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EdLaFave

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Everything posted by EdLaFave

  1. EdLaFave

    Playing with FIRE Documentary trailer! Must see!

    Looking forward to it.
  2. I enjoyed the read. I keep reading on the topic and I’m becoming more convinced that I’m well suited to FIRE. This subculture is so interesting to me. Just my two cents on the author’s five points (reasonable people will disagree): 1) You will suffer an identity crisis for an unknown period of time. As the author says, this varies based on how much you identify with your job title, which thankfully is 0% for me. I’m always puzzled by people who attach identity to a job that they want to leave. 2) You will be stuck in your head. The author talks a lot about being upset that you’re not “productive,” I never did understand why people derived happiness from productivity and I’ve always enjoyed being “stuck” in thought. 3) People will treat you like a weird misfit. I’ve always felt like an alien in this world where I’ve had to study the behavior of normal people because they frequently behaved in ways that were unexpected. My wife, having worked with autistic kids in school, is now convinced I’m autistic, but very highly functioning. I believe she is correct. Either way, I’ve always embraced the misfit title. 4) You’ll be disappointed that you aren’t much happier. I don’t think it is reasonable to expect retirement to generate happiness. It is reasonable to think retirement will remove a source of unhappiness from your life and then you’ll be left with whatever else you have. 5) You constantly wonder whether this is all there is to life. There is no point to life except for maximizing enjoyment. I’ve never understood the angst around searching for life’s purpose beyond that simple statement; there is no purpose. I’ve also never understood being fulfilled by earning a salary and by making your boss wealthy through your labor. I don’t get it.
  3. One thing I’d like everybody to know about index fund investing (target date or otherwise)... You’ll hear people preach about simplicity. If you’re anything like me, you’ll think they’re saying that you should accept lower/mediocre performance because you can’t handle the complexity. However, it is the low costs associated with this type of investing that will deliver superior performance and it is just a happy perk that it is also incredibly simple! This initial argument of simplicity turned me off to the idea almost immediately and caused my conversion to index funds to be delayed by multiple years while I searched for superior performance. Learn from my mistake.
  4. EdLaFave

    Playing with FIRE Documentary trailer! Must see!

    Can you make the case as to why I personally should not FIRE? I truly want to hear the argument. I won’t take exception to anything you might say, but it may take time to fully set aside my bias and truly hear you. I’m quite looking forward to seeing the documentary. Based on the math I’ve seen, my concern for FIRE folks is that they don’t understand just how aggressive their portfolio needs to be and just how low their withdrawal rate needs to be in order to be “safe” (i.e. not get into a race between a dwindling portfolio and a dwindling, or not so dwindling lifespan). I’ve frequently read some FIRE comments talking about a 4% withdrawal rate from a portfolio with 30-70% bonds...and I worry. In a lot of ways the conventional wisdom of “safe” investing is very dangerous to FIRE folks.
  5. EdLaFave

    Help deciphering fees

    I believe the most useful way to analyze fees is to calculate (after adjusting for inflation) what percentage of your real profits were lost due to the fees. My Investing 101 page has a link to a spreadsheet (could be more user friendly, sorry) that will let you do just that for a variety of parameters (number of investing years, inflation rate, nominal return rate, investment per year, expense ratio, management fee, and sales load). Let's assume a 3% annual real return and a 30 year investing time frame: 5.75% sales load and a 1.25% expense ratio = losing 60.97% of real returns. 5.75% sales load and a 1% expense ratio = losing 52.64% of real returns. 0% sales load and a 0.07% expense ratio = losing 3.08% of real returns. Let's switch the real return to a more aggressive 5%: 5.75% sales load and a 1.25% expense ratio = losing 43.14% of real returns. 5.75% sales load and a 1% expense ratio = losing 37.19% of real returns. 0% sales load and a 0.07% expense ratio = losing 2.21% of real returns. Let's keep the 5% real return and switch the time frame to a shorter 10 year window: 5.75% sales load and a 1.25% expense ratio = losing 49.95% of real returns. 5.75% sales load and a 1% expense ratio = losing 44.85% of real returns. 0% sales load and a 0.07% expense ratio = losing 1.62% of real returns. So the fees you're describing will absolutely devastate a portfolio. I've found that it is easier to get people to understand the impact of fees like this: A 1.5% yearly expense sounds like nothing right? Well lets say you get a typical return of 6% on the year. Guess what? A typical 3% inflation just took away half your return, now you're at a 3% real return. Now the 1.5% yearly expense took away half of your real return. So the 1.5% of your portfolio fee just took way 50% of your returns....it is a big deal!
  6. The idea of getting Fidelity to pay you money to hold your account while you invest in their ZERO expense ratio index funds is attractive. People do similar things with savings accounts and credit cards. In my younger days I would have been all over it, but I’m old and lazy now 😀🤷‍♂️
  7. Ask and you shall receive. It wouldn’t surprise me if Vanguard would refuse such a request, but I’d like to hear the results if somebody gives it a go.
  8. There has been a lot of FIRE talk here recently and I’m reading some of their blogs. What does the FIRE community say about how many years worth of expenses you need to retire at, let's say, 35?
  9. EdLaFave

