Few questions for FIREd folks

[gunderson500]

@realmajor101 Thanks for your wishes. All the best.

 

[loulou1]

@realmajor101

At what age did you FIRE?

37

What is the life expectancy you planned for?

Did not consider this.

Your retirement fund was what multiple of the estimated average annual expense (in present value non-inflation-adjusted terms at the time) when you FIREd?

Not based on expense. But if my post tax annual take home salary was 10 lakhs then my goal was to retire when I have 5x (post tax) amount in cash. i.e. 50 Lakhs in this example.

How much did you provision for old age healthcare and assisted living support?

Have health insurance.

If you own a house, where does it fit in your plan for twilight years? Do you intend to avail reverse mortgage income from it, or sell it and move into a retirement home, or just live in it till your EOL and bequeath the property to legal heir(s)?

Plan to stay in my own property ... most probably.

What is the baseline post-tax real rate of return requirement from your retirement portfolio to sustain FIRE (those comfortable with negative rate should clarify their inflation benchmark in FD terms, e.g. X basis points above FD rate or Y times FD rate, etc.)? Accordingly, what is your target asset allocation?

Idea is to at least make my early take home work salary.

If you now work on hobbies or projects which don't involve serious monetary compensation, how do you deal with people asking what you do for a living without letting them have any hint or ideas about your net worth?

I tell people that I am self employed.

What are some avoidable mistakes (if any) you made in the pre-FIRE phase and things you wish had known before you FIREd?

Can't think of any.

Edit (bonus questions on public request):

What was your primary occupation / source of income before you retired?

I was a programmer with a MNC.

 

[underagedbear]

@loulou1 Is 5x post tax anywhere close to enough to retire on?

 

[loulou1]

@underagedbear I might has misunderstood the question. I have updated that statement as follows:

"Not based on expense. But if my post tax annual take home salary was 10 lakhs then my goal was to retire when I have 5x (post tax) amount in cash. i.e. 50 Lakhs in this example."

 

[underagedbear]

@loulou1 That was my question actually. What is the multiple of your annual expenses? Assuming you used to save 50%, it would imply the multiple is 10x, which still seems low. Only if you used to save 80%, the multiple would be 25x.

 

[loulou1]

@underagedbear To clarify, I am not "retired" retired. I am an active equity investor who loves investing and programming. So I do end up generating more that passive income. In my case if I would have waited to save 10x, I would have to work for another 10 years! "Ain't nobody got time for that" ;-)

 

[trevorodhiambo]

@loulou1 If I understand correctly, you have two goals:

1. Retire when you have 5x of your salary in cash
2. Earn enough from your investments that you can recover your salary each year

Assuming you already achieved 1,

You're looking at 20% returns + an additional 7% to adjust for inflation.

27% seems ambitious (especially for an entire portfolio that'd consist of debt funds, FDs etc.)!

 

[loulou1]

@trevorodhiambo Ans 1: Yes

Ans 2: Yes

Assuming you already achieved 1

Yes

You're looking at 20% returns + an additional 7% to adjust for inflation.

Let's see. Suppose my yearly post tax take home is 10lakhs. For that I need 50 Lakhs and 20% return.

After 1st year, accounting for inflation (or yearly salary hike - whichever way you want to see it) my new figure is 10.7 lakhs. Right?

Assuming my 50 lakhs is still 50 lakhs (I have spent all of the 10 lakhs that I made last year); I need to make returns of 21.4% on my 50 lakhs to generate 10.7 lakhs

Also, practically I will not be spending all of 10 lakhs that I earned in the 1st years. Assuming I save half of it. I will have 55 lakhs and hence I need to just generate 19.5% return that year.

Basically as my corpus grows, even after considering inflation/salary hikes, my required returns will keep falling allowing me to invest in less risky companies!

Please correct me if you think I am wrong!

 

[trevorodhiambo]

@loulou1 No, you're totally correct.

You don't need your corpus to grow by the inflation rate, just need your corpus to grow enough that the returns increase by the inflation rate, which is a lot lesser.

 

[loulou1]

@trevorodhiambo Btw, are you still doing F&O trades? Last time we met, you were in it .. hence asking ...

 

[trevorodhiambo]

@loulou1 Haha that was an unmitigated disaster.

