Periodic reviews will be necessary to stay on track and change spending if necessary, but it will be pretty easy to monitor everything online with Personal Capital. In July I’ll have a look at how the first half of the year went. In December I’ll review the whole year, and get ready for the Roth Conversion. I’ll review any changes that may effect me prior to the end of year, and adjust as necessary.
Mid Year Review
Here I’ll look at how much I’ve spent so far. With a $40,000/year spend rate, anything less than or equal to $20,000 will be an indication to stay the course.
End of Year Review
Expense check in time. Did I spend around $3,333 per month? How did it feel? How can I adjust my
budget spending plan?
I’ll be tracking my IRA basis with IRS form 8606.
Lastly, the annual Roth conversion will happen soon, so I’ll calculate how much I can convert.
Have any things critical to RE changed? For example: changes to IRA-to-ROTH conversion event allowance, updates to income brackets, health care rules, changes to dividend distributions or taxation, etc.
I will also re-run the Vanguard and cFIREsim simulations to see where I stand.
Backup Plans and Side Hustle Income
Years 1-5 are gonna be interesting. I’ll have to be flexible and possibly find some side hustles in order to not sell depreciated shares if things go south. But hey, that would be much better than my previous full time gig.
Years 6-10 will have Roth conversion dollars to use up, plus any dividends & interest.
A likely scenario:
Scenario 1: FIRE is going great and my brokerage account is steadily growing from the initial value of $1,300,000. I’m living off of $40,000, or 3% of the portfolio value. Mr. Market decides to capsize and sink 25%. $1,300,000 is now $950,000. Since I was able to pad the stash for a 3% WR, the market’s 25% drop only increases my annual spend rate by 1%. I’m now withdrawing the amount considered generally safe for a 30 year time period. Once the market recovers, I’ll be back to 3%.
In all actuality, I’d probably find some part time work because I’d be scared shitless!
Income patch #1. Spending cuts. Nonessential purchases will cease. Booze is on this list.
Income patch #2. Further spending cuts. Any additional recreation that I don’t already own. No going out to eat. This would put my spending down ~6k easily.
Income patch #3. Get a job. Not a career, definitely no deployments, but something to supplement the monthly income. $500-1000 a month will go a long way to patch the dividends.
Aborting FIRE and Plan B
Pulling the ripcord prematurely could result in a catastrophic failure, and nobody wants to have that! There needs to be NO GO criteria in place since the first 10 years of retirement is so critical.
NO GO / Plan B: If the market just totally capsizes it would be advantageous to buy cheap shares for awhile in exchange for relatively easy work. I’m eligible for re-hire, so this is an option. Not an ideal one, but a money-making one.
Major Takeaways and Final Thoughts
A high savings rate is what has allowed me to attain Financial Independence. I’ve managed a 73% lifetime savings rate as calculated from ssa.gov.
Spend rate is king. Be cognizant of spending and continue to work towards efficiency. The ability to adjust is absolutely necessary to my extremely early retirement.
Living below the line is normal. Be strong. Stay the course. Be grateful. Thankful. Pay it forward. And cheers to successfully capitalizing on an exceptional talent!
Credit to the construction and success of this SuperPlan goes to the Personal Finance blogosphere.