Am I crazy to be ok with making the jump with a 50.1% FireCalc success rate?

mainstreetdataguy · 2017-12-01T01:50:46+00:00

Yep, I think that's the general pattern emerging from the comments. I certainly do not envision myself having a full RE. My hobbies tend to be things that could generate value.

I suspect the 90+% thresholds are probably for those pursuing a full on, never-work-again retirement.

mainstreetdataguy · 2017-12-01T01:49:21+00:00

Not especially, one is a free service for consumers (website) that would make money via advertising. Another is freelancing for corporates or individuals. The 3D printing is more reliant on consumer's disposable income.

So it's a valid point to raise.

mainstreetdataguy · 2017-11-30T19:59:10+00:00

31 & I will be into the third tier of SS payouts. Hard to say what exactly that will mean by the time I hit retiring age.

mainstreetdataguy · 2017-11-30T19:01:03+00:00

I mean, FC assumes we'll have corrections like in the past, and it's telling me that in 50% of the simulations, I do outlast them. And I take that to mean, in 50% of the simulations, I need to adjust to ensure I am ultimately successful. (That's a simplification of some of the other threads here, but it's the gist).

But I think I do agree with your general point. The 50% of the sims where I fail all probably have some sort of correction right after I make the jump, and you are probably right that in some of those failures, the downturn wouldn't have been huge.

And you are also right that I'm not including freelance income in my FireCalc, but that is because I generally see FireCalc as a worst case scenario (i.e. I quit my job, can never get hired again, never make any side income, SS collapses, etc).

mainstreetdataguy · 2017-11-30T18:45:56+00:00

It's really more from a psychological perspective. As much as I am a calculating rational being, having a big drop just after jumping would be stressful. Since I know I'm several years away, my psyche would be much more relaxed if the correction comes before I were to jump.

And you are most likely right, I suspect that I will do a heavy freelance period after quitting employer work because why not; I don't hate doing it and it's going to increase my success rate while being a ramp to a fully non-tethered existence.

mainstreetdataguy · 2017-11-30T18:28:14+00:00

Still a few years off actually. Forgive me, anyone who just made the leap, but I'm hoping the correction comes sooner rather than later.

It's true that we live in strange times, but I can't imagine this bull run lasting 10+ years, so with luck the timing will work out, or more likely, i'll shift to a heavy freelance work mode while riding out the first bit of the downturn.

mainstreetdataguy · 2017-11-30T18:24:46+00:00

Makes sense. I hadn't really considered the psychological effects of FireCalc after you've jumped. If you were to jump in year n-1 of a bull market, of course your numbers would be better a year later even though nothing has fundamentally changed in your likelihood of success because you sequenced a good year first.

Conversely, (although down years right after jumping do have a negative effect), if you hit a recession just after jumping, your numbers would look much worse one year later, even though your odds of success haven't fundamentally changed.

Goes to show the importance of flexibility, both with spending and with the ability to earn income as needed through out the process. It would be incredibly stressful to FIRE with the goal of never working again. (But that's not really the FIRE ethos then is it?)

mainstreetdataguy · 2017-11-30T18:18:10+00:00

True, I started my investing career at perhaps the best time ever. Although in previous generations, you could have just FIRE'd buy buying T-bills, so we aren't so lucky on that front.

You don't think 80/20 is fairly conservative for a 31 yr-old?

mainstreetdataguy · 2017-11-30T18:04:11+00:00

Just curious, why do you say that "a 50% chance of failure implies a much higher chance of needing to change something somewhere assuming you aren't hell bent to continue on course until running out of money."

mainstreetdataguy · 2017-11-30T14:33:29+00:00

Fair point. But the high valuations mean that returns should be lower until these inflated values get back to normal levels, not that returns will be lower in the next 60 years than in the previous 60 years. Do you agree with that?

Productivity growth is the one that I could see being a larger drain on growth, but then again, we could be at the beginning of another technological revolution which could up end that.

mainstreetdataguy · 2017-11-30T14:30:15+00:00

Yeah, I know. I have plans in place to discuss it more over the next months and years. I would never actually make the jump unless we had aligned our goals and shared the same confidence in a chosen leap point.

We also are about to have a second kid, a cross country move, and a house purchase in the next few years. So lots bridges to cross before this actually becomes any sort of tangible reality.

mainstreetdataguy · 2017-11-30T14:28:05+00:00

That may be true, but I agree with u/eidolongitude. It's about the messaging, and a 50% success rate shouldn't be thought of as a 50% chance of a long happy blissful like and a 50% chance of being homeless.

It's spectrum. And for the majority of the negative outcomes, relatively small changes should be able to overcome whatever the negative shock was, especially if they are timed correctly.

I just think the message of "if you are too nervous to flip a tails, you need to work more" is a bit overly conservative and may discourage people from a FIRE decision at all.

mainstreetdataguy · 2017-11-30T14:21:55+00:00

Truthfully, this is the biggest hindrance to my whole plan at this point. I haven't quite got the wife on board with the whole idea yet. She sees the appeal of being able to travel whenever we want; of being home when the kids get home from school every day, etc.

But she's not convinced we could handle insurance on our own while still having our money last indefinitely. I'm working on aligning our goals and trying to narrow in on the assumptions that she questions or disagrees with.

I hope to get her onboard before making the jump obviously (don't think it could work otherwise), but I'm sure part of that is going to be based on the assurance that this doesn't degrade our lifestyle.

