Mrs. FIF

I did it. After so much consternation over the status of the market and my own preparedness for leaving an admittedly good job, I made the decision to join my husband in Early Retirement. Though sometimes I still tell myself that it could be a sabbatical if it needed to be.  I’m not sure if that is to massage my ego as a fallback position in case all these calculations and plans of mine are wrong and history is wrong and we end up in a Japanese-style 30-year market downturn. I’ll admit, my decision was more of an emotional one in the end. If I had kept working, I would have had better numbers. But I greatly dislike my career field. While I wouldn’t be opposed to making more money at some point, I have no desire to make it as a corporate minion that adds no value to the world, except for my own bottom line.

So how did the numbers look?

While I had been planning for a 3.5% withdrawal rate from my invested assets, at the time of my retirement, I am estimating that with inflation and the market downturn, I will be withdrawing at a rate of 4.5% annually. Retiring with higher than the 4% “rule” might seem crazy (again with those emotions), I have many reasons why I felt I could still retire right now. Many of my reasons align with the FI Tax Guy’s article, The Four Backstops to the Four Percent Rule.

Mortgage & Home Equity

Every payment to my mortgage builds more home equity I could use at a later time. I don’t currently count my home equity in my Financial Independents resources. At some point, we will downsize from the two-story, 5 bedroom we live in now to raise our four little tax write-offs, but I don’t know when or how beneficial it will be to my financial picture when it happens.  For that reason, I’ve left it out of my planning projections. But it is still there, and it will become more valuable as I chip away at that mortgage.

Spending Adjustments

My current Financial Independence Retire Early (FIRE) plan estimates a static annual spending for all time. Now. While I am responsible for the care and feeding of 6 human beings. I really do expect my expenses to go down as I launch my mini Mr & Mrs FIFs. Sometimes I daydream about only having to feed two people. Can you imagine bringing home groceries for only two people? If you don’t have to imagine it, it must be glorious. Beyond that, I also believe I’ll be able to manage my expenses as necessary. I may be starting at 4.5%, but I don’t expect to stay there.

Future Cash Flows

I expect future cash flows, which include Mr. FIF’s military pension and Social Security to cover ALL my spending needs in roughly 20 years. So while I might be planning to live forever, my portfolio only has to live for 20 years. Also, both of these future cash flows are inflation adjusted. While planning 20 years ahead for Social Security benefits is difficult, I use 70% of what current benefits would be as my planning number and I’m comfortable with that.

Life Expectancy

Did I mention I plan to live forever? I do. Mr. FIF exits the picture at 95 though, when I account for survivor benefits I would receive from his pension and Social Security. Though, a recent longevity calculator, www.livingto100.com, told me I would die around the same time as Mr. FIF, at the young age of 86. Mr. FIF could quite possibly outlive me, making it to the ripe old age of 91. After I got over my shock and ah, I started to accept, we might not live forever. We might not even live the 20 years that we need our portfolio to live. But of course, I won’t change my plan for immortality.

The Stock Market is Down

No seriously, it is. Which means? It will go up… with any luck, before I actually withdraw anything! I do not recommend your retirement plans be based on luck. But with lower valuations that come with a bear market, expected returns do go up. For a far more technical discussion of this topic, I turn to Big ERN and The 4% Rule Works Again! I intend to use cash, iBonds, and bond funds before tapping into my equities while I await a recovery.

Worst Case Scenario

Then there is the line I always tell myself, my worst-case scenario of going back to work is the same as every non-retiree’s everyday life. I’ll likely do some kind of fun part-time work before I worry too much about a full-time gig. Either way, I do have some amount of confidence in my ability to earn more money if it is required.

It feels ironic that my last post began talking about how the bull market has rocketed me to my FI number faster than expected. Between that post and now, my investments are down around 10%. Beyond that, I had some unexpected expenses this year (dentist recommending ¾ kids get orthodontics), mother-in-law needing assisted living, and I’m flat out spending more with inflation. 

My original FI # from Living Life 4% at a Time with Financial Independence was $1,300,000. At the time, with an assumed 6% real return, I estimated I would get to that number by August of 2023. By the end of last year, my FI assets had made it to $1.2M and I thought that was “close enough” to my FI goals that I could maybe punch out in the summer of 2022. 

Retire Anyway, in a Down Market?! Inconceivable!

I read and reread Should I Stay or Should I Go Now from January and find that even with markets down more, I feel EXACTLY the same. Which really means I was even better off than I thought I was in January.  

Some of the changes in my estimates include the fact that even though I am spending more, roughly half of our income is inflation adjusted. Beyond that, our future estimates for Social Security are also inflation adjusted. Many people don’t include Social Security in their financial independence numbers at all, but I think that is crazy. I give my Social Security estimates a moderate haircut (70%), but I can’t imagine a world where the politicians let SS go up in smoke completely. 

I know some people hate this one, but some of my expenses are ALSO inflation protected. What do you mean by that Mrs. FIF? We have a large home mortgage at 2.875%. These payments aren’t going up no matter the inflation. 

Oh, and now it’s time to confess. I finally convinced Mr. FIF to trade in his old gas guzzler for a shiny, new (to us) electric vehicle. I added an inflation protected payment of $675/mo for 6 years to the budget. BUT, I removed $300/mo in fuel spending from the budget as long as we drive the EV as our primary vehicle. 

Mrs. FIF, don’t you know about sequence of return risk? Spend less up front. Don’t retire at the top of a recession/crash. Yes, yes, I do. 

But What Do the Spreadsheets Say? 

