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Our FIRE Portfolios Are Down 20%, What Now?

How has the recent market downturn changed our plans? Jason + Eric candidly discuss their pre- and post-FI moods in this volatile time. Learn what they’re doing and thinking about right now as Jason nears the two-year post-FI mark and Eric contemplates pushing his 2024 FI date back.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Essential Background: Let’s start out with some definitions. Terms like correction, market crash, and bear market are thrown around casually at times and knowing their meaning is important. This Fortune article is a brief and effective summary.

Buying Stock in a Down Market is a part of show guest, Fritz Gilbert’s, post-FIRE strategy, which he discussed in a recent conversation with us. In this episode highlight, we discuss how he felt during the 2020 market decline and learn about his approach to continue buying in order to take advantage of low equity prices.

The Psychology of Money (Morgan Housel), is the book Eric discussed in this episode. Subtitled “Timeless lessons on wealth, greed, and happiness”, it recounts 19 short stories “exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics”.

Fixed Income has an essential role to play in any portfolio, particularly as you approach your retirement date. Did you miss our two-part series on Eric’s recent efforts to change their asset allocation from 100% stock? As he referenced in the current episode, that was an important part of increasing his confidence in this down market. Be sure to check out part one and part 2 of our conversation, as well as the behind the scenes conversation Eric and his wife Laura shared on this essential topic.

Tax Loss Harvesting is a concept we’ve discussed on the show before, but haven’t dug into deeply. This Investopedia article is a good summary. In brief, TLH is an approach by which investors can sell an asset at a loss, reducing the total amount of capital gains taxes due from the sale of profitable investments. You can then use the sale proceeds to purchase a similar asset or security, maintaining your asset allocation.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Teaching Our Teens About FI and Money (Parts 1 and 2)

Having children comes along with many necessary expenses, but also provides a key opportunity to provide them with a solid financial education. In part one of a two part series, we tackle a topic that’s been requested many times by viewers: all things relating to kids. Topics discussed in this episode include our own financial upbringing, early attempts to teach our kids about saving + investing, the value of teens having jobs, and talking with them about FIRE. Join us for the first episode of this two-part series.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Part 1

Part 2

Show Notes

Essential Background: If you haven’t watched our very first episode of Two Sides of FI which contains much of our own financial backstory, this is definitely material relevant to our discussion here.

UTMA custodial accounts may be useful investment vehicles for you to consider for your children, particularly when they don’t yet have earned income and are not eligible for a Roth IRA. These accounts are very flexible by design, and unlike with a 529 plan, the funds in a custodial account do not have to be used solely for higher-education expenses. 

529 Plans are tax-advantaged savings plans designed to encourage saving for future education costs. There are many different places that can host these accounts including but not limited to the same brokerages you may use for your own investments. Be sure to look into whether there are (tax or other) advantages in your state of residence before deciding where to invest.

Roth IRAs are well known by most viewers of our channel, but did you know there are compelling reasons to consider them for your kids? For minors, these will need to be custodial accounts just like a UTMA and most brokerages offer them.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Buying Bonds. Still Not Convinced I’m Doing the Right Thing! (Part 2)

I reallocated my investment portfolio, sold out of my 100% equity position and I’m not happy about it. Part two of a two-part series, you’ll learn why and how I’m making peace with it. Ensuring that your investment portfolio can fund your lifestyle for the duration of your lifespan is essential to success in FIRE. One of the most impactful elements of that is how your portfolio is constructed, or your asset allocation. In this episode, Eric discusses his desire to reduce the risk of his portfolio with Jason, and ensure he + Laura are set up for success. Topics discussed include the role of bonds + fixed income, the types of investment risk, seeking feedback from internet forums, and tax considerations. Join us for the second episode of this two-part series on Eric’s reallocation experience.

If you missed Part 1, which includes a link to a behind the scenes conversation with Eric + Laura, be sure to check it out first!

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Essential Background: If you haven’t watched our previous episodes on asset allocation (part 1 and part 2), this is highly relevant material to our discussion here.

Series I Savings Bonds (I Bonds): These assets are rightfully getting a lot of interest in the moment given their unusually high returns (for now). Get all the details via Treasury Direct. For more details, check out this recent Money Guy Show episode as well.

