Are we at "Peak FI"?

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BeanCity
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Are we at "Peak FI"?

Post by BeanCity » Sun Jan 06, 2019 3:30 pm

It seems like not a week goes by without me hearing of someone talking about being "financially Independent"/FI/FIRE. Most of the people saying the did achieve this or want to achieve this are by and large through a) investing in real estate b) investing in the stock market....

It is hard to deny that we have been in a fantastic bull run for a while now. Anyone who simply continuously put money into the S&P or bought real estate around 2008-2013 is sitting well right now.

My observation is that so many people have been elated due to the good economy and by making some good money over the last decade that it seems like people have also become complacent and have allowed "lifestyle creep" to happen, and have also taken on debt.

Do other Bogleheads feel this is the case too? Have you leveraged yourself quite a bit over the last few years (be true to yourself on how you answer this)? Do you get the feeling others (maybe outside of Bogleheads) have leveraged themselves [(removed) -admin LadyGeek]?

Has the recent downtick in the stockmarket got you in trouble to the point you have to short sell assets?

Feel free to share your experiences, opinions, war stories on this.

If this is the case, and people have become too optimistic, complacent, and overleveraged, can we expect a lot more blood in the water if things don't rebound?

Are there better questions to ask on this topic that I have simply not thought of?

drk
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Re: Are we at "Peak FI"?

Post by drk » Sun Jan 06, 2019 3:41 pm

Your post could probably use an edit. You started out talking about financial independence and ended talking about over-indebtedness. These are mutually exclusive states by definition.

Old_Dollar
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Re: Are we at "Peak FI"?

Post by Old_Dollar » Sun Jan 06, 2019 3:44 pm

As far as FIRE is concerned, yes the bull run made it possible. The lifestyle of frugality and high to extremely saving (20% to over 50% of gross income) is likely here to stay. I graduated University in 2008, the worst possible time for a new graduate and was underemployed for many years despite the mythical STEM degree. I adopted a high savings rate in order to catch up. I'm still not caught up, but once I am there is no chance I am letting the foot off that pedal. The future simply holds too many unknowns for any frivolous expenditures; travel, nice cars, dating, eating out, etc. I've sacrificed so I don't get caught in a poverty trap. Peak FI may be here but the psychological cost of 2008 is permanently burned into my psyche and I will never forget it and do my best to prevent a future blow to my financial stability. So the high savings rate and extreme budget tracking is here to stay.
Last edited by Old_Dollar on Sun Jan 06, 2019 3:46 pm, edited 1 time in total.
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livesoft
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Re: Are we at "Peak FI"?

Post by livesoft » Sun Jan 06, 2019 3:46 pm

I think many bogleheads have not even noticed that their portfolios are down 5%. Not a big drop at all. Not a flesh wound. Not even a scratch. No blood in the water.

As for myself, I did increase my debt level from no debt to car loan and medical debt. Why not? Loans were 0% interest rate.

But I am spending less than ever before. Don't forget that FIRE is mostly about reducing expenses. One thing that does irk me is that my taxes went up because of the new tax law.
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blinx77
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Re: Are we at "Peak FI"?

Post by blinx77 » Sun Jan 06, 2019 4:01 pm

Nope. As the world becomes wealthier, it's only logical that an increasing amount of people will figure out how to live off of accumulated assets sooner than in previous generations. Particularly as information sharing through the internet makes the unusual paradigm and tricks available to all. (Previously, you'd need to know a friend that did it, believe them, and try to replicate their advice).

Also related to declining rates of childbirth, particularly among highly educated people. Not necessarily a good trend but it is what it is.

delamer
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Re: Are we at "Peak FI"?

Post by delamer » Sun Jan 06, 2019 4:10 pm

Stock market declines might spook some people.

But most people are basing their behavior on being employed, having interest rates on the low side, and having home values that are stable (or increasing).

So unless the stock market issues spill over into the rest of the economy, I don’t see blood in the water.

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Re: Are we at "Peak FI"?

Post by aristotelian » Sun Jan 06, 2019 4:23 pm

You may be right about interest in FI corresponding to the bull market, but it is not about lifestyle creep. I'm fact, one of the keys to it is reducing expense so that you can minimize the resources you need to sustain yourself. That aspect of FI is completely be independent of the market.

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Re: Are we at "Peak FI"?

Post by goodenyou » Sun Jan 06, 2019 4:34 pm

If we could answer that question, we could time the market. I think it goes without saying that in the Go-Go Times of an ever-increasing stock market, the wealth effect for consumption or the new wealth effect of FI (the new status symbol) is real. If you have your eyes on FI, you don't risk it with more debt. I have more appreciation of risk and a balanced portfolio and my SWR that would make me sleep very well at night during retirement.
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Re: Are we at "Peak FI"?

Post by TheHouse7 » Sun Jan 06, 2019 4:37 pm

The only way anyone would consider true FI is being part of a few that can truly control thier costs under any economic condition.

