Today is the day! With thoughts, numbers, and graphs [M 38]

After 16+ years of employment, today is the day. I’ve hit my goal, I’m packing up my desk and leaving my job. In retrospect, my FIRE reddit user name feels short-sighted...

What FIRE means to me:

I’ve been working on this goal basically from the start of employment, well before I heard the term FIRE. I’ve always been frugal and very interested in being financially independent allowing myself to work on my own independent projects. As a result, I’m viewing this more as financial independence, than retirement. I’m still a driven individual who wants to work on ideas/projects, but now I have the ability to take risks, work on what I find interesting, and ultimately I can fail on these projects. In addition. I also have the ability to take the time off giving me more time to travel and work on hobbies.

The numbers:

I’m 38, single, and my goal was to have roughly 75k USD a year (after taxes). After doing a lot of research and number crunching, the withdraw rate I felt comfortable using was 3.3%. That means my net worth target was 2.5 million.

Here is a graph of my net worth over time: https://imgur.com/a/sMBawDG. The first graph is tracking just my personal investment starting with 2008 as I didn’t track my retirement accounts over time until many years later.

It took me 10 years of working to hit the 500k mark, and then roughly 6 more years to hit my 2.5 target. It’s crazy how momentum builds in the later years.

Allocation and performance:

Here is a rough breakdown on how I invested my money

• 45% S&P 500 and growth index
• 10% Tech funds
• 15% International
• 15% Small cap
• 10% Speculation individual investments
• 5% Bonds

As you can see, I was a bit different from the "tried and true" FIRE strategy. I work in Tech and felt that will be the most influential industry as time moves forward. In addition, starting in 2012 I wanted some money set aside for individual investment, offering a bit higher risk/reward.

For the speculative investments, I only put money in growth companies I felt confident in never pulling out and that would continue to grow and change society. I also ensured that I felt they had a high barrier of entry for competition. These all ended up being tech companies. The majority of this discretionary amount was put into Amazon, Netflix, and Tesla. The first 2 of those have done quite well over the years. And my one potential flop, Tesla, has clearly exploded the last year. So I am quite fortunate and lucky these individual investments have done so well. And while they make up 10% of my initial investment, they make up 25% of my overall private worth now. With these, my allocation has out performed the S&P500 over the years by a decent amount.

And last, you will notice on the graphs that my 401k earnings did way worse than my private portfolio (or the S&P500). The offered funds had higher expense ratios, worse performance, and while I had a similar allocation to my private interments, it did significantly worse.

Lessons learned along the way:

2008 – This was the big one. I was lucky to have paid off my debts and just start investing in 2007, before the 2008 crisis hit. I learned a lot from that mess. When the 2008 crisis hit, I took my money out of the market after a 40% loss. Based on those results, I was frustrated and I decided to a large amount of the remaining money and put 35,000 towards a car in cash (missing the 2009 rally). Paying cash for the car seemed like the financially correct thing to do – Had I financed, that money in my portfolio would now be worth 130,000ish. While this seemed very costly at the time, learning this lesson early saved me much more in future mistakes. When this 2020 market dip happened, I remained cool, left my money where it was. At the end of Q2, I’m up 10% on the year. The amount of stories I read on people still with the money out of the market after this recovery, missing 40% recovery, hit home as the lesson I learned in 2008.

Advise from people on what is happening in the market – As I read investment analysis over the years on what the market will do, I learned that for the most part, no one knows shit about the future (myself included). I made a point to write down what the sentiment was and check 6 months later where things stood, it was wrong far more than it was correct. People in general are very emotional and overreact, I’m still shocked in how the market over reacts and then settles. I kept plugging in money constantly along the way, and that has worked.

My take-always:

• Don’t try and time the market (duh, but I had to learn it)
• You are playing a long game, don’t get scared and take money out as the market falls
• If you can, continuing to invest after a market fall is key. It's important have the emergency fund to help limit down-market hardships preventing investment.

The FIRE plan now that I’ve triggered:

As I said, my safe withdrawal rate is 3.3%. Some CAPE >30 models show that having odds of failing over a 50 year period, but I am OK with that smaller amount of risk. I also feel that past result of CAPE ratios wont have the same results as they will now. The market and fed reserve tools are evolving. Clearly this is totally speculation.

I’ve reallocated money so I have essentially 2.5 years of living money in bonds/cash. I’m taking a the approach where I will live off dividends and sold allocations in good and neutral performing years. When market years are bad, I will live off withdrawn bond money, and will be reinvesting dividends. I will then be replenishing the bond money after the market has pulled out of the recession.

I plan to continue living in a Medium cost of living city in the US. Being single - living in a good city environment with easy access to people, hobbies, and having a good place to work on my projects in paramount. I was debating moving internationally, but now doesn’t seem to be a good time to consider that, I will reevaluate that in future years.

Conclusion:

So that is it, hopefully this write-up is helpful to someone. It's certainly been valuable to gather my thoughts.

It’s not really “hit me” yet that I’ve made it. I’m nervous and excited for what is to come. Let me know if you have any questions or comments. If you think I’m overlooking something, let me know. I’m always evolving my plan and considering feedback is the best tool I have for refining. I’ll look to do a 1 year update next year.