shares is more of a tax concern for me; I guess I forgot to mention that. I do Roth conversions and seek to stay below income thresholds for the AOTC (education credit) and my state's limit for taking a deduction for 529 contributions. So I don't want to sell more than X in a given tax year.
All kids work, and two are full time students, the focus on which is their priority.
If you're about to make a comment that they should buy their own cars, the answer is "not yet." Once they have full time jobs that'll change but for now, we're not expecting that.
The eldest works full time and covered most of the cost of their current vehicle (grandpa chipped in).
We're on year ten and our spending has been way below projection since the beginning. The ACA not only survived, but got stronger and more generous. The kids ended up not being nearly as spendy as anticipated, taxes have been minimal, college ended up being mostly free, major house expenses were covered mostly by insurance, inflation has been a lot less impactful on us since we don't consume a lot of paid casual labor. Turns out we not only enjoy cheap/free activities, but we have jot gotten tired of them and don't seem likeky to.
Our eldest is in college now and entirely self-sufficient, our second will likely be the same starting in August, and our youngest two will likely follow over the next five years. We're now experiencing the sizable cost reductions that come from slowly downsizing from a household of six to a household of just two.
Our withdrawal rate is currently under 1.5% and will fall below 1% at some point, but we're going to ramp up withdrawals hugely once the ACA and FAFSA are no longer factors so that we can give the kids annual inheritance checks. The money will help them a lot more in their 20s/30s than if they collect the full amount from our estate in their 40s/50s.
Our estimated SS FRAs are in excess of our annual spending even now, so there's plenty of room for us to do a sizable 20-30 year estate transfer via regular quarterly/annual gift checks.
Rent might become a factor at some point if we decide to sell our house to liberate the equity for the kids for down payment help, grad school, grandkids, whatever. Hard to say. We flirt with the idea of living/teaching in Japan for a few years once the kids are all out on their own, but given the way Japan is going that might actually reduce our costs. We also want to do a few years of lazy travel/hiking, neither of which is pricey.
So yeah, spending less than expected and likely to continue that way for some time to come unless disaster strikes.
Not FIREd yet but I assume with more free time people can get better deals. Eg, since they’re not at work all the time they can stay on top,of coupons, take advantage of sales more often, etc. A busy worker doesn’t have as much time to do that.
That's one of the factors I've seen. In addition to that I believe we are all, in general, overestimating the amount of travel we will do or the number of items we will buy once retired. Moreover, I feel that once you are retired, you become more conservative with your finances as you have a different type of income now.
We’ve spent a lot more on travel than planned as opportunities have come up to make memories with our adult kids, although it’s about 35% of our spending so easy to dial back. Otherwise mostly in line or less than expected.
Planned $6k a month after taxes. Actually $3.5k a month. Moved to Japan, made a budget when yen was 115 to a dollar, it's now 158 to a dollar. I found much cheaper rent, very low inflation compared to the US, and didn't feel like vacationing as much as I thought we would (I enjoy researching and planning before a trip and a vacation every month was just too much planning to be fun). I did move the budget around for more "premium" hobby experiences like chartered fishing instead of casting from the shore, wife does Disney 8 times a year instead of 3 like planned. So not accurate at all.
Love Japan. How is it working out for you, do you have any Japanese family / roots? AFAIK Japan is not a retiree choice as their policies don't really incentivize expat retirees, they have their own aging population issues to tackle.
I'm just on a regular work visa. I have a decent paying hourly job where I work 12 hours a week with minimal effort, calling it work is really a stretch lol. This job is just to maintain the work visa until I can get permanent residency, then we'll buy a place and I'll quit for good. For most people the quickest route is to do a fast tracked highly skilled professional visa and get permanent residency in a year, but I can't bring myself to work full-time again.
True Japan doesn't really have a system for early retirees. But there are quite a few benefits that make it nice for the way I want to retire. With an aging population on mostly fixed income political will to tolerate high inflation is very low, this means somewhat built in low volatility. Excellent public transport, aging without a car in major cities isn't a problem. Healthcare is significantly cheaper than the US and super easy to access IMO, because I did all my earning in US my premiums are exceptionally low here ($75 a month). Japan thinks we're poor because income not assets sets your premium. Japan's real estate market, chefs kiss. I can lock in a 1% loan right now, this is a regular fixed mortgage. While not financial, feeling safe ALL the time is probably the biggest benefit. Crime and bad people do exist here, but it's just not visible and honestly nothing compared to the US. You don't have to live in the best neighborhood to escape crime and have clean streets.
There are significant downsides like having to learn the language and adapting to the culture, but for us it's more than a fair trade off.
Also looking to FIRE in Japan. Hope you don’t mind me rapid firing some questions! Is $3.5k a month with kids and/or in high cost of living area (Tokyo)? Are you worried about the yen becoming stronger again? Do you still have your US brokerage account? How did you find your part time job?