I think cheap and easily accessible lending will always temp the majority to accept more risk than they can handle.

I think u.s. is already past previous debt levels before the last financial crisis. (Don't quote me.)
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Re: Are we at "Peak FI"?

Post by harvestbook » Sun Jan 06, 2019 4:38 pm

Our expenses have declined over the bull run as we see the benefits of having more invested. Instead of complacency due to the wealth effect, we've come to value frugality and simplicity as a way of life.

I think FIRE is here to stay for a number of reasons--fewer people stay in one job or career, fewer such careers offer pensions or long-term job security, ACA broadens health insurance options, low-cost index investing is more widespread, and the digital era makes it easier to be an entrepreneur. No one can predict how AI will change the job market in the future. It could be the idea of a 40-hour week and 30-year career becomes obsolete.

FIRE will likely remain a niche interest since many people want instant gratification or don't have the means, temperament, or desire to save much more than they spend. But I wouldn't be surprised if this were the "peak noise" of it really being remarkable and getting the attention it has in the last few years. The principles will endure, though.
Last edited by harvestbook on Sun Jan 06, 2019 4:39 pm, edited 1 time in total.
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stlutz
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Re: Are we at "Peak FI"?

Post by stlutz » Sun Jan 06, 2019 4:38 pm

I've never heard the phrase used anywhere except on the internet.

For decades some people have been well off and retired early. I expect that to continue in the future.

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Re: Are we at "Peak FI"?

Post by cherijoh » Sun Jan 06, 2019 4:41 pm

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm
It seems like not a week goes by without me hearing of someone talking about being "financially Independent"/FI/FIRE. Most of the people saying the did achieve this or want to achieve this are by and large through a) investing in real estate b) investing in the stock market....

It is hard to deny that we have been in a fantastic bull run for a while now. Anyone who simply continuously put money into the S&P or bought real estate around 2008-2013 is sitting well right now.

My observation is that so many people have been elated due to the good economy and by making some good money over the last decade that it seems like people have also become complacent and have allowed "lifestyle creep" to happen, and have also taken on debt.

Do other Bogleheads feel this is the case too? Have you leveraged yourself quite a bit over the last few years (be true to yourself on how you answer this)? Do you get the feeling others (maybe outside of Bogleheads) have leveraged themselves [(removed) -admin LadyGeek]?

Has the recent downtick in the stockmarket got you in trouble to the point you have to short sell assets?

Feel free to share your experiences, opinions, war stories on this.

If this is the case, and people have become too optimistic, complacent, and overleveraged, can we expect a lot more blood in the water if things don't rebound?

Are there better questions to ask on this topic that I have simply not thought of?
Prior to the December correction, there seemd to be an uptick in Boglehead posters in their late 30's early 40's asking if they would be able to retire between ages 48 - 55. Some of them were well on track to achieve their goal of FI/FIRE IMO. But others either wanted to take their feet off the gas (and reduce their savings rate/increase consumption) OR extrapolated historical returns (or worse yet the phenomonal return rate of the last decade) to hit their number at their projected date. I'm not very optimistic for the latter group since they seemed to have discounted the possibility of a major correction.

I retired last April but would say that I kept my foot on the gas until the very end. I managed to max out my 401-k (including catch-up provisions) and my Roth IRA before I retired. (My Megacorp paid out performance bonuses in late February - mine was the equivalent of ~ 3 paychecks). I had been dialing back my AA in preparation for the big event and beefing up my cash buffer, so the December corrections didn't give me any second thoughts about having taken the plunge. I did do some extra Roth Conversions in December to take advantage of RBDs.

aristotelian
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Re: Are we at "Peak FI"?

Post by aristotelian » Sun Jan 06, 2019 4:50 pm

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm

My observation is that so many people have been elated due to the good economy and by making some good money over the last decade that it seems like people have also become complacent and have allowed "lifestyle creep" to happen, and have also taken on debt.

Do other Bogleheads feel this is the case too? Have you leveraged yourself quite a bit over the last few years (be true to yourself on how you answer this)? Do you get the feeling others (maybe outside of Bogleheads) have leveraged themselves [(removed) -admin LadyGeek]?
You may be right about some of the correlation between interest in FI and the bull market. However, it is absolutely not about lifestyle inflation. A cornerstone of the philosophy is to reduce your expense to maximize your savings rate as well as lower the number you need to hit to sustain yourself. A good job and positive investment returns can accelerate FI, but it is just as much driven by frugality.

It also has nothing to do with leverage. Some people use it, especially in real estate. Just as many are savvy about reducing risk and building "bond tents" as they approach FI. Personally, I took the bull market as an opportunity to pay off my mortgage. Some proponents of FI view mortgages as "good debt" but that has been true across time.

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Re: Are we at "Peak FI"?