Investment Policy Statements (IPS) are key guiding documents for your investment portfolio. Don’t have one? Have a look at this Bogleheads wiki article for all the details that you’ll need to help put one in place.

How To Build A Retirement Paycheck:  This is the first of three great Retirement Manifesto posts on author Fritz Gilbert’s implementation of the Bucket Strategy, which we have touched on in several episodes to date. Here you’ll find guidance on how to determine the asset allocation you’ll want to have in place by the time you retire early. The other two articles in the series are linked here as well.

A Bond Tent strategy is one of the common approaches used by the FIRE community to mitigate both Retirement Date + Sequence of Returns Risks (RD and SRR in the images below). As is often the case, Michael Kitces has a great article on the topic. We couldn’t cover sufficient depth on this important topic in our episode, but this post has all the details you need. See the graphics below:

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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I Rebalanced My FI/RE Portfolio and I Hate It! (Part 1)

Eric reallocated his investment portfolio, sold out of his 100% equity position and he’s not happy about it. In this two-part episode, you’ll learn why and how he’s making peace with it. Ensuring that your investment portfolio can fund your lifestyle for the duration of your lifespan is essential to success in FIRE. One of the most impactful elements of that is how your portfolio is constructed, or your asset allocation. In part one, Eric discusses his desire to reduce the risk of his portfolio with Jason, and ensure he + Laura are set up for success. Topics discussed include the role of bonds + fixed income, the types of investment risk, seeking feedback from internet forums, and tax considerations.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Pick up where part 1 leaves off with a bonus, behind-the-scenes look at Eric and Laura’s decision-making process (video below).

Eric + Laura Discuss Their Reallocation

Show Notes

Essential Background: If you haven’t watched our previous episodes on asset allocation (part 1 and part 2), this is highly relevant material to our discussion here.

Vanguard’s Principles of Investing Success is a really great read. It’s chock-full of information, including the chart showing average returns by asset mix (pp. 10) that Eric referenced in this episode. Whether you’re just getting started with investing or are very experienced, we suspect you’ll find something of value in this easy read.

How To Build A Retirement Paycheck:  This is the first of three great Retirement Manifesto posts on author Fritz Gilbert’s implementation of the Bucket Strategy, which we have touched on several episodes to date. Here you’ll find guidance on how to determine the asset allocation you’ll want to have in place by the time you retire early. The other two articles in the series are linked here as well.

Financial Independence: How Long Will It Take? We showed visuals from this Go Curry Cracker post, which highlights the dramatic impact that your overall savings rate has on determining your FI timeline. This concept is also covered in the “Principles of Investing Success” article linked above.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Retirement Is Nothing Like I Thought It Would Be

We all daydream about what retirement will be like, but will reality live up to expectations? In this episode, Eric and Jason are joined by Fritz Gilbert, who blogs at The Retirement Manifesto. Now nearly four years after retiring early, Fritz brings valuable experience + perspectives to this question. Our discussion goes well beyond the numbers, covering topics including finding your purpose, working “one more year”, determining your FIRE timing, and the keys to success in retirement.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Retirement Is Nothing Like I Thought It Would Be – This is Fritz’ post that inspired us to make an episode of Two Sides of FI together. As you may have gathered from our earlier episodes, Jason completely agrees with Fritz that it’s impossible to really know what retirement is going to be like until you experience it. Now in his fourth year of early retirement, Fritz has a lot of experience to reflect upon and we’re grateful that he’s chosen to share it with us.

Keys to a Successful Retirement – As we discussed in this episode, Fritz recently wrote a book capturing lessons he learned on his retirement journey so far. His own description of the book is a really apt summary: “Covering topics like finances, embracing your passions, and dealing with feelings of aimlessness, grief, and depression that may crop up, this in-depth guide to retired living answers all the burning questions you want to ask—as well as those you’re afraid to. Take a complete look at your newfound freedom and explore what it really means to have a successful retirement.” We highly recommend it!