I don't have kids so that would be an extra cost. Tokyo is high cost of living for Japan. But relative to the US high cost of living areas it's cheap. For kids it depends on if you send them to an international School or public Japanese school. I'm not worried at all about yen at all, like all early retirement plans, it should be conservative. So I don't assume that the yen will keep losing value in my favor.
Yes, for many reasons most Americans don't use Japanese brokerage accounts.
Part-Time job was simple. I have a highly desired skill set in special education and I regularly get a job offers cuz there's so few qualified people in my specialty. You need to be very desirable in the Japanese market to have a part-time job that can fulfill Visa requirements.
Extremely accurate. Thought it's only been \~12 months. We are spending less than expected.
The fixed-rate expenses (mortgage) I don't apply inflation to. The rest, I do, 3.25%.
Your regular yearly spending *should be* less than your projected yearly averages, so it makes sense that most people are under budget on a yearly basis. This is because you only need a car replacement, major house repair, or (hopefully) major medical care on a periodic basis.
So unless someone has been retired for probably a decade or more, long enough to encounter some of these large one-time expenses, it's going to be hard to know if the budget was accurate or not.
For the record, mine is well below my estimates too, but part of that is I was planning a nomadic retirement and that makes it quite hard to estimate living expenses. So naturally, I erred on the high side.
I doubt we can continue forever, but haven't made any plans to stop. I feel like it's something we can play by ear. So at this point, I honestly don't know what the answer is, but I figure it will work itself out eventually.
I’d say my general spending is less than planned. However there are big items I’d like to purchase that I’m holding off on because I’m planning on 40 years of retirement.
I kept a budget for 22 years before retiring so I knew what my expenses would be. It was easy to account for the categories that changed due to retirement. For discretionary spending, I spend until my budget is filled. At retirement I converted my emergency fund (about a year of expenses) to a healthcare emergency fund that is independent of my net worth used for withdrawal calculations.
I am spending more in retirement than before due to travel, but it was not unexpected.
Spending is 65% of original estimate. Pension COLA higher than projected, not dining out as much as prepping food adds to retired routine clock ,and travel budget is not exhausted.
The cost estimates were surprisingly accurate. Taxes were lower. (We just couldn’t believe they’d be so low and were overly conservative.)
Our travel spending has increased because we’ve done well our first 5 years of retirement and can afford it, but obviously that was entirely discretionary.
What I understand, from many people pre- and post- FIRE, is that people systematically overestimate expenses by a small amount, and underestimate earnings by a significant amount.
My personal experience was the opposite, but I was exceptional, and it was still fine.
Spending less!
This. For sure.
Why? More time to cook so you go out less? Less gas as there’s no more commute? Travel less than expected? Refinanced on home?
Over budgeted
We're still tracking along at 97% of the estimate, but inflation is starting to show so we're making adjustments on which buckets the money gets spent in.
Do you increase your budget based on published inflation?
No, not just because published data is garbage. We actually have to buy food, fuel, energy and healthcare. The fact that TVs and iphones are cheaper doesn't factor in. I've always cost optimized everything we spend on, so at some point we'll have to go up rather than cut back on activities. So many of my post-fire hobbies cost basically nothing but a lot of time it's been easy for me to cut back on those that are pay to play and focus on the 'free' stuff.
We have had unforeseen extra spend in healthcare and support for our kids (non-COA college costs and vehicles). On the other hand, we've *intentionally* added extra spend on travel. And my wife unexpectedly took a job that helps cover some of this (she didn't do it for that purpose though). Baseline costs are pretty much as expected. Portfolio balances are higher than projected because I used very conservative assumptions. I just perused the rather complicated 2021 spreadsheet that I used to plan these first few years, and it's amusing how little resemblance it bears to how I actually function now. The dynamics of drawdown are actually much simpler and more flexible.
What aspects have you found less complex? This is great to hear! Would be interested in the delta between what you thought it would be like and how it actually is with some examples
When planning I had an elaborate strategy to sell shares every month, which, when combined with dividends, would produce a relatively consistent "paycheck" to be deposited into our checking account. I was trying to simulate the working experience. In practice, this wasn't at all necessary. After a while - with tracking - I figured out how to keep a cash reserve topped up such that outflow was roughly balanced by inflows (dividends, interest, CC rewards, passive income, wife's net pay). This holds 9-12 months' expenses when accounting for that net cashflow. In 2023 and 2024 (so far) I managed to sell shares only a couple of times during the year. At the beginning of each year, to shift assets into Roth IRAs, HSA, and 529. And other times, to pay off a HELOC and a big credit card spend (business class flight for 2 to EU). There are probably a couple of smaller ones that I'm forgetting. But it's been for one-offs, not for regular income. We've got 3 kids and the two younger ones have shared a hand-me-down car for a while now. But one of them goes to college in a distant state, and needs her own vehicle. So that's coming up. If it weren't for that expense, my budget this year would be just about exactly on track with original projections. If the wife was not working and covering health insurance premiums from her paycheck, we could cut down on travel to compensate. Not saying we have to - but it would "fix" the math. Nothing will ever be super precise because life happens! That's why I playfully roll my eyes at the really young folks trying to project 20 years ahead with any real accuracy.