Post by whodidntante » Sun Jan 06, 2019 5:01 pm

Years of central bank influenced anomalously low interest rates caused me to confront my debt aversion. Debt itself can be a good investment if the rate is a very low fixed rate.

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Re: Are we at "Peak FI"?

Post by averagedude » Sun Jan 06, 2019 5:05 pm

I believe FIRE is here to stay for intelligent high wage earners that make it their goal, but most will not be retiring in their thirties like they think. Alot of these people are choosing not to have as many children if at all. They also are aware how possible it is to do it if they control the big expenses like housing and transportation and invest where there money compounds at a high rate of return. When you are not living in the rich suburbs, there is less want on keeping up the Jone's. Most will probably still work for income, but it will be more on their terms. Amazingly when you don't have to depend on the income from a job, the more you seem to enjoy it.

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Re: Are we at "Peak FI"?

Post by tim1999 » Sun Jan 06, 2019 7:44 pm

A couple of my observations:
-I've never heard FIRE mentioned outside of the internet. And rarely outside of Bogleheads or Reddit. I even work with a bunch of younger (non-tech) engineers, and while they tend to be fiscally conservative types, I get the sense that most of them aren't trying to live on rice and beans, sock all of their pay away in retirement funds, and spend as little as possible. They live a little. Take vacations, buy stuff, etc. but within reason. One guy who I thought was pretty thrifty/borderline cheap (refuses to go out for a $6 lunch, wears cheap clothes in poor condition, etc.) rolled up in a brand new Toyota Tacoma last Friday.
-Seems like the majority FIRE proponents/candidates I read about on the internet seem to be California tech types with monster salaries and stock grants. Take away these people and I think the amount of today's 20-30somethings who have a chance at FIRE before age 40-45 is near nil unless they were born on third base and/or are committed to a lifestyle of basically spending no money whatsoever.

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Re: Are we at "Peak FI"?

Post by AlphaLess » Sun Jan 06, 2019 7:45 pm

drk wrote:
Sun Jan 06, 2019 3:41 pm
Your post could probably use an edit. You started out talking about financial independence and ended talking about over-indebtedness. These are mutually exclusive states by definition.
100% agreed with this assessment.
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blinx77
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Re: Are we at "Peak FI"?

Post by blinx77 » Sun Jan 06, 2019 7:58 pm

tim1999 wrote:
Sun Jan 06, 2019 7:44 pm
A couple of my observations:
-I've never heard FIRE mentioned outside of the internet. And rarely outside of Bogleheads or Reddit. I even work with a bunch of younger (non-tech) engineers, and while they tend to be fiscally conservative types, I get the sense that most of them aren't trying to live on rice and beans, sock all of their pay away in retirement funds, and spend as little as possible. They live a little. Take vacations, buy stuff, etc. but within reason. One guy who I thought was pretty thrifty/borderline cheap (refuses to go out for a $6 lunch, wears cheap clothes in poor condition, etc.) rolled up in a brand new Toyota Tacoma last Friday.
-Seems like the majority FIRE proponents/candidates I read about on the internet seem to be California tech types with monster salaries and stock grants. Take away these people and I think the amount of today's 20-30somethings who have a chance at FIRE before age 40-45 is near nil unless they were born on third base and/or are committed to a lifestyle of basically spending no money whatsoever.
My goal is to be "on track" in my 40s, done except for discretionary spending on kids by 50 (e.g., in my 50s I can stock up funds for private college rather than public, grad school) and either for real retired or "running up the score" (e.g., vacation house, filling funds for wedding, travel, donation, inheritance) by 55.

Not anything a great many on this board haven't accomplished, as well as a fair number of people my parents' age where I live in the suburbs of DC. I think it's doable and I'm on track.

I use FIRE principles where they add value to my life but have no illusions that I'll be spending my 40s working.

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BeanCity
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Re: Are we at "Peak FI"?

Post by BeanCity » Sun Jan 06, 2019 8:29 pm

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm

*Please note I have edited the post after a few people recommended so* Hopefully with the edit, my questions and general observations loop back to each other better now.

It seems like not a week goes by without me hearing of someone talking about being "financially Independent"/FI/FIRE. Most of the people saying they did achieve FIRE, or want to achieve this are by and large making it happen via a) investing in real estate b) investing in the stock market....

It is hard to deny that we have been in a fantastic bull run for a while. Anyone who simply continuously put money into the S&P or bought real estate around 2008-2013 is sitting well right now.

Should I take this as a sign that we have reached a market peak?

My synonymous observation is that so many people have been elated due to the good economy and by making stellar returns over the last decade. It also seems that people are becoming complacent and have allowed "lifestyle creep" to happen, and have also taken on debt.

Do other Bogleheads observe these instances as well?

As a side question - have you leveraged yourself quite a bit over the last few years (be true to yourself on how you answer this)? Do you get the feeling others (maybe outside of Bogleheads) have leveraged themselves more than ever?