In this episode, we referenced a number of different blog posts Fritz wrote that we found useful, inspiring, and impactful. Please be sure to check them out:

Freedom for Fido is the charity that the Gilberts started, whose stated purpose is to:
“Free the dogs who live on chains in the North Georgia Mountains. We are a charity which provides free fencing and dog houses for low-income residents of the Blue Ridge area.” This project is clearly an important part of their lives and we’d recommend you check out the great and impactful work they’re doing together with their volunteer community.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Financial Independence, Retire Early…Go Back to Work?

Discussing the concerns, worries, and interests occupying our thoughts right now. A temporal look from their respective sides of FI, Eric and Jason discuss a new job prospect, while Eric is a little too focused on saving to achieve FI. They probe ideas about how “vacation time” is different post-RE, as well as their current favorite podcasts and books. 

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Eric’s “NOW” page @ 30X40 Design Workshop is where you’ll find links to some of the things that are inspiring Eric right now in his studio: tools, books, YouTube channels, podcasts and more. This includes links to the content he referenced in this episode.

Jason’s reading list – Here’s a list of all the books he’s read recently, is currently reading, or are up next. This is an example of a simple Notion page where you’ll find links out to learn more about these titles. Simply click on the triangles to the left of each section header to expand the respective lists.

Tenet was one of Jason’s favorite movies of 2021 and the link will take you to the film’s website. This movie can be a little challenging to wrap your brain around at times, so be forewarned. But once you get comfortable with “how the world works” in Tenet, it’s a really wild ride. It’s also visually stunning, so watch it on the largest screen you can. At the above linked you’ll find paths to digital copies and other purchase options. Depending on your region, you may also find it streaming on HBO or HBOMax, and potentially other services.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Comparing our FIRE Portfolios + Asset Allocations (Part 2)

Choosing how to divide your assets among stocks, bonds, and other investment vehicles is a good first step, but asset allocation also impacts your tax rate, portfolio performance, and long-term ease of maintaining it all. In part two, Eric and Jason dig further into their own portfolios from their respective sides of FI and discuss the role of bonds, risk, tools you can use to assess your portfolio and model performance, rebalancing, and an interesting – not often discussed – case for financial advisors.

Did you miss Part 1? Check it out here.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Portfolio Charts offers a wealth of different portfolio visualization tools and calculators for deeper analysis of your asset allocation, and other personal finance elements. As Eric mentioned in the episode, you’re not likely to find another resource with so many different visualizations available.

Morningstar is perhaps best known as a resource for analysis + ratings for mutual funds. However, the site also has a variety of tools for portfolio analysis and exploration. Some functionality is provided free of charge, while others come with a premium subscription. Importantly, the latter is offered as a 14-day free trial so you can readily use these tools to analyze your asset allocation and then cancel without risk prior to billing.

Big ERN’s SWR Spreadsheet (Early Retirement Now) is a comprehensive planning tool largely aimed at investigating safe withdrawal rate. In line with Big ERN’s standard approach, this is a resource aimed at those desiring detailed, quantitative analysis, and is a bit more “in the weeds”. But having the ability to input your asset allocation along and projected rates of return, is vital to do truly informed modeling. Other tools may be easier starting points, but this one has lots of power when you’re ready to dig deeper.

M1 Pies (M1 Finance) are one of the visualizations Eric discussed to reference the investment approaches of others in the personal finance community, like JL Collins and Paula Pant, which we talked about in Part 1. These are M1 Finance’s flagship portfolio tool, allowing you to see the asset allocations of others and potentially invest in the same approaches.

cFIREsim – This popular tool is the “Crowdsourced Financial Independence and Retire Early Simulator”. cFIREsim is among our favorite sites for performing Monte Carlo analysis of a given FIRE strategy. While you can get started with just a handful of simple parameters, this site is extremely flexible and will allow you to do more complex modeling if that is of interest.

