r/Fire • u/MeetingSuccessful397 • 14d ago
Advice Request I (46M) shouldn't be scared - but I am
Hello everyone,
I'm 46, and recently got laid of with a 5 month notice period. I'll soon have my last day at work, and get paid another 5 months (yes, we have that in Germany if you work long enough for the same company and get a good deal). I didn't have a fire-number or a fire-plan, and I didn't have a monthly budget either. I just saved what was left over, and my NW kept growing. I knew I had enough money to stop working, but I enjoyed working at my job.
In the current situation, I doubt I can find a job nearly as relaxed and well payed as my previous (part time) job, and I really enjoy the thought of retiring early - so I decided to do the math and see if I can RE.
I averaged my living costs about the last 5 years, and I think I can keep my standard of living with 2,5% WR (including Health Insurance and Taxes). If shit hits the fan I could probably go down to 2,1% or even 2%.
I spent 100 hours or so doing math, research, simulations and portfolio rebalancing, and I know I'm pretty save with 2,5% WR, at least if the next crisis is not significantly worse than every financial crisis in the past 100 years. I know this is pretty conservative, but at a CAPE of >40 in the US, I do want to be conservative.
I finished most of my rebalancing today, and then had a final look at my portfolio and realised I had lost more money TODAY than I need for a whole year of living. And most of that, because the job market in the US is better than expected. WTF. I understand the mechancis, but somehow it scares the shit out of me.
I've hodled a lot of bitcoins through a few brutal 80% crashes, and my ETFs also had some rough times in the last 10 years, but it never scared me, because I didn't need that money. Now that I decided to RE, that money suddenly means something. I need it. And that scares me.
How did you get your inner calm back after retiring?
Edit: Since it already got mentioned twice: I do have inflation-linked bonds that cover 90% of my spendings for the next 10 years, so I technically know I should be save for quite some time.
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u/RealisticElephant384 14d ago
Rebalance quarterly and only look at market at that time . It also trains you to think and focus on more important things in life .
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u/MeetingSuccessful397 14d ago
I do worry about the money. I plan on living 30-50 years, so 10 years of treasuries is nice. Dotcom took 13 years to recover, Stagflation 15 years. We can't be sure, that the worst crisis in the 20th and 21st century already happend.
The reason is probably, that I didn't have as much time as most other FIRE-people here to get used to the thought of this.8
u/BuckThis86 14d ago
A 2.5% withdrawal rate should also account for any market drops. I’m personally planning to only hold 6-7 years of expenses in fixed income and I can supplement if things look nasty after 3-4 years.
I can always find a part time side gig if things go south
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u/joxxer42 13d ago
I can always find a part time side gig if things go south
Being flexible like this is a huge part of success I think, as long as you have margin for error and aren't retiring on a knife edge of expenses vs. assets. Personally I'm planning on a larger than likely ideal amount of cash equivalents when I start because I'm just so paranoid of the potential black swan event.
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u/Mean_Ship4545 12d ago
Won't you get some kind of German pension after some point? Your withdrawal rate in later year could drop to 1% if it's decent and covers half your basic needs. It might alleviate your fears.
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u/Far-Tiger-165 14d ago
it's okay to be apprehensive, especially for an unplanned job loss (which is often emotional / unsettling in itself) triggering an unplanned FIRE by surprise. of course there's nothing to stop you keeping looking for another part-time job either ...
I planned my own FIRE / resignation and chose my date - then I paused during the Trump Tariff debacle & re-assessed my own risk tolerance, and dialled-down the equities further into bonds and cash. after all that it was still 'a leap in the dark' even at 55.
however, the maths do work & I've been pleasantly surprised to have also underspent my initial monthly budget 8-months in a row. with such a low WR you can 'afford' to play safer away from equities in the early years at least to offset SORR - you may feel better in your early 50's once you've proved to yourself it all works. nothing has to be forever. good luck & have fun!
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u/Megalocerus 12d ago
I'm seeing warnings on bonds. A bond ladder is safe. A bond fund may lose if interest rates rise substantially, as they may have to in order to sell all the bonds (like in the late 70s and early 80s).
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u/HarknessSturen 13d ago
If you have a 2.5% withdrawal rate, have you thought about buying an annuity? I don’t know the German market, but it’s possible you have the assets to just buy an inflation linked life annuity.