Has the recent downtick in the stockmarket got you in trouble to the point you have to short sell assets?

Feel free to share your experiences, opinions, war stories on this.

If this is the case, and people have become too optimistic, complacent, and overleveraged, can we expect a lot more blood in the water if things don't rebound?

I can't help but think many people pursuing FI and the general public who are not Bogleheads may be in for a reckoning.

Are there better questions to ask on this topic that I have simply not thought of?

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Re: Are we at "Peak FI"?

Post by phantom0308 » Sun Jan 06, 2019 9:02 pm

FIRE calculations are at least somewhat based on future returns. If future returns are depressed for a long period of time that could cause people on the edge of being FI to not be. Most of the people I've seen talk about this have continued working past the point they need to and do at least some part-time work though. I'm not worried about them, but only time will tell if their announcements were premature.

software
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Re: Are we at "Peak FI"?

Post by software » Sun Jan 06, 2019 9:07 pm

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm
Has the recent downtick in the stockmarket got you in trouble to the point you have to short sell assets?
I think you are confused on what “short selling assets” means.

It doesn’t mean selling assets when they are down.

MathWizard
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Re: Are we at "Peak FI"?

Post by MathWizard » Sun Jan 06, 2019 9:20 pm

Lifestyle creep, perhaps.

I no longer buy generic bread. My wife still jokes about the deal I got on generic bread 35 years ago when we were first married, 10 one pound loaves fir a dollar. Tasteless, but you could make toast with it and put margarine on it.

Now I buy bread at $4 per loaf and use butter.
I'm no longer buying cars with 80 thousand miles on them, or buying vans at state auctions that nobody else wanted to bid very high on.

I've also taken my wife on vacation using commercial air. Before we drove everywhere.

We were married 25 years before we took a commercial airliner for personal reasons. ( I had flown for business, my wife had never flown until our 25th anniversary.)

I've also started to hire some house maintenance. My wife and I have done almost all of it ourselves. I'm no longer able to work all weekend late into the night and then put in a week at work, like I used to.

Even with the creep, we are close to being FI expecting to be there in about 3-5 years.

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Re: Are we at "Peak FI"?

Post by Cycle » Sun Jan 06, 2019 9:22 pm

TheHouse7 wrote:
Sun Jan 06, 2019 4:37 pm
I think u.s. is already past previous debt levels before the last financial crisis. (Don't quote me.)
I've seen a lot of dumpsters and port-a-potties on peoples front lawns (home renovations)
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fortunefavored
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Re: Are we at "Peak FI"?

Post by fortunefavored » Sun Jan 06, 2019 9:22 pm

I personally know many people (10+) who have retired between 35-50. All in the "highly paid tech" arena and most leveraging geographic arbitrage. I guarantee they will all be fine.

I don't think you have PeakFI-chatter until those salaries collapse, which they inevitably will. The people I know retiring early realized it is all a house of cards and got while the gettin' is good. All of them have a tight handle on expenses, debt, etc.

I worry a lot more about those NOT on that path who think the music will play forever.

I personally continue to delever and reduce expenses while saving for FI, which should be before 50.

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Re: Are we at "Peak FI"?

Post by Cycle » Sun Jan 06, 2019 9:24 pm

I've been getting the organic sugar free peanut butter from Aldi. I also used to pocket the quarter when someone would give me a free cart, but last week I paid it forward, since i'm feeling pretty flush :greedy
Never look back unless you are planning to go that way

Rus In Urbe
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Re: Are we at "Peak FI"?

Post by Rus In Urbe » Sun Jan 06, 2019 9:24 pm

Should I take this as a sign that we have reached a market peak?
This is one of the most confusing initial posts I've read on Bogleheads. What are you really asking? Are you looking for evidence that that there is a "market peak" because maybe Bogleheads (or FI folks) have gone into debt, or become less frugal, or are going underwater in the market downturn....whaaaa?

Sure, with a long bull market, some folks (including FI-ers) may have become perhaps irrationally exuberant (to use a throw-back Greenspan phrase) about their prospects for early retirement. Sure, with a long bull market, some other devoted Bogleheads and practiced investors have extra money and may be spending it a little more freely. Whoa, big news, eh?

But you seem to be fishing for something here----maybe a reason to sell out at the "market peak?"
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Re: Are we at "Peak FI"?

Post by randomguy » Sun Jan 06, 2019 9:25 pm

averagedude wrote:
Sun Jan 06, 2019 5:05 pm
I believe FIRE is here to stay for intelligent high wage earners that make it their goal, but most will not be retiring in their thirties like they think. Alot of these people are choosing not to have as many children if at all. They also are aware how possible it is to do it if they control the big expenses like housing and transportation and invest where there money compounds at a high rate of return. When you are not living in the rich suburbs, there is less want on keeping up the Jone's. Most will probably still work for income, but it will be more on their terms. Amazingly when you don't have to depend on the income from a job, the more you seem to enjoy it.
FIRE has always been here. The only thing remotely new is the acronym. What is new is that the internet allows small subsets of the population to connect easier and build a community. You get a 1000 people with a shared interest and you can get a lively message board going.