Portfolio Visualizer is a site containing a variety of modeling tools, including the one linked here which allows one to backtest different portfolio asset allocations. While past results are not necessarily predictive of future returns, this approach does allow one to understand the merit + drawbacks of various asset allocations. One useful approach this enables is to compare the performance of your current portfolio vs. a variety of others of your construction.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Getting Your FIRE Asset Allocation Right. Here’s Ours (Part 1)

What is the best way to divide up your investments among stocks, bonds, and other vehicles? Asset allocation is an essential yet confusing topic. That said, it is an area of critical importance when thinking about early retirement. This is because decisions made about asset allocation can have huge implications on portfolio performance, taxation, and ease of maintenance. Join us for this first episode in a two-part series, as Eric and Jason talk about their portfolios, the merits of simple vs. more complex strategies, the role of bonds, and the risks they considered along the way.

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Show Notes

Our asset allocations:

I do have a very small crypto stake but it’s well below 1% – Jason

The Bogleheads Wiki is an excellent place to begin one’s research on the potentially complicated topic of asset allocation. Named after and inspired by Vanguard founder, Jack Bogle, the Boglehead philosophy is focused on a “small number of simple investment principles that have been shown over time to produce risk-adjusted returns far greater than those achieved by the average investor”. Most commonly these employ so-called “lazy portfolios” of only a few diverse funds that are low cost, easily managed, and capture the performance of the entire market. The site also has an excellent discussion forum.

An Investment Policy Statement (IPS) is an important starting point for any portfolio. The IPS is a document that – according to the Bogleheads wiki: “defines general investment goals and objectives. It describes the strategies that will be used to meet these objectives and contains specific information on subjects such as asset allocation, risk tolerance, and liquidity requirements.” See the link for more information and a template you can use for your own portfolio.

M1 Pies (M1 Finance) are one of the visualizations Eric discussed to reference the investment approaches of others in the personal finance community, like JL Collins and Paula Pant. These are M1 Finance’s flagship portfolio tool, allowing you to see the asset allocations of others and potentially invest in the same approaches.

Portfolio Visualizer is a site containing a variety of modeling tools, including the one linked here which allows one to backtest different portfolio asset allocations. While past results are not necessarily predictive of future returns, this approach does allow one to understand the merit + drawbacks of various asset allocations. One useful approach this enables is to compare the performance of your current portfolio vs. a variety of others of your construction.

“Our Retirement Investment Drawdown Strategy” (Retirement Manifesto) is a great article describing how Fritz employs the bucket strategy to build a retirement paycheck and manage his investment portfolio post-FIRE. This is just one element of our last episode – be sure to watch for helpful background – but is a great example of how one’s asset allocation very much informs how assets are drawn down in the de-cumulation phase of FIRE.

Preferred Stocks (Early Retirement Now) and associated funds, are one of the “hybrid” investment vehicles one could consider in a portfolio. In the linked article, Big ERN talks about how he invests in an ETF made up of preferred stock elements, which have features of both stocks and bonds.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Have Enough to Retire (Early)? 10 Steps to Make Sure

Will you have enough to money to retire (early or otherwise)? Achieving financial independence requires many key elements to be in place and special consideration if you plan to retire early. You need a plan: what will you do? What will you spend? Where will it come from?

In this episode, Eric and Jason discuss a recent blog post by Fritz @ The Retirement Manifesto where he discusses the “10 Steps to Make Sure You Have Enough Money to Retire”. We cover how we’ve been designing our “dream retirement”, how we track current expenses and project future spend, how Jason is drawing down assets and Eric’s evolving plan to use “the bucket strategy”, and much more.

Show Notes

10 Steps to Make Sure You Have Enough Money to Retire – This is The Retirement Manifesto blog post that inspired our episode. Be sure to visit Fritz’ website for this article, as well as all the associated tools we mentioned in the show. We also highly recommend his three-part series on The Bucket Strategy, which we referred to in the episode.

Social Security is an important aspect to consider in most US retirement income plans. This link will take you to calculators that you can use to estimate your retirement benefits. SSA Tools is another useful site, one in which where you can copy/paste your SSA.gov data and use “…clear interactive visuals that let the user investigate how different choices might affect their overall benefit.” It’s a really good tool for modeling different scenarios. Lastly, Open Social Security runs the math for each possible claiming age and reports which strategy is expected to provide the most total spendable dollars over your lifetime.

New Retirement.com – More and more people on Reddit seem to be discussing this comprehensive retirement planning suite. They have a very full-featured free offering as well as a modestly priced paid version with a host of really nice features, plus consulting services. There’s a very active Facebook community as well.