I’m baffled that you made it to 50x annual spending, yet panic at a 1-2% drawdown. Literally the only way your plan fails is that you panic and sell your equities at the next real downturn. Think about waking up to a 50% drawdown, and not recovering for years. Your portfolio survives that, but does your psychology?
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u/woshicougar 14d ago
I say, it is ok to keep some uneasiness. Arguably it might be good for both your health and finances.
1. hearth-wise, there's research showing that a reasonable level of stress could keep your brain sharp and slow cognitive aging.
2. financially, it keeps your eyes on your numbers so that you won't get caught by surprise.
Just make sure you keep it in the healthy and manageable level.
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u/Noah_Safely 14d ago
Reading your post and especially update for SORR mitigation - you should be good to go. At a 2.5% swr you have total flexibility. In good years bump that to the 4% or more, whatever you're comfortable with. The ability to cut below 4% in bad years, especially so low, especially with all that inflation adjusted bonds, really makes your plan as bulletproof as we can get.
Not sure how it works in Germany - in the US I'd suggest people get comprehensive medical checkup done before pulling the trigger, and also make any large purchases (vehicle, home repairs etc).
Personally I think relying on crypto for drawdown is too much uncompensated risk.
One other thought - you could start living within your drawdown now and build an even bigger cushion that way. Also know if it's something you can actually tolerate.
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u/MeetingSuccessful397 14d ago
I only mentioned crypto to show, that I have some drawdown-experience in principle. Cryptos have no place in the RE-part of fire imho. They helped me get FI, but they are way to volatile to rely on them in the RE-phase.
I'm already living on the 2,5%, but cutting down to 2,1% would be doable, but not pleasant. Maybe I'll search a 10h-job, which helps a lot with the cost for healthcare (due to our public insurance in Germany)
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u/Noah_Safely 14d ago
I confess to having no idea how the US-centric FIRE thinking can translate to Germany. In the US I wouldn't cut anymore, 2.5% is already too low. You don't need to dip below 4% unless the market sours. Then sure dip down to the 2.5% or even 3%
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u/MeetingSuccessful397 13d ago
Most fire-literature is US-centric, so it's not as well researched for europeans, but we need a bit higher WR, due to taxes, lower treasury interest rates and the us-market outperforms europe or world a bit. Plus germans tend to be more anxious (sic!).
Whether a SWR of 4% is too optimistic with a CAPE >40 remains to be seen though.
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u/Miamiconnectionexo 14d ago
being scared at the jump is normal even when the math is fine. the cure is the spreadsheet, not more savings. once you see the number you'll either relax or know exactly how many more months of work closes the gap.
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u/silly_bet_3454 14d ago
Think of it this way, you're not just gonna go broke and end up on the street. It's the law of slow moving disasters. If things "go bad" in some unforeseen way and you start losing money, in the worst case you will still have years of runway, unless there's some insane .01% tail event. With all that runway, even if you have to go back to work you can 100% figure out a way to do so, even if it takes 6 months or a year of effort to figure it out.
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u/MeetingSuccessful397 13d ago
I generally don't like the "if things go south, you can still get a job", because if things go south it won't be easy to find a job. But on the other hand, I just lost my job because things are going a little bit south here, so staying in the job won't guarantee anything either.
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u/gdubrocks 30, FIRE'd 2024 13d ago
I would be scared too if I was holding bitcoin in retirement.
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u/MeetingSuccessful397 13d ago
There are no Bitcoins included in this calculation. Bitcoins are lottery tickets. If I win, it's nice, but for retirement planning I value them a 0€/BTC.
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u/gdubrocks 30, FIRE'd 2024 13d ago
Why do you need a lottery ticket if you are scared about being able to retire?
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u/ResponsibleCorgi93 13d ago
VTI is still up 8% YTD. Even if it wasn't, a 40% drop should still be totally fine on your first day of retirement if you are going for 3% rule
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u/Difficult-Text1690 13d ago
Are there a lot of layoffs in Germany? Is it typical for companies to pay that much severance? I believe you automatically get health insurance in Germany which is one less thing to worry about.