A 10-15 year period of low (think <2% real returns) would probably push people from stocks/bonds into things like real estate and the like. Not sure if it would change much else.

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Re: Are we at "Peak FI"?

Post by Turbo29 » Sun Jan 06, 2019 9:26 pm

Rus In Urbe wrote:
Sun Jan 06, 2019 9:24 pm
[
But you seem to be fishing for something here----maybe a reason to sell out at the "market peak?"
The "peak" has already come and gone. That's until the next peak. But no one knows when that will be.

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Re: Are we at "Peak FI"?

Post by stlutz » Sun Jan 06, 2019 9:27 pm

I think u.s. is already past previous debt levels before the last financial crisis. (Don't quote me.)
Not really.

https://fred.stlouisfed.org/series/TDSP

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Re: Are we at "Peak FI"?

Post by Ged » Sun Jan 06, 2019 9:28 pm

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm

Feel free to share your experiences, opinions, war stories on this.
My opinion is that people who Boglehead philosophy appeals to are fairly unlikely to overextend due to a robust economy. Less so the general population.

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Re: Are we at "Peak FI"?

Post by DrGoogle2017 » Sun Jan 06, 2019 9:30 pm

No, debt has gone down, I still have a mortgage, but it’s gone down every year. None of my millennial nor Gen Z have mentioned FI or early retire yet. They still spending money, but a bit more sensibly. One trip overseas every year vs multiple trips like they had plan in the past. One kid even put off going to New Zealand as an example.
Last edited by DrGoogle2017 on Sun Jan 06, 2019 10:11 pm, edited 1 time in total.

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Re: Are we at "Peak FI"?

Post by AerialWombat » Sun Jan 06, 2019 9:38 pm

I think “early” retirement will *grow*. It’s been growing for decades, just without the FIRE label.

The entire concept of retirement as we know it today is only, what, 100 years old, give or take?

We live in the most prosperous time in H. sapien history. It’s impossible to predict the future, but most generations in most countries have it better than the last generation, and unless Black Swan, I see no reason for the long-term (as in, centuries and millennia) trend to reverse.

I will hit FI in October 2019. Yes, primarily via cash flow from real estate. Around Jan. 25, 2020, I will enter semi-retirement, although my current lifestyle already resembles it by most people’s standards.
Last edited by AerialWombat on Sun Jan 06, 2019 9:39 pm, edited 1 time in total.
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Rus In Urbe
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Re: Are we at "Peak FI"?

Post by Rus In Urbe » Sun Jan 06, 2019 9:39 pm

Rus In Urbe wrote: ↑Sun Jan 06, 2019 10:24 pm
[
But you seem to be fishing for something here----maybe a reason to sell out at the "market peak?"
The "peak" has already come and gone. That's until the next peak. But no one knows when that will be.
Precisely.....fishing. Or looking for a crystal ball?
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Re: Are we at "Peak FI"?

Post by SoAnyway » Sun Jan 06, 2019 9:40 pm

Rus In Urbe wrote:
Sun Jan 06, 2019 9:24 pm
This is one of the most confusing initial posts I've read on Bogleheads. What are you really asking?
I concur. I'm quite confused, OP. :confused To use the forum lingo, I'm struggling to find the "personal" and "actionable" part of your post, i.e. the question you're asking that's about you (or someone else specific) that relates to a personal situation such that the replies will make a difference when applied to that situation.
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Re: Are we at "Peak FI"?

Post by KlangFool » Sun Jan 06, 2019 9:41 pm

OP,

I live in a very affluent neighborhood. Annual median household income of 150K. Median house price of 500K to 600K. One of the top high school in Virginia. But, when I look under the cover, I see folks with little to no financial security.

A) Out of my kids' high school classmates, I am the small minority that pays my kids college education fully. Aka, without a student loan.

B) 30% of the students are on the free or reduced meal program.

C) My daughter was at a sports club. The parents need an installment plan to pay for the $600 annual fee of the sports club.

No, I do not believe that we are at "Peak FI".

KlangFool

SoAnyway
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Re: Are we at "Peak FI"?

Post by SoAnyway » Sun Jan 06, 2019 9:45 pm

Rus In Urbe wrote:
Sun Jan 06, 2019 9:39 pm
Rus In Urbe wrote: ↑Sun Jan 06, 2019 10:24 pm
[
But you seem to be fishing for something here----maybe a reason to sell out at the "market peak?"
The "peak" has already come and gone. That's until the next peak. But no one knows when that will be.
Precisely.....fishing. Or looking for a crystal ball?
Sorry, OP. No one here has one. Moreover, few BHs will offer support for market timing. (Or for trolling for that matter, if that's what "fishing" means? :confused )
Nothing in this post constitutes legal or medical advice. | Consult your attorney or physician to verify if/how anything stated might or might not be applicable to your specific situation.

nguy44
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Re: Are we at "Peak FI"?