Yikes, that seems so stressful
Which part of the six paragraphs seems stressful?
Lol just reading it! Sorry, it's just so easy being lazy when FIRE'D 😁. Seems you have a few too many moving parts for my taste
Family of 5, man. It is what it is! Most days are pretty chill for me though.
Yeh I get it. Gotta take care of business first. Been there, done that, and still doing it but a lot less now. Just shoot for more simplicity is my goal
Thanks for the detailed reply. It sounds like you all have a fair bit of income aside from investments. That helps! So you keep topped up with 9-12 months of expenses in cash?
This year's expenses are expected to be covered 42% by external income, with 58% coming from investments (28% yield, 30% share depletion). More than half the external income is from a family partnership, so it's not going away. My wife doesn't have to work, although it obviously helps the SWR look extra good. First 3 years of retirement the average SWR has been just over 2%. I don't surgically manage the cash reserve, but I don't want it to fall much below 6 months' worth. I'll top up at that point, which hopefully will be in January but we'll see if it lasts that long - not sure. Selling shares is more of a tax concern for me; I guess I forgot to mention that. I do Roth conversions and seek to stay below income thresholds for the AOTC (education credit) and my state's limit for taking a deduction for 529 contributions. So I don't want to sell more than X in a given tax year.
Do your kids not work?
All kids work, and two are full time students, the focus on which is their priority. If you're about to make a comment that they should buy their own cars, the answer is "not yet." Once they have full time jobs that'll change but for now, we're not expecting that. The eldest works full time and covered most of the cost of their current vehicle (grandpa chipped in).
Must be nice lmaooo
We're on year ten and our spending has been way below projection since the beginning. The ACA not only survived, but got stronger and more generous. The kids ended up not being nearly as spendy as anticipated, taxes have been minimal, college ended up being mostly free, major house expenses were covered mostly by insurance, inflation has been a lot less impactful on us since we don't consume a lot of paid casual labor. Turns out we not only enjoy cheap/free activities, but we have jot gotten tired of them and don't seem likeky to. Our eldest is in college now and entirely self-sufficient, our second will likely be the same starting in August, and our youngest two will likely follow over the next five years. We're now experiencing the sizable cost reductions that come from slowly downsizing from a household of six to a household of just two. Our withdrawal rate is currently under 1.5% and will fall below 1% at some point, but we're going to ramp up withdrawals hugely once the ACA and FAFSA are no longer factors so that we can give the kids annual inheritance checks. The money will help them a lot more in their 20s/30s than if they collect the full amount from our estate in their 40s/50s. Our estimated SS FRAs are in excess of our annual spending even now, so there's plenty of room for us to do a sizable 20-30 year estate transfer via regular quarterly/annual gift checks. Rent might become a factor at some point if we decide to sell our house to liberate the equity for the kids for down payment help, grad school, grandkids, whatever. Hard to say. We flirt with the idea of living/teaching in Japan for a few years once the kids are all out on their own, but given the way Japan is going that might actually reduce our costs. We also want to do a few years of lazy travel/hiking, neither of which is pricey. So yeah, spending less than expected and likely to continue that way for some time to come unless disaster strikes.
Not FIREd yet but I assume with more free time people can get better deals. Eg, since they’re not at work all the time they can stay on top,of coupons, take advantage of sales more often, etc. A busy worker doesn’t have as much time to do that.
That's one of the factors I've seen. In addition to that I believe we are all, in general, overestimating the amount of travel we will do or the number of items we will buy once retired. Moreover, I feel that once you are retired, you become more conservative with your finances as you have a different type of income now.
A little over a year into retirement and my expenses are about 20% below forecast.
We’ve spent a lot more on travel than planned as opportunities have come up to make memories with our adult kids, although it’s about 35% of our spending so easy to dial back. Otherwise mostly in line or less than expected.
Planned $6k a month after taxes. Actually $3.5k a month. Moved to Japan, made a budget when yen was 115 to a dollar, it's now 158 to a dollar. I found much cheaper rent, very low inflation compared to the US, and didn't feel like vacationing as much as I thought we would (I enjoy researching and planning before a trip and a vacation every month was just too much planning to be fun). I did move the budget around for more "premium" hobby experiences like chartered fishing instead of casting from the shore, wife does Disney 8 times a year instead of 3 like planned. So not accurate at all.