My favorite financial independence spreadsheet of all time is the free Google Sheet DIY Withdrawal Rate Toolbox that Early Retirement Now puts out. I like cFIREsim 3.0 too, oh and a new one I’m still putting through it’s paces: FICalc, but my heart will always belong to a spreadsheet. The main place I spend my time in Big ERN’s Withdrawal Rate Toolbox is on the Cash Flow Assist tab. I don’t care so much about my Safe Withdrawal Rate (SWR). <gasp> I care about how much I can safely spend, which includes any passive income. The Cash Flow Assist tab lets me model our pension, Social Security, mortgage payments that don’t increase with inflation, and any other cash flow impacts on our financial independence plan. 

The other ingenious attribute that Big ERN works into his Withdrawal Rate Toolbox is CONTEXT. Every other calculator I’ve come across puts your numbers through a Monte Carlo simulation of ALL market returns. But Big ERN provides withdrawal amounts based on what the market is doing right now. He also has a great post explaining how the market wants to revert back to a mean. So your SWR should be lower if the market is at all time highs, but if it has pulled back, you can probably raise your SWR and be ok – and his toolbox provides the modeling. 

That is a long way of saying, based on what I am currently estimating spending (with my mortgage, car note, and 70% SS) I have a 1% failure rate. 

As the markets have continued to do well during the pre-coronavirus bull market and the incredible recovery from the “coronavirus crash,” it is no surprise that many stories are floating around the Internet about people hitting their FIRE number earlier than they thought they would. We are no different. As our investments continue to climb and with the promise of a big bonus payout this February, we realized that we were on track to hit our FIRE number this summer instead of next August 2023.

I’ve taken many steps to prepare myself mentally and emotionally to leap into being “retired” at 42. I went to my first CampFI, which is like a summer camp for adults who like money! Not only did I go, but Nana also watched the little FIFs and Mr. FIF came with me! We had a great time together, but I was surprised to see Mr. FIF really enjoy himself. He made new friends that gave him great ideas of things to do with his free time. He talked to a lot of people about starting a podcast (which he hasn’t started, but it’s on his explore in retirement list). I think the most important thing that came out of the CampFI for us was that I went through our financial numbers at great length with Mr. FIF and explained the financial independence concepts that I’ve applied to our situation to determine that we will have ENOUGH by this summer. He agreed and for the first time, was on board with my joining him in retirement this summer.

I thought that was what I wanted. It is 100% why I brought him to CampFI. So, the FI experts, people like Karsten from Early Retirement Now and Doug from The Military Guide could tell him I was right, and the numbers worked. But now, as I get closer to executing the RE part of FIRE, I have doubts. I have run the numbers using so many calculators. My favorite of which is Big ERN’s Early Retirement Now SWR Toolbox v2.0 which tells me historical failure rates of different spending levels based on the stock market’s current high valuation. I’ve also run my numbers through cFIREsim and FIRECalc with and without social security and am still higher than a 95% success rate. All the numbers say I’m good, but WHAT IF?

But What If?

That’s right, what if future returns are not like historical returns? Is there something worse than the great recession right around the corner? What if my meticulously considered “retirement” budget is wrong and I need more. What if I’m not happy spending that little? What if I can somehow spend more in old age than I do with 4 kids at home. I just spent $300 at Costco today on meat and toilet paper, so I can’t imagine that last one, but still. I have so many what-ifs in my head now.

I make GOOD money. If I wanted to keep climbing the corporate ladder I could and I could make even MORE money.

So now I am stuck in a WHAT IF tailspin. I tell myself things like, “one more year never hurt anyone.” I’ve read many FIRE stories of people that made it to their number and then worked one more year just to be sure. It’s a thing we call “One More Year Syndrome”.

Like many, I do not like my job. It isn’t terrible. I just don’t love it. I don’t help anyone. I’ve long since given up climbing the corporate ladder which somewhat depresses me when I see less qualified people climbing ahead. I’m in tech and I have never liked tech. I got a military scholarship for math. The military then taught me cybersecurity and gave me a job doing it. When I got out after 5 and a half years, companies offered to keep paying me well for my skill set. I got the necessary certifications to keep growing my career, but never really put my whole self into it. At that point, as a military spouse, the family came before my career. Mr. FIF and I always discussed life after the military as the time when I would focus on my career. However, the more time I spent in this career, the less I liked it.  

I’ve taken breaks throughout my career, usually because a new baby came along. I also don’t long to be a stay-at-home mom. Don’t get me wrong, I love the little FIFs and I consider raising good people to be one of my most important responsibilities. I just do not want it to be my identity. I do not want my only friends to come from mom groups that talk about potty training. Again, no disrespect, there was a time when that WAS all I talked about with other moms, but I was a mom that would rather be at work than changing diapers. I would rather win a work award than be on the Parent-Teacher Association (PTA). Mr. FIF was offered a job last year and considered it for a hot second. He said if he took the job, I could quit working now. I told him that would not make me retired early, that would make me a stay-at-home mom and that’s not what I want. I want to share the parenting responsibilities AND chase something more meaningful than my current career. I know that is something that Mr. FIF and I must work on regardless of our “retirement” or financial status.  

As I ponder these considerations and scenarios, I tell myself that at 42, the likelihood that I find something meaningful to do that ALSO generates money is high. The likelihood that I will spend less money when I get rid of four more mouths to feed is high. The likelihood that I could go back to my current career field even with a resume gap is high if I keep my certifications active. That is the only way to keep my what-ifs at bay. So, what do you think? Should I stay one more year or should I go this summer?