Post by nguy44 » Sun Jan 06, 2019 10:11 pm

OP,
Actually I think the dot-com boom of the late 90s, and perhaps the housing bubble, was worse in terms of your definition of "peak FI" ... I heard many more folks in the 90s talking about retiring early, salaries were skyrocketing and demand was such that companies were paying you just for an interview, the Dow was predicted to hit 20K by the early 2000s, companies had not yet begun to cut retirement benefits, etc.

I think anyone pursuing with FI has to factor in fluctuation in the markets and real estate, and determine what their tolerance is to live with that fluctuation, within their FI-desired lifestyle. Every time there is a fall from a peak, the inevitable question is "will that peak ever be reached again"... no one knows, but one has to factor that into their FI plans.

For example, once I was able to hit my FI level, I became more conservative with my investments. Having retired middle of 2018, I have enough in safe cash investments so that I do not have to touch my equities for 5-7 years. My overall gains will not be that great, but they will still be more than I need, and my losses will not be as great as the market, and a reduced impact on my FI. Not saying this is for everyone, just saying this is the course I have chosen for my FI in RE.

Gibby45
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Re: Are we at "Peak FI"?

Post by Gibby45 » Mon Jan 07, 2019 12:02 am

I am one of the people who plans to be able to retire early. I think we are at "Peak FI" only in the sense that the term is now semi well-known. Many of us young Gen X-ers/Xennials/old Millennials remember seeing our parents lose pensions, we have always heard that Soc. Sec. would run out, we remember the dot com bust, we took on boatloads of student loan debt, and we were early in our careers when things crashed in 08/09. I don't think anyone who believes in FIRE believes that the stock market only goes up or that things are always rosy. To the contrary, my desire to gain financial understanding and financial independence came from my belief that you CAN'T count on the stock market or job security. I don't think this will change with the younger generation(s). They will likely be much more entrepreneurial and independent than prior generations.

I love my job and I love working, but I don't believe I can or should count on a job being available for 20+ years. My retirement (whenever it starts) will be based on a Boglehead 3 fund portfolio, rental real estate and lack of debt. I admit that I'm much more interested in the FI than the RE. I disagree that not spending money is the same as not having a life. If you figure out the activities and events you would like to attend, you can figure out a way to attend them for half price or free with a little effort. The same is true for traveling (credit card miles) and nice restaurants (Costco/Groupon/Happy Hour v. dinner). My desire for FIRE doesn't prevent me from participating in or partaking of anything that I would like to, it just makes me find a way to do all of those things at a discount.

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steve roy
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Re: Are we at "Peak FI"?

Post by steve roy » Mon Jan 07, 2019 12:27 am

Because Mrs. Steve Roy and I have pensions and Social Security, we have a reasonably healthy cash flow.

That being the case, we only have 24% equities in our portfolios. (Why play the game when you don't need to?)

So. The downtick hasn't really impacted us much. And we've stopped looking at our Vanguard accounts. We're not at PEAK FI, but we're close enough to throw silver dollars at it.

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Watty
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Re: Are we at "Peak FI"?

Post by Watty » Mon Jan 07, 2019 12:57 am

BeanCity wrote:
Sun Jan 06, 2019 3:30 pm
It seems like not a week goes by without me hearing of someone talking about being "financially Independent"/FI/FIRE. Most of the people saying the did achieve this or want to achieve this are by and large through a) investing in real estate b) investing in the stock market....
Some of the increase in "RE", retire early, talk is that early retirement is more of an option when there are private healthcare options available even if they are sometimes costly.

In the past I knew relatively highly paid people that got jobs like being school bus drivers or working in retail sales after they got laid off in their 50s or early 60s. This was mainly just to get health insurance because they could not qualify for any private health insurance so retirement was not an option.

I retired just before I turned 59 and I know that I would have worked a few more years if the ACA had not looked stable when I retired. If I had to make the decision today I would probably want to work "one more year" to see how what the healthcare situation looks like in another year.

cogito
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Re: Are we at "Peak FI"?

Post by cogito » Mon Jan 07, 2019 12:58 am

I'd like to second Gibby's sentiments. I'm a millenial who has lurked here for about 5 years and learned very, very much, but I'm always a little amazed at the lack of empathy from the older crowd here. Most of the people in the FIRE "movement" are bogleheadish, frugile kids who want to handle their financial lives as responsibly as they can. Both my wife and I came from families that were utterly destroyed during the financial crisis (and still haven't recovered) and that has been what drove us to figure out a way to set ourselves up for as much success as possible. We have lived through a bear market, and it left it's scars. I work in the very volatile, stressful game industry, and can't wait to get out of the rat race and spend more time with my kids, wife, and hobbies, even though I enjoy my career. If we don't make it there by 35, then great, every step closer that we take is a step closer to my family having more financial independence than our own parents did.