    Fidelity....What do I do now

    For anybody stumbling across this thread, here is where the full discussion took place.
  10. EdLaFave

    Reputable 403B Houston Area

    I appreciate the gratitude and I’m really happy you seem to have this sorted out. Please pay it forward by educating your coworkers because they’re likely being exploíted. If you’re ever feeling up for a project then work to reform the plans in your district! Come back and ask as many questions as you need.
  11. EdLaFave

    Reputable 403B Houston Area

    There are an incredibly excessive amount of options. I argue that a major reason, arguably THE reason, that financial institutions do this is to overwhelm investors and drive them into the arms of expensive advisers. The good news for you is that it really is simple once you cut through the noise and we will answer as many questions as you can conceive of. Check out my Fidelity page to drastically reduce your list of choices. You need to build a fully diversified portfolio and you basically have two easy ways to do that... #1 is called the three fund portfolio. You own a domestic stock fund that covers every US stock, an international stock fund that covers the rest of the world, and a bond fund. #2 is called an “all-in-one” fund or a “fund-of-funds”. This is a single fund that essentially holds the three funds mentioned above, but hides those details from you. One variant of these “all-in-one” funds are called target date funds and they increase your bond holdings automatically as you approach the target date. Another variant of these “all-in-one” fund is a fixed allocation where the bond holdings do not increase over time. Option #1 has the lowest cost, but it is your responsibility to make sure the three funds stay in the correct proportion to each other because the three funds will not increase/decrease in lock step with each other. For instance, just about every paycheck this year I’ve had to buy international stocks because domestic stocks have done so much better. Having to do this manually opens people up to behavioral errors because it requires you to buy the worst performing asset. Option #2 has a slightly higher cost, but you don’t have to do anything. Just keeping dumping money into that one fund every paycheck, over and over again. You can almost think of this fund as a nearly free adviser/manager doing the work for you! I have option #1, but I think Option #2 is appropriate for most people. The biggest decision you’ll have to make is what percentage of your portfolio should be allocated to bonds. Nobody can make this call for you because it is based on who you are as a person. Bonds will decrease expected returns, but nothing decreases expected returns like stocks dropping by half, freaking out, selling stocks at the bottom, and not reentering the market until the recovery is over. Or driving yourself into an early grave because you can’t sleep during the inevitable crashes you’ll experience. So ask yourself how much of your portfolio you can emotionally and financially afford to lose, think of it in absolute dollars and a percentage, know that stocks can drop by 50%, and pick a bond allocation that won’t cause you to lose too much. For the record I have an old emergency fund in bonds and everything else in stocks. Others on this board have something like 70% in bonds I think. This is a personal choice, but it is critical it is true to who you are as a person/investor.
  12. In case anybody stumbles on this monologue thread, my initial analysis seems to indicate that with a stock heavy portfolio: A normal retiree can be safe by withdrawing 4% of their portfolio per year. This is widely known and conventional wisdom that the data/math supports. An early retire can most likely be safe withdrawing 3.5% of their portfolio per year, but it seems to me 3% is really where you want to be if you can force yourself to work a bit longer. ...I’ve read folks argue that 4% is still safe for early retirees, but for a variety of reasons I won’t get into, I disagree. I agree that 4% is likely to be successful but a hypothetical 51% chance of success is both likely and unacceptably risky. So from a safety perspective, I personally wouldn’t feel comfortable at 4% as an early retiree. ...a final note from my initial analysis, even small differences in the withdrawal rate have a big difference. So if you retire, especially if you’re young, and safety is important to you...then you need to watch your budget closely, much more closely than you may have in your working years.
  13. EdLaFave