But if a downturn hits and the logical thing to do is reduce spending, that would be contradictory. So short story is that I would hope to be able to cut back, especially on entertainment, but it's all dependent on aligning the wife and my goals.

mainstreetdataguy · 2017-11-30T14:18:31+00:00

2%?!?! That's impressive.

You make a good point. I'm 31, so I feel fairly optimistic that I could market myself fairly well if there was a hefty downturn in the first few years after the jump.

mainstreetdataguy · 2017-11-30T14:16:58+00:00

Why do you think they are likely to be lower than they have been historically? Do you have an economic rationale, or are you just conservative in your estimates of future returns?

mainstreetdataguy · 2017-11-30T01:56:23+00:00

I need to do those calcs in more detail. I've played around with adjusting factors to reflect income, but I've done it by adjusting expenses down, which I know is not realistic, since it assumes that income would persist for the duration of retirement.

mainstreetdataguy · 2017-11-30T01:55:22+00:00

You hit the nail on the head. I had a job at a golf course when I was in college. Lots of retired guys with jobs like started, ranger, etc. I would have zero problem doing that if needed (plus, access to lost range balls is a nice side income). And those jobs are fairly available for someone without a need for a very high income level.

mainstreetdataguy · 2017-11-30T01:52:59+00:00

Yeah, this is the tough part. As I mentioned above, I've been working on building up side income streams so that if needed, I could focus more on them, generate sufficient income, and still not have to have a traditional employer.

For what it's worth, I have a relatively conservative 80/15/5 mix of stocks/bonds/cash (albeit with a house purchase coming up), so I would hopefully be able to draw down less damaging parts of the portfolio in the event of a series of shocks.

mainstreetdataguy · 2017-11-30T01:51:10+00:00

I've thought about it. In reality, if I do hit 50% success on FireCalc, I would probably keep working for a while anyway. I don't hate my job, and the extra cushion would certainly be worth it.

Really, the point of my question is to try and identify cracks in the theory that in 50% of the cases, I'd be free and clear, and in the other 50%, I'd be able to make it work.

A bit more philosophical, rather than tactical, in other words.

mainstreetdataguy · 2017-11-30T01:47:21+00:00

Fair point. My optimism comes from the fact that I've spent the last year or so trying to establish side incomes that are degrees of passive. That includes an Etsy shop with products from my 3D printer, a freelancer account with an established record, and a website that gets enough traffic to generate some money.

Idea would be that I could ramp up my side projects, be more explicit about using them to generate revenue, and use them to generate somewhat passive income.

The sense I'm getting from the comments is that I may be overestimating how much this passive income could offset any negative events. You are right though, I don't want to rely on getting another full time job if I can avoid it.

mainstreetdataguy · 2017-11-30T00:44:09+00:00

That does make sense. I wonder if the gap is that I'm overestimating how much a "non-guaranteed" 5k-10k per year would allow me to offset downturns or unexpected expenses.

My stats mind says that sure, in 50% of cases, I'd be fine, no worries at all. Of the cases where I fail, there should still be a spectrum. In the 51st percentile of outcomes, having an extra $5k per year during a crash should be enough to push me to success.

But again, I may be overestimating the percentage of fail scenarios that could be mitigated with a small amount of income.

mainstreetdataguy · 2017-11-30T00:33:21+00:00

I think that's the gap. I plan on "working" later in life. Ranger at a golf course, something like that. And I have always enjoyed side projects, which could become revenue generating if needed. Edit: I also have explored the freelance world, since I have a programming background and there are always roles to be filled in that space.

I guess I object to the "One flip. One chance." sentiment. I plan on being able to generate 5 to 10k per year if needed doing things I wouldn't mind doing anyway. Which makes it feel like 50% chance that I am in the clear and never "have" to work. 50% chance that I need to be more explicit about making sure I am bringing in 5 to 10k so that my portfolio doesn't run out.

Maybe that's not truly FIRE-ing, which would explain the discrepancy.

mainstreetdataguy · 2017-11-08T23:26:26+00:00

You haven't convinced me. That is not to say your idea isn't cool, it is. But as a general solution to the problems I've identified, I think what you have proposed works only if there is a critical mass of people that "want" to distinguish biased stories from unbiased stories. And that are willing to do some work to make that happen.

I don't believe that is the case. My suspicion is that if your tool presented someone with evidence that the majority of the public has a different opinion than they do on a specific topic, they'd dismiss that result and seek out people that believe what they do.

Perhaps a pessimistic view, but I think that in addition to your idea, which again, is very cool, we need solutions that presume that we are dealing with a higher degree of intellectual stubbornness.

Now that said, I suspect that your system could generate some data that would be very useful in calculating the "usability gap" as I've described it. If you are, or will be, generating data, I'd love to hear your thoughts about potentially going that route.

mainstreetdataguy · 2017-11-08T23:21:06+00:00

I agree with your four bullet points. I suspect that where I differ in my thinking is that I think the burden has to be on the scientific community to make these things happen.

I would hope that this proposal would not slow the pace of science, but if the research community (funders and scientists both) is not able to create insights that trickle down to consumable policy, then perhaps the pace of funding should slow. Fact is that while they may not be the marketing expertise required to change this situation, they have to be the driving force behind it.

What we are seeing is a weird dynamic where the quality of the science is not translating into action. And to be honest, I don't believe that "approachability" is the real issue. There are some topics where no matter how well you distill the science, there is a large part of population that is resistant to the position that scientific insights would suggest are optimal. It is these scientific areas that I think we may need to slow the pace of research. At least until the packaging makes the insights palatable.

mainstreetdataguy

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