I do not think we are close to Peak FIRE; On the contrary, I think that the FIRE community is the next generation of bogleheads, and will continue to grow and learn from the wisdom here, if not continually held at a distance and treated as some kind of a strange aberration, or a sign of the incoming great bubble crash of 2020.

jharkin
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Re: Are we at "Peak FI"?

Post by jharkin » Mon Jan 07, 2019 8:19 am

tim1999 wrote:
Sun Jan 06, 2019 7:44 pm
A couple of my observations:
-I've never heard FIRE mentioned outside of the internet. And rarely outside of Bogleheads or Reddit. I even work with a bunch of younger (non-tech) engineers, and while they tend to be fiscally conservative types, I get the sense that most of them aren't trying to live on rice and beans, sock all of their pay away in retirement funds, and spend as little as possible. They live a little. Take vacations, buy stuff, etc. but within reason. One guy who I thought was pretty thrifty/borderline cheap (refuses to go out for a $6 lunch, wears cheap clothes in poor condition, etc.) rolled up in a brand new Toyota Tacoma last Friday.
-Seems like the majority FIRE proponents/candidates I read about on the internet seem to be California tech types with monster salaries and stock grants. Take away these people and I think the amount of today's 20-30somethings who have a chance at FIRE before age 40-45 is near nil unless they were born on third base and/or are committed to a lifestyle of basically spending no money whatsoever.
+1 Nor have I.

I have *one* older friend who retired in his late 40s because he never had kids, got very lucky with his 401k investments and pension and got an early retirement (layoff) buyout package at an opportune time. And he is "retired" in the MMM sense... he has a small side business and works odd jobs, keeping income low to qualify for maximum ACA subsidies, etc.

Everyone else I know basically plans to work until social security eligibility no matter how much or how little money they have. Many don't save and will work till they die at a desk, on the othe end a a couple people whom I suspect have big 2 comma balances in their early 50s.. if you asked them ... would tell you they are going work until 65 anyway either because "that's just what people do" or "I'd be bored if I don't work" (their words).

When I tell people I plan to retire before 60 they look at me like I'm a creature from another planet. Even my wife doesn't believe its possible in spite of me walking though the details with her. Mostly because its so rare she has never in her life seen somebody do it.


To answer the OP questions:

Have you leveraged yourself quite a bit over the last few years (be true to yourself on how you answer this)?
No. Since I bought a house in 09 we have been steadily de-leveraging. Total debt is less than 1/3 of assets now. And 90% of that debt is cheap 3.5% first home mortgage.
Do you get the feeling others (maybe outside of Bogleheads) have leveraged themselves
Judging by the glut of new construction luxury homes and the percentage of expensive european cars on the road I suspect so.
Has the recent downtick in the stockmarket got you in trouble to the point you have to short sell assets?
Assuming you actually meant sell at a loss - No. In fact my IPS forced me to rebalance a little, selling some bonds to buy stocks.

Feel free to share your experiences, opinions, war stories on this.

If this is the case, and people have become too optimistic, complacent, and overleveraged, can we expect a lot more blood in the water if things don't rebound?
I suspect a prolonged downturn in the market could really put the MMM/Madfientist/GoCurryCracker types to the test. Especially if it comes with a side order of ACA subsidy cuts.

KlangFool
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Re: Are we at "Peak FI"?

Post by KlangFool » Mon Jan 07, 2019 8:53 am

cogito wrote:
Mon Jan 07, 2019 12:58 am
I'd like to second Gibby's sentiments. I'm a millenial who has lurked here for about 5 years and learned very, very much, but I'm always a little amazed at the lack of empathy from the older crowd here. Most of the people in the FIRE "movement" are bogleheadish, frugile kids who want to handle their financial lives as responsibly as they can. Both my wife and I came from families that were utterly destroyed during the financial crisis (and still haven't recovered) and that has been what drove us to figure out a way to set ourselves up for as much success as possible. We have lived through a bear market, and it left it's scars. I work in the very volatile, stressful game industry, and can't wait to get out of the rat race and spend more time with my kids, wife, and hobbies, even though I enjoy my career. If we don't make it there by 35, then great, every step closer that we take is a step closer to my family having more financial independence than our own parents did.

I do not think we are close to Peak FIRE; On the contrary, I think that the FIRE community is the next generation of bogleheads, and will continue to grow and learn from the wisdom here, if not continually held at a distance and treated as some kind of a strange aberration, or a sign of the incoming great bubble crash of 2020.
cogito,

You are not the only one. I have been pushing folks to consider FI instead of retirement.

1) I am 50+.