    Reputable 403B Houston Area

    You absolutely do not want National Life Group. You want a vendor that lets you build a fully diversified portfolio at rock bottom costs. You don’t want an insurance company that is going to sell you some complicated, high cost, mix between insurance and investment that you’ll never be able to understand. @whyme has setup a Fidelity account so they can probably answer some of your practical questions about enrolling. My guess is you can do it all online or you can call in for help. Side note: anything with an adviser is going to be high cost and not in your best interest to invest in. You don’t need an adviser for any plan that I’ve rated highly.
  14. EdLaFave

    Reputable 403B Houston Area

    Congrats, you’ve got some excellent choices on that list! As Krow noted, Fidelity Investments is the way to go. There is a similarly named “Fidelity Security Life Insurance” company which I’ve never heard of, but based on their name they’re bad news. So don’t confuse the two. A word of caution about Fidelity is that they give some of their funds very similar names where one fund is great and the other is rather expensive (this has been discussed previously on this board). I can only assume they’ve done this to trick the investor into paying higher fees than is necessary and this has even caused confusion for those well versed on the matter. So be careful and you may want to double check with the board about the funds you use. Also, I’m not sure how advanced your knowledge is, but I wrote up an Investing 101 page that might be helpful to you.
  15. EdLaFave

    Reputable 403B Houston Area

    Can you list both the 403b and 457b vendors that are on your district’s approved list? Also, some states have state sponsored 457b plans...not sure if Texas does, but I’m sure that is google-able I documented the 5 best plans available in Florida here. All 5 are also available throughout the nation and hopefully in your district!
  16. EdLaFave

    Money Moustache responds to Suze O

    lol, you had to look up cockblocker and I had to google pollyannaish. We’re all learning across generational divides in this post.
  17. EdLaFave

    Money Moustache responds to Suze O

    The censorship on this board drives me nuts. I have to type exploít with an accent mark or it to will be blocked. Plenty of other innocuous words are banned as well. ...but hey, we’ve got cockblocking to help us express our thoughts 😂🤷‍♂️
  18. EdLaFave

    Money Moustache responds to Suze O

    I’ve really enjoyed reading about this for the last few days, but I haven’t found either side of the argument particularly engaging. As this article points out, we’re basically arguing over an equation that has some level of uncertainty built into it. It is hard for me to get too excited about math, but I’m pretty excited about the benefits and viability of FIRE.
  19. EdLaFave

    Money Moustache responds to Suze O

    “There’s a tricky paradox going on here: the more people you reach, the bigger the range of misconceptions that will come up, potentially cockblocking your movement before it really takes off.” Geez 🙄😔
  20. EdLaFave

    Suzie O Throws water on FIRE movement

    Hopefully things turn out well for him, that’s tough.
  21. EdLaFave

    Suzie O Throws water on FIRE movement

    I thought that health plans have maximum out of pocket caps for the year. How did your friend get to half a million in medical liabilities?
  22. EdLaFave

    403b help for Washington State

    I'll let somebody else comment on the possibility of a state run 457b (that should be google-able though). Are you sure you don't have any "regular" 457b vendors available? You have access to an elite plan in Security Benefit's NEA DirectInvest. I'm enrolled in that plan and I love it. The only superior plans I've seen come from Fidelity and Vanguard and the margin of superiority is very small, so small that I didn't bother to switch when I got Fidelity and Vanguard added to our district. I documented the DirectInvest plan here. Security Benefit's reps are some combination of uninformed and deceitful. They may try to push you into a more expensive option, don't fall for it. You can read about the trouble we went through to enroll here. I documented the exact steps and paperwork I went through to enroll here. Some of it is specific to our district, OCPS (FL), but the rest should be helpful to you.
  23. EdLaFave

