r/leanfire • u/AutomaticSquirrel32 FIRE 8/2023 • 6d ago
FIRE year 3 update
I've been away from reddit for a while. And I thought I lost this account. I was using a different one but once I cleared cookies and signed back in, it was this account, and it is also somehow the anni month of when I quit. Since the stars aligned, I may as well give an update.
Previous update: https://www.reddit.com/r/leanfire/comments/1euncf8/fire_1_year_update/
To be honest, not too much have changed. This month is the start of my 4th FIRE year. I'm still enjoying my life, maybe a bit too much.
The big changes that really impacted my life are:
Health Insurance: We are back on ACA since last year because I couldn't prove income (they asked for ridiculous stuff and tax return + transactions showing monthly dividends wasn't good enough) and I didn't want to be on Medicaid in the first place anyway. This means I need to convert a much larger amount to Roth so my kids are not in the Medicaid bracket. This also means another ~$4k to my spending. This is fine with me. My T401k actually has grown quite a bit that I started worrying about RMD. It is a bit pre-mature but it has been growing much more than my conversion rate.
Spending: Unfortunately in the last 2 years, my spending has skyrocketed. Last year, I paid an extra $10k to replace the HVAC. This year, I spent another $10k for car repair/maintenance + dental work. My kids have been growing and eating 2x what I eat. So with inflation, the food cost is also pretty high, and trips are also more expensive. In addition, due to all the free time I had, I also started a new expensive hobby. I started collecting a character merch and spiraled into garage kit painting + sewing/embedding buying all the fancy tools. With tariffs + crazy shipping cost, it has been very expensive (for example, I just paid almost ~$400 just on tariffs + shipping on one of my packages. I thought it would be cheaper splitting the package into a tariff exempted one and a general one but this ended up costing me another $150 to ship the tariff exempted package. It would have been cheaper just paying tariffs for these and ship them as one instead of 2 packages. Lesson learnt). Due to these things, last year I spent $45k and this year I'm on track to spend $48k, so 3% of my original FIRE number.
FIRE number: Thanks to the great market, this number is now bigger. I'm at around 2.4 mil. I started out with 5 years of spending in money market. I spent a big chunk down and replenished it back this year to 4 years. I'm aiming to spend this and replenish enough to make a total of 10 years of living on cash to avoid SORR. After 10 years, I will leave 1 year in cash for EF. Having a large amount of money in MM sometimes feels bad since my mom brags about how much her money has grown every year (like 2-4% higher than mine). But the thought of returning to work is even worse, so I'll stick with a large amount of cash.
Anyway, that's all I can think of. I wish you all the best on your FIRE journey. It is worth it.
EDIT: Fixed some mistake
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u/pras_srini 6d ago
Hey!! I still remember you!! Congrats and $48K is incredibly safe in the big scheme of things given investments are at $2.4M. You also own your home right? So this should be super safe.
Are you still gaming? How is the health? By converting a much higher amount to Roth, is your ~$4K spending due to taxes? If so, have you looked at tax gain harvesting as a means of generating income but at the 0% bracket?
I think ~10 years of cash to hedge against SORR is a no brainer right now. If you keep it in t-bills you’ll have some more income to report and that’ll help with ACA.
Love the update, all the best!!
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u/AutomaticSquirrel32 FIRE 8/2023 6d ago
I still remember you too! How have things been working out for you? Yes, I still play games, but it's only gacha, and more for the social aspect. I have a friend discord group and we hang out and move from gacha to gacha. The $4k is due to paying extra on health insurance and some for taxes, yes.
Thanks for the advice on the LTCG. I'm currently converting enough to keep federal under $1k and take the rest from LTCG on top of that to fill whatever required to keep the kids out of medicaid.
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u/pras_srini 6d ago
I’m doing great! The market has been kind and I’ve been slowly taking chips off the table, building a cash fund similar to yours. I hold that in municipal bonds as my income is high now, and I don’t care for all the extra taxes like NIIT. My job is still stressful but I built a new product team and I’m having fun coaching them and driving execution.
I’m getting close to pulling the trigger - just need to buy a place or decide to slow travel using Airbnb. I fell really bad while skiing earlier this year and fractured/dislocated my shoulder and that was a wake up call for me in terms of risk management. Need to keep my body in shape if I want to do the things I want to do, so lots of PT (and expensive bills)! Time is flying by, faster and faster.
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u/pickandpray FIREd - 2023 5d ago
I got kicked off medicaid after I had trouble with income verification also, but looking back, I realize it was a missed opportunity to do some Roth conversions.
I'm realizing now the ACA represents a similar missed opportunity around Roth conversions , so I'm expecting to use the next 3 years before I hit Medicare age to do some conversions.
I only have 1 year before irmaa look backs, so next year will be a big cash outflow year for income tax and unsubsidized ACA coverage.
Definitely not lean.