2) I was in college during Houston Oil Bust. I graduated into Texas Saving & Loan Crisis. I was in Asia during the Asian Currency Crisis. I was in Telecom during Telecom Bust. Then, my employer laid off 50% of its employees at my location on 1/1/2009. In summary, I have no job security for my 20+ years whole working lives.

3) I save 1 year of expense every year whenever I am employed.

4) I am pushing folks to reconsider that they will be continuously fully-employed until retirement age. Many of my peers are permanently unemployed or under-employed in their 40s and 50s.

KlangFool

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randomizer
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Re: Are we at "Peak FI"?

Post by randomizer » Mon Jan 07, 2019 8:54 am

I am not FI yet but I try to be frugal. Biggest expense is my mortgage.
87.5:12.5, EM tilt — HODL the course!

sabtastic
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Re: Are we at "Peak FI"?

Post by sabtastic » Mon Jan 07, 2019 9:17 am

One of the things that bothers me about the FI movement is the fact that a lot of these individuals are actually still working. Many rely on passive income or rental income, etc. but advertise that they "no longer work". While not needing a day job is no doubt an impressive feat, managing rental units, running a blog site or travelling around giving lectures is not my idea of "retired". Additionally, many of these individuals are chasing returns with things like lending club, etc. Why take the risk if you are FI?

As for the debt, that is very personal. We try our best to not have any debt at all, but that is not always a good thing. In 2010 DW and I were too spooked to buy a house or take on a mortgage as everyone around us was losing their heads and their shirts. We invested the down payment in the market and continued to rent a small condo. We now have two children in this tiny condo and in the area of CA we live the home prices have increased far beyond the broad market over the same period of time.

remomnyc
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Re: Are we at "Peak FI"?

Post by remomnyc » Mon Jan 07, 2019 9:22 am

Those who are FI typically LBYM, whether they have $1M or $10M in assets, so if one is FI, one is not overleveraged, because that would be the antithesis of being FI.

livesoft
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Re: Are we at "Peak FI"?

Post by livesoft » Mon Jan 07, 2019 9:31 am

In the old days, there was Stealth Wealth. And a quick internet search shows that it is still a big social media craze nowadays. Get it? :)
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Dottie57
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Re: Are we at "Peak FI"?

Post by Dottie57 » Mon Jan 07, 2019 9:32 am

Watty wrote:
Mon Jan 07, 2019 12:57 am
BeanCity wrote:
Sun Jan 06, 2019 3:30 pm
It seems like not a week goes by without me hearing of someone talking about being "financially Independent"/FI/FIRE. Most of the people saying the did achieve this or want to achieve this are by and large through a) investing in real estate b) investing in the stock market....
Some of the increase in "RE", retire early, talk is that early retirement is more of an option when there are private healthcare options available even if they are sometimes costly.

In the past I knew relatively highly paid people that got jobs like being school bus drivers or working in retail sales after they got laid off in their 50s or early 60s. This was mainly just to get health insurance because they could not qualify for any private health insurance so retirement was not an option.

I retired just before I turned 59 and I know that I would have worked a few more years if the ACA had not looked stable when I retired. If I had to make the decision today I would probably want to work "one more year" to see how what the healthcare situation looks like in another year.
Agree on the healthcare situation.

LiterallyIronic
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Re: Are we at "Peak FI"?

Post by LiterallyIronic » Mon Jan 07, 2019 11:10 am

Old_Dollar wrote:
Sun Jan 06, 2019 3:44 pm
As far as FIRE is concerned, yes the bull run made it possible. The lifestyle of frugality and high to extremely saving (20% to over 50% of gross income) is likely here to stay. I graduated University in 2008, the worst possible time for a new graduate and was underemployed for many years despite the mythical STEM degree. I adopted a high savings rate in order to catch up. I'm still not caught up, but once I am there is no chance I am letting the foot off that pedal.
This is me. Except the degree I got in 2008 (after taking seven years to graduate) was not STEM. So I got to work in a call center after graduation, making $9.50/hour. Now I'm 35 with $64k in retirement. According to Fidelity, "on track" would be to have 2x my income saved by age 35. I'm not even at 1x. Pedal to the metal to try to catch up. Maybe I can reach 3x by 40 and be "caught up" per that chart, but I seriously doubt it.

barnaclebob
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Re: Are we at "Peak FI"?

Post by barnaclebob » Mon Jan 07, 2019 11:17 am

tim1999 wrote:
Sun Jan 06, 2019 7:44 pm
A couple of my observations:
-Seems like the majority FIRE proponents/candidates I read about on the internet seem to be California tech types with monster salaries and stock grants. Take away these people and I think the amount of today's 20-30somethings who have a chance at FIRE before age 40-45 is near nil unless they were born on third base and/or are committed to a lifestyle of basically spending no money whatsoever.
Yep, its relatively easy to FIRE when you started working at a FANG company about a decade ago.

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