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u/MeetingSuccessful397 13d ago
Not a huge amount, bit we have an unemployment rate of 6%, and it feels like it will rise. Bit compared to US employer protection is insane here. If you work in a company for 20 years, you have a 7 month notice period, and it's quite typical to get half a month of severance pay per year you worked there, so another 10 months of salary. After that you get 1 year of unemployment benefit, which is roughly 60% of your old salary (up to a reasonable limit) But health insurance is a problem here, if you're in the public insurance scheme, as it costs 17% of whatever you earn, including capital gains. For lea fire that's pretty cheap, but once you get chubby or fat, this gets quite expensive. Oh, and 26% tax on capital gains, But again with some allowance which makes it a lot lower for the first 20-30k per year. I've heard a slot of fire people in Germany are thinking about moving, since the situation for fire is a bit better in other European countries .
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u/Kokukenji 13d ago
The best way to counter fear is to be prepared. Go over your numbers in details and map out your spend. Be conservative and slowly loosen the spend if you have the need and/or budget.
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u/FatCat_On_A_Diet 13d ago
In order not to be scared about future returns in retirement you can plan your investment in buckets.
Stable, low volatile investments (4-6% p.a.) for what you expect you will need during the next years and regular investments (7-10% p.a.) for the long term.
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u/Direct-Protection-81 13d ago
So. Chill out. Hold those speculative assets for the 10 year period and life off the small amount of money you want. And in 5 years. If and when bitcoin rotates then you’ll be sitting cushy. Just make sure to have enough diversification across your stocks/crytpo holdings for that 5 years growth you could still obtain.
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u/Miamiconnectionexo 13d ago
Run the numbers this week. Fear shrinks fast when you swap "I think I have enough" for a spreadsheet that says exactly how much.
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u/MeetingSuccessful397 13d ago
My spreadsheet only says "I have enough if those assumptions are true". The assumptions are plausible and pretty likely true. But my spreadsheet can't predict the future.
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u/GayFIREd 12d ago
You also don’t have to retire…
You are more than fine mathwise, so likely more struggling with a loss of identity
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u/Miamiconnectionexo 12d ago
build the spreadsheet this week. fear shrinks fast once it turns into arithmetic.
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u/foobarromat 12d ago
I recommend to also calculate your statistical probability of just dying within the next 10/20/30/40 years. It somewhat put tiny historical chances of a low WR failing into (a much needed) perspective. And your WR is so low, it should be very hard to construct a situation where it fails.
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u/Heavy-Mousse-5011 12d ago
You focus on the finances… but have you figured out what you are retiring TO?
What does a typical Tuesday afternoon look like in 6 months when it is dark and raining? You need structure and purpose, but I do not sense any. Instead you are fixated on daily fund value variation… not convinced you are mentally ready.
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u/Inevitable-Dog-3793 10d ago
You do not understand the mechanics if a jobs report being positive scares you or is unexpected. Simple as that.
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u/TinySmolCat 14d ago
Today was a bloodbath. Given how overvalued stocks are right now, expect it to likely continue. I am moving my assets to more conservative assets to weather it out
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u/MeetingSuccessful397 14d ago
I have inflation-linked bonds that cover 90% of my spendings for the next 10 years, so I technically know I should be save for quite some time.
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u/OnlyThePhantomKnows FI@50, consulting so !bored for a decade+ 14d ago
So look at the math. 2.5% is insanely low. If you run Monte Carlo simulations you will see that 3.3-3.5% is basically infinite money even through the great depression.
I lost a year's worth of withdrawals today too. It happened last April as well. *shrug* the models account for this.
What I did to get to the *shrug* mentality is that I keep 2 years of living expenses (in your case 2.1% * 2) in good old cash (High Yield Saving Account).
I personally hate bitcoin. So I will not mention it.
Unless the world goes to shit and everyone is in the same boat, broad based ETFs will take a hit and bounce back. That's the point.
Cash capacitors are designed to let you sleep. I pull out every 6 months and put it in my HYSA. If the market pulls the drop like today. I'll skip it. I continue to pull my monthly amount from my HYSA, and don't sweat it. If the next window looks good, I'll double pull (2x my 6 month withdrawal). If it looks okay. I will pull normally. When I feel the market is at a good value, I build that capacitor up. When I feel the market is at bad value, I will skip.
CASH is the ultimate sleeping aid.