July 18, 2019

I came across this idea a while weeks ago and I thought it might be interesting to you.

What is FIRE? Financial Independence, Retire Early - 1992 best-selling book Your Money or Your Life written by Vicki Robin

By dedicating up to 70% of income to savings, followers of the FIRE movement may eventually be able to quit their jobs and live solely off small withdrawals from their portfolios

In this video, we cover:

The 4% rule: Spending only 4% of your portfolio. This means you are expecting a personal expense of $40K. Extremely low spending

$1 million: Most people are aiming at 1 million earning 6% per year. What is the key bottleneck?

Considerations: Tax, increase in living expense, buffer, headcount, family, dependents, and healthcare

What are some of the options that will help you achieve FIRE?

Option 1: Invest in ETFs (6%) return. Real return after inflation (6% - 2% = 4%)

Option 2: Imagine you buy a house: down payment of $100,000 worth $500,000 to $800,000. Cash flow positive. Captain gain 7% of $45K to $56K per year. Conservative approach: Buy 2 properties. Aggressive approach: re-leverage

Option 3: Invest in the stock market and get 30% (using long term stock options). $100K will be $1.1 million in 10 years

If you earn a much higher return than 6% (through option 2 or 3), then you can withdraw a higher amount than 4% which shortens your time to retirement

If you earn 12%, you only need $500,000 in portfolio (50% less)

If you earn 18%, you only need $333,000 in portfolio (66% less)

If you like the video, please share or comment.



About the author 

Eric Seto

Investor, CPA (Canada) based in Hong Kong and Vancouver

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