Financial Samurai Newsletter May 12, 2024: Early Retirement

This is a free Financial Samurai newsletter that was published on May 12, 2024. Every week, I come out with a free weekly newsletter to help readers achieve financial freedom sooner rather than later. Join 65,000 other readers and subscribe here. This way, you'll never miss a thing.

Financial Samurai began in July 2009 and is the leading personal finance website today with over 1 million organic pageviews a month. Everything is written based off firsthand experience because money is too important to be left up to pontification.

Sam is the pioneer of the modern-day FIRE movement. He attended The College of William & Mary for undergrad, got his MBA from UC Berkeley, and worked at Goldman Sachs and Credit Suisse for 13 years until he retired in 2012 at age 34. Sam is one of the rare personal finance writers who actually has the background and experience in finance.

You can learn more about Sam Dogen by clicking his About page. You can also visit his Top Financial Products page to help you save, invest, and organize your finances better.

Financial Samurai Newsletter May 12, 2024: Early Retirement

One of my preferred methods of learning is through case studies. Writing for Financial Samurai allows me to devise and test potentially improved models, observing their outcomes firsthand.

In a recent article, I delved into an analysis of current trends in home prices, particularly within San Francisco's robust housing market. I outlined specific strategies for prospective buyers to maximize their savings when entering the market.

Fastest growing metros with the fastest growing house prices in America 2024

Investing in real estate now seems like a good idea ahead of a potential decline in mortgage rates. To dollar-cost average into real estate, check out Fundrise. Fundrise funds invests primarily in the Sunbelt region where valuations are lower and yields tend to be higher. You can dollar-cost average with just $10 at a time.

A Retirement Withdrawal Rate Case Study

In this week's newsletter, I revisit my assertion from 2020 challenging the conventional wisdom of the 4% Rule for retirement withdrawals. I advocate for a dynamic approach, adjusting withdrawal rates as circumstances evolve.

The heightened risk perception that arises when retirement expenses rely primarily on investment income underscores the necessity for adaptability. Forecasting safe withdrawal rates when you are gainfully employed is not helpful because you will never know how you truly feel in retirement until you retire.

For retirees, economic downturns amplify concerns far more than for those still in the workforce. Consequently, any supplemental retirement income generated feels particularly reassuring. For instance, the $1,000 I earn from coaching high school tennis carries a significance akin to earning $5,000 from a traditional job.

Take a look at my new post, Navigating Retirement: Dynamic Safe Withdrawal Rates In Action. It'll show you how to think about retirement spending under different circumstances.

The Joy Of Making Less Passive Income

Eight months after slashing my passive income to upgrade to a more luxurious home using proceeds from stocks and bonds, I'm taking a moment to reflect on the positive outcomes of this decision.

Every significant purchase comes with trade-offs to weigh, and in my case, the move to a nicer home brought with it increased stress and the necessity to focus more on bolstering my cash reserves. Living paycheck to paycheck has been no fun!

Thankfully, I've navigated through this period, supported by a surprisingly substantial real estate capital distribution and the sustained bull market since the purchase last October. I'm thankful the stock market has not taken a dive since we purchased the home.

This experience underscores a vital lesson: the journey toward financial independence often holds more excitement than reaching the destination itself. Once you've amassed enough investment income to cover your basic needs, you may find yourself grappling with existential questions like, “Is this all there is?” or “What comes next?”

Temper Expectations Once You Achieve FIRE

I've previously explored the concept of a “trough of sorrow,” where feelings of disillusionment can follow the achievement of significant goals. Ironically, facing a reduction in income can awaken a renewed sense of purpose and motivation, leading to action and ultimately, fulfilling results.

If you're still on the path to financial independence, I encourage you to embrace the journey, as I am doing. Despite its challenges, you may come to miss it once it's over. It's akin to the experience of raising children, isn't it?

Don't forget to read “Why Earning Less Passive Income Has Improved My Life.” You might discover unexpected insights that align with my perspective. Personally, I was surprised by the conclusions I reached in the end.

House prices versus earnings growth in the UK - Financial Samurai newsletter
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It's Scary How Hard People Try To Get To The Top

Finally, I had the opportunity to spend a weekend with a New York Times photographer and her husband for an article on FIRE. One key takeaway from this experience is the realization that achieving success often demands an extraordinary amount of hard work. The idea that successful individuals owe their accomplishments primarily to luck seems misguided.

I firmly believe that everyone should strive to excel in at least one area—to reach the top one percent in something, anything—to experience maximum fulfillment. This pursuit isn't limited to financial success but extends to various aspects of life, such as sports, art, dance, music, games, parenthood, punctuality, philanthropy, and more. Attaining excellence in any of these areas requires dedication and effort, and there's no greater satisfaction than earning your success.

Even if you fall short after giving your best effort, finding solace in knowing that you did everything you could is a remarkable outcome in itself.For more, check out, Behind The Headlines: My Experience Working With The New York Times.

To Your Financial Freedom,

Sam

Newsletter Recommendations: Some Great Retirement Planning Tools

Plan better for retirement by utilizing Empower's free retirement planning tool. It will help you estimate your future retirement needs and retirement cash flow. Your goal is to get your probability of success rate to 99%. The success rate is another great target to incorporate for retirement success.

Empower's Retirement Planner Free Tool - Financial Samurai newsletter
Empower's Free Retirement Planner

Alternatively, explore the robust financial tools offered by NewRetirement. Designed specifically for retirement planning, NewRetirement has the capability to comprehensively incorporate various aspects of your diversified net worth, including real estate, providing a more comprehensive and accurate financial overview. After your free trial, there is a subscription fee.

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