    Suzie O Throws water on FIRE movement

    I don’t intend for this to be harsh (text sometimes is), but the viability of FIRE is based on math and the approximation of values that are nearly guaranteed to fall within a specific range. It absolutely is reasonable to live off of capital for the majority of your adult life if you’ve acquired a sufficient amount of capital. Again, it is an equation, yes there are degrees of uncertainty, but somebody’s age doesn’t inherently make FIRE unreasonable. A silly example: if you gave me 10M at birth then I’d never need to work a day in my life. If the argument is that most people are financially irresponsible, and athletes and celebrities are the poster children for irresponsibility, then you can reasonably conclude FIRE isn’t reasonable for them. Of course those folks will almost certainly never have a portfolio big enough to even dream of FIRE. If somebody earns poverty wages then you can reasonably say FIRE isn’t viable for them. I don’t think most people earn enough to FIRE. However, big time savers can make FIRE a reality because the math says so. I don’t think FIRE requires extreme budgeting. I think people save for the lifestyle that brings them happiness and then they do it. I comfortably live on 25k-30k worth of spending, some need less, and some need more. I don’t think FIRE is about sacrifice, quite the opposite actually, I think FIRE is about indulging in whatever brings you happiness. I do think a lot of FIRE folks are repulsed by consumerism and find no joy or happiness there. For instance, just walking through a mall makes me feel incredibly gross and uncomfortable.
  24. EdLaFave

    Suzie O Throws water on FIRE movement

    Intelligence, intuition, whatever it is...I agree, almost entirely with what you’ve said, and the rest of it I just mostly agree with. FIRE folks will be tested in a recession. I think about the stress I might feel if I had 33x annual spending and suddenly I only had 16x. Would I just go back to work until things eventually recovered? Could I find a job? Would the recovery take 10 years? Apparently even being rich enough to consider FIRE comes with its own stresses.
  25. EdLaFave

    Suzie O Throws water on FIRE movement

    I didn't listen to the podcast, but I can't seriously engage in her argument because: She didn't provide any math. She merely said FIRE is an awful idea because you're giving up years of income, which is a lot like saying "Thing A isn't going to work because it is Thing A". The folks pushing for $15/hour call it a living wage because roughly $30,000 buys you the necessities of a dignified life. It may not be the life you want, but it is a life. The idea that you might need to save 166-333 times the annual living wage is patently absurd. There may be an argument against FIRE, but this isn't it. Tony, it sounds like you're not making a general argument against FIRE, it sounds like you're making a realistic observation that most people don't make enough to FIRE. In that case I agree, but I will add a couple thoughts: I'm not in the prognostication game, but I"m not sure continued runaway medical costs are more likely than legislation to bring per capita costs down by half---roughly to the level of the rest of the industrialized world. If such legislation were to be written, it is quite possible that the tax revenue required wouldn't fall too heavily on FIRE folks who are no longer earning large incomes but are instead living off relatively modest investment income. Now we don't have total control, life is unpredictable, but I believe a very large portion of health spending is due to self inflicted wounds (poor diet, vices, insufficient exercise, lack of access to care, etc.) and it wouldn't surprise me if FIRE folks make active efforts to mitigate those risk factors because they have the time, lack of stress, and resources to do so. If you're FIRE then you've already paid for your college education. I graduated in 2007. I went to an in-state school to get a 4 year degree. I worked. I lived with many roommates. I got need and merit based scholarships/grants. I graduated with a few grand of debt plus maybe 10 grand of debt associated with my car, which is still running today!!! I'm not sure how much education costs have increased, but it is certainly possible to get a valuable degree at a low price, especially in relation to the increased earning power it provides. Again I'm not in the prognostication game, but lots of places already have tuition-free community college...that may expand further to cover 4 year institutions at some point. I think we're all betting on stock market returns and we're all accounting for the inevitable ups and downs. If we start to explore economic collapse type of scenarios then we're all in trouble regardless. If we're exploring downturns like the 2000s, they're survivable. Fixing social security is incredibly simple: make it a progressive tax, tax the entirety of somebody's income, and maybe even reduce the payout received by the rich. However, I think quite a few FIRE folks are probably already counting on $0 from SS because they want independence and because they haven't worked the number of years to get a "full" payout. It would be interesting to perform the analysis. Presumably the higher taxes would be disproportionally shouldered by the wealthy...but if you're FIRE then that might be you during your earning years. I suppose that would make it easier for the "average" person to FIRE because although their taxes went up to pay healthcare, they may have gone up less than the free market would have charged for healthcare.
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