Financial Order of Operations (Money Guy Show) – is a really great resource that “outlines the 9 steps anyone can take to build wealth and reach financial abundance.” We recommend downloading a copy and having a look at the associated episodes on their YouTube channel too. This is an essential tool to ensure your personal financial habits are supporting your FIRE goals.

You Need a Budget (YNAB) – By our observation, there is no budgeting tool more widely discussed, nor with a user base so passionate than YNAB. If manual spreadsheets aren’t your thing, or you’ve struggled with budgeting, look no further. YNAB has a free 34-day trial and the subsequent annual fee readily pays for itself. (affiliate link – a free month for each of us if you sign up!)

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

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Healthcare is my Second Highest Cost in Early Retirement

Health insurance may not be top of mind in early retirement when you’re young and healthy, but it should be. In the US, healthcare costs are a significant line item in our budget. To help us decode what you need to know, we’ve invited a retirement benefits expert to answer our questions through the lens of those seeking financial independence and early retirement.

To protect against astronomical expenses resulting from unexpected medical issues it’s prudent to carry insurance and if you’re retiring before 65 (when Medicare kicks in) you’ll be responsible for covering those costs. What do you need to consider? What ARE the costs involved? What insurance shouldn’t you purchase? Are there other options for coverage? What about long term care insurance? These are just a few of the topics we cover in this hour-long episode.

Our sincere thanks to Amy Manning for sharing her time, knowledge and expertise with us!

Show Notes

In this episode we mentioned a number of useful resources primarily for US residents seeking healthcare that we’d like to share with you. Note that many apply whether you are on a FIRE path or traditional retirement age.

COBRA is an important bridge strategy for health insurance for many people in the US, just as it was for Jason. The linked page is a great starting point and points to a variety of other sources that you will find helpful. Please note that some states have additional information available, and may even have further extension coverage offered beyond the federal requirements. As one tip – the best time to research COBRA is before leaving your employer. Your HR benefits partner or healthcare plan administrator is an ideal starting point to gather more information about your company’s plan and coverage options.

Healthcare.gov is the best starting point when it comes to information about Affordable care Act (ACA or “Obamacare”) plans. In many cases, you will be directed to a state-run plan with its own website, but this is not always the case. Presently, a number of states have federally-run, state-federal partnership, or federally-supported plans. Where there isn’t a state exchange, you’ll see options and apply for coverage directly from healthcare.gov.

ACA plan subsidies are a topic worth a deeper dive than our time allowed in this episode. Many on a FIRE path plan on having incomes well within the limits where cost-reducing subsidies apply. Typically, as long as your household income is below 400% of the Federal Poverty Limit (FPL), these apply. When you investigate ACA coverage options, information will be provided on your eligibility for these based on the income information you supply. Importantly, in 2021 and 2022, provisions of the American Rescue Plan (ARP) legislation made further improvements to eligibility, eliminating so-called “subsidy cliffs”.

Healthcare Sharing Ministries (HSMs) are an option of interest to many. However, neither of us are experts on the topic. We’ve looked into HSMs and decided they weren’t for us, as they’re not bound by the same requirements as true insurance plans. That said, this page seems to be a reasonable starting point for high level information on a number of options available. If you have interest in these plans, be sure to dig deeper. Many user stories are available online via Reddit and other sources. For information on the potential downsides of HSMs, we found this recent John Oliver segment very eye-opening. Caveat emptor, friends.

GoodRx and RxSaver are convenient tools to find out where you can get your prescriptions filled for the lowest cost via coupon discounts. A related tip for diagnostic testing + labwork is that for many insurance companies, it’s easy to use their website to confirm your options for in-network testing. Don’t be surprised by higher bills that come from using labs that are out-of-network! A few minutes of work is well worth it to ensure you’re getting the lowest cost options available to you.

Medicare.gov should be your starting point for researching healthcare coverage options for US retirees once they reach 65 years of age. It’s never too early to understand what this will look like for you even though it may seem far in the future. If you’re new to the topic, easy to digest summary information is available on this page. As you develop your retirement budget, this site will be a useful source of information to estimate those future costs.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.