If you remember, when we had the meetup, I was a MF-only investor. The F&O thing came in a bit later. I was under the impression that I could make short-term stock-level movements by looking at volumes and price action and stuff (and not understanding the company fundamentals).

I just found the price swings with leverage too scary, not that I was any good at it, and decided to focus on other things within a couple of months.

I read you're going to try out trading somewhere here - that seems very unlike the Warren Buffet-esque impression I had of you .

 

[loulou1]

@trevorodhiambo ha ha ha .. looks like I will have to change your tag now: https://screenshots.firefox.com/lBiyGWHPh984Ym1g/www.reddit.com

I read you're going to try out trading somewhere here - that seems very unlike the Warren Buffet-esque impression I had of you .

Yes, I am indeed in process of creating a system that will generate buy and sell calls based on few strategies that I have programmed. I am in process of testing them right now. Tests will continue for another 3-6 months before I put any money in it. If things work out I plan to automate it. But this will be a small part of my portfolio. Most of it will continue in the fundamental/"Warren Buffet-esque" way!

 

[trevorodhiambo]

@loulou1

looks like I will have to change your tag now

Nooooo. Quickly buys some options to salvage his reputation

If things work out I plan to automate it.

Cool! Where do you get the real-time feeds from? And actual order placing will be something like a Selenium based automation I'm guessing?

(Ohh, feel free to ignore if it ventures into the trade secret territory. I'm just curious )

 

[loulou1]

@trevorodhiambo Currently I don't need real time feeds. Just need the historical data which I have.

As far as automation is concerned brokers like Interactive Brokers provide Python (and other languages too) based APIs that will aid in placing trades.

Only the buy and sell strategies are a trade secret in this venture! Everything else can be shared!

 

[resjudicata]

@loulou1 Hapuchu sir you're writing life goals for me over there.

 

[realmajor101]

@loulou1

Not based on expense. But if my post tax annual take home salary was 10 lakhs then my goal was to retire when I have 5x (post tax) amount in cash. i.e. 50 Lakhs in this example.

Going by that example, if your annual take home salary was 10 lakhs then what were your annual expenses at that time?

Idea is to at least make my early take home work salary.

Man, that sounds like too much work / pressure for a stress-free retired life!

I tell people that I am self employed.

Well, with the ambitious target you are working with, it's not technically a lie!

Oh hey, I just recalled that you had this thing going where you gave your parents 12% tax-free interest on their savings. Is that still on? With equity LTCG tax kicking in from next year, will you pass it on to them or absorb it yourself? Also, does this tax influence your strategy or cash-flow in any way?

 

[loulou1]

@realmajor101

Going by that example, if your annual take home salary was 10 lakhs then what were your annual expenses at that time?

As I see it expenses don't matter in my calculation as my goal is to make (or at least try to make) as much money as my take home salary.

Man, that sounds like too much work / pressure for a stress-free retired life!

I love investing and programming FOR investing! And because I love what I do, it does not seem work to me. Plus my "work" can be done from any place which let's me travel and spend time with people I love. Over the years I have figured out a system that lets me invest in a relatively stress free way.

Is that still on?

Oh ya. It is still very much on. In fact my father's portfolio now pays for itself! i.e. I just few sell shares from his portfolio to pay him every month as a result LTCG will also be paid by him.

does this tax influence your strategy or cash-flow in any way?

I have to regularly sell shares to pay my bills. I used to sell shares that I had held for 1 year, now I will have to pay 10% so I will be taking a 10% hit. But there were lot of situations where I was holding some shares just for getting the LTCG benefit and in that process my total returns were getting reduced because of the fall in share price because of the wait. Now I think my txns falling inside STCG will increase as the diff between LT and ST is just 5%.

 

[resjudicata]

@loulou1 So LTCG is the whole reason you are going to trade now?

 

[loulou1]

@resjudicata No no. That is not the way I am thinking about it. But LTCG tax will reduce my tax guilt to five percent.

On an unrelated note, I am in process of creating a system that will generate short term buy and sell calls. That is something I am doing to take advantage of a flattish year, in case that is how it turns out.

 

[resjudicata]

@loulou1 I was thinking the same about doing algo trading using zerodha kite API. Only sad part is it is still expensive for me. Will this tool of yours be "open source" by any chance ?