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u/someguy984 5d ago
I don't think you should be afraid of Children's Medicaid. I have heard good things about it. Also to avoid it you will have to have enough income and that will increase your ACA costs substantially. Something like half the children in the US are on it.
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u/pderrickson2 5d ago edited 5d ago
Yeah the coverage is way better than pretty much any private insurance. A lot of wealthy people put their kids on it if they have intensive physical or behavioral health needs. Treatment is way more manageable and qualified procedures are much broader!!
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
I had trouble with income verification. Anything I provided wasn't good enough. Maybe each state is different. However, if I can't provide income, and my income falls in the Medicaid bracket, and they stay on ACA, I will need to pay the full unsubsidized cost for them. They even sent me a letter saying this.
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u/someguy984 5d ago
Ask for a Fair Hearing, reason is wrongfully denied despite proof. That bumps it up a level and you should win.
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
It's fine tbh. I have money, and the medicaid's purpose is to help people without. Also the hassle. I enjoy living my life hassle free. It's much better not renewing every year. Also I heard next year medicaid will require some work or volunteer time.
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u/someguy984 5d ago
Doesn't apply if you care for children age 13 or under.
Also if you have ANY income of $580 a month you satisfy the requirement.
Remember child Medicaid and adult Medicaid have different edibility requirements, Children are MUCH higher. So an adult may not qualify but the child does.
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u/14hammarby 5d ago
I thought you should only use your cash reserve if the market is down in the early years to avoid SORR, or is this not true? Why are you drawing from your cash heavily while the market has gone up
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
I'm not doing the cash reserve strategy. I would have started out with less years in cash had I chose to do this. And I'm not opting to get the most out of the market either. It feels great on papers, but in practice, it feels awful. This strategy requires frequent selling of stocks to live on. It is too stressful for me. I will have to keep thinking about money (when to sell, when to replenish, is this drop good enough to use my cash, am I selling at too low a price? Oh no, stocks go up today, I sold too early, etc?) rather than enjoying my life without thinking about it. I think I would have spent much less had I kept watching the market. I think my mental health is worth not getting the highest return.
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u/fried_haris 5d ago
"I started out with 5 years of spending in money market. I spent a big chunk down and replenished it back this year to 4 years"
This is something I've been wondering about.
Currently, I'm thinking 3 years.
How did you settle on that? Personal risk aversion? Protected expenses?
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u/Hnry_Dvd_Thr_Awy Re-employed, for now. 5d ago
Not OP but I did/do 18 months and then withdraw anywhere from 0-100% of living expenses from there depending on how the market is doing. Replenishment happens as things improve.
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u/fried_haris 3d ago
Appreciate the response. That is helpful.
I get nervous thinking about anything less than 24 months
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
It is personal. Some do a glide path starting out with a certain bond allocation and gradually go back in stock allocation. Some do a few years of cash protection and only sell stocks. For me, I started out with 5 years due to the "don't invest money you can't afford to lose if you need to use it within five years." Nowadays, people say a down market recovers in less than 3 years, so quite a few people, like you, do 3 years of protection. The more conservatives go for a glide path. I picked something more in the middle.
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u/fried_haris 3d ago
Appreciate you getting back to me. Yes, it's a personal thing.
I was thinking, start with 3 years, use up the first year, see how the market is, withdrawal of of one year. Repeat.
So the 2 year buffer always remains, just in case
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u/Vicuna00 9h ago
thanks for the update.
did it rattle you when you had to spend more than expected? (I know your withdrawal rate is ultra low but still that's a big shock)
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u/AutomaticSquirrel32 FIRE 8/2023 30m ago
Yes. For sure. Especially 2 years in a row. I even had a feeling thought here and there of going back to work (living with saving does cause some anxiety moment worrying whether I could make it). I struck it down though. So I'm going with this budget as a new one. I could amortize it a bit better for replacement and repair, but it is too much accounting, and I don't want to have another sinking fund.
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u/Ok-Significance3814 5d ago
IDK but this post doesn't sound like lean fire to me, in the numbers, the rule of the sub is 27k for individual 48k is almost twice that and also the way of living.
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
I'm under spending for a family. $48k is under $54k a year listed on the side. And like I said, a big chunk was from once time expenses: huge car repair and dental work. Are we gating keeping on exactly what should be spent on? Hobbies aren't allowed?
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u/AutomaticSquirrel32 FIRE 8/2023 5d ago
I'm not even using reddit often anymore. I thought it may be helpful to someone on FIRE journey that their spending may increase in the future and plan accordingly (new hobbies, inflation, expected expenses that they may forget like car maintenance, appliances replacement, kids needing more things when they get older, etc). If I'm not welcome, this is my last update. Apologies.
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u/Artistic_Resident_73 6d ago
10y years of living in cash?! Sounds a little excessive. But that’s maybe just mr