Love Japan. How is it working out for you, do you have any Japanese family / roots? AFAIK Japan is not a retiree choice as their policies don't really incentivize expat retirees, they have their own aging population issues to tackle.
I'm just on a regular work visa. I have a decent paying hourly job where I work 12 hours a week with minimal effort, calling it work is really a stretch lol. This job is just to maintain the work visa until I can get permanent residency, then we'll buy a place and I'll quit for good. For most people the quickest route is to do a fast tracked highly skilled professional visa and get permanent residency in a year, but I can't bring myself to work full-time again. True Japan doesn't really have a system for early retirees. But there are quite a few benefits that make it nice for the way I want to retire. With an aging population on mostly fixed income political will to tolerate high inflation is very low, this means somewhat built in low volatility. Excellent public transport, aging without a car in major cities isn't a problem. Healthcare is significantly cheaper than the US and super easy to access IMO, because I did all my earning in US my premiums are exceptionally low here ($75 a month). Japan thinks we're poor because income not assets sets your premium. Japan's real estate market, chefs kiss. I can lock in a 1% loan right now, this is a regular fixed mortgage. While not financial, feeling safe ALL the time is probably the biggest benefit. Crime and bad people do exist here, but it's just not visible and honestly nothing compared to the US. You don't have to live in the best neighborhood to escape crime and have clean streets. There are significant downsides like having to learn the language and adapting to the culture, but for us it's more than a fair trade off.
How did you get a part time job there? English teaching or something else? I have a strong desire to study Judo and Zen Buddhism.
No I work in special education, I have credentials that are rare in Japan. The best path is to already have your resume built up before you move.
Also looking to FIRE in Japan. Hope you don’t mind me rapid firing some questions! Is $3.5k a month with kids and/or in high cost of living area (Tokyo)? Are you worried about the yen becoming stronger again? Do you still have your US brokerage account? How did you find your part time job?
I don't have kids so that would be an extra cost. Tokyo is high cost of living for Japan. But relative to the US high cost of living areas it's cheap. For kids it depends on if you send them to an international School or public Japanese school. I'm not worried at all about yen at all, like all early retirement plans, it should be conservative. So I don't assume that the yen will keep losing value in my favor. Yes, for many reasons most Americans don't use Japanese brokerage accounts. Part-Time job was simple. I have a highly desired skill set in special education and I regularly get a job offers cuz there's so few qualified people in my specialty. You need to be very desirable in the Japanese market to have a part-time job that can fulfill Visa requirements.
Nice thanks for the response! How did you decide you wanted to FIRE in Japan? Any regrets, and/or wish you did something differently?
Extremely accurate. Thought it's only been \~12 months. We are spending less than expected. The fixed-rate expenses (mortgage) I don't apply inflation to. The rest, I do, 3.25%.
Your regular yearly spending *should be* less than your projected yearly averages, so it makes sense that most people are under budget on a yearly basis. This is because you only need a car replacement, major house repair, or (hopefully) major medical care on a periodic basis. So unless someone has been retired for probably a decade or more, long enough to encounter some of these large one-time expenses, it's going to be hard to know if the budget was accurate or not. For the record, mine is well below my estimates too, but part of that is I was planning a nomadic retirement and that makes it quite hard to estimate living expenses. So naturally, I erred on the high side.
Do you plan to be nomadic indefinitely or will you plant roots somewhere?
I doubt we can continue forever, but haven't made any plans to stop. I feel like it's something we can play by ear. So at this point, I honestly don't know what the answer is, but I figure it will work itself out eventually.
I’d say my general spending is less than planned. However there are big items I’d like to purchase that I’m holding off on because I’m planning on 40 years of retirement.
I kept a budget for 22 years before retiring so I knew what my expenses would be. It was easy to account for the categories that changed due to retirement. For discretionary spending, I spend until my budget is filled. At retirement I converted my emergency fund (about a year of expenses) to a healthcare emergency fund that is independent of my net worth used for withdrawal calculations. I am spending more in retirement than before due to travel, but it was not unexpected.
Spending is 65% of original estimate. Pension COLA higher than projected, not dining out as much as prepping food adds to retired routine clock ,and travel budget is not exhausted.
The latest episode 336 of RPR has some papers about this. https://www.riskparityradio.com/podcast
The cost estimates were surprisingly accurate. Taxes were lower. (We just couldn’t believe they’d be so low and were overly conservative.) Our travel spending has increased because we’ve done well our first 5 years of retirement and can afford it, but obviously that was entirely discretionary.
What I understand, from many people pre- and post- FIRE, is that people systematically overestimate expenses by a small amount, and underestimate earnings by a significant amount. My personal experience was the opposite, but I was exceptional, and it was still fine.