From FI to Coast FIRE: Life After FI
I went from Financially Independent (FI) at 48 to Coast FIRE when 49. Not much of a retirement!
Well, that’s the grace offered by FI. You can work for money if you want to or need to (as I do). A nine (9%) variable interest rate loan on the home I purchased on margin is why I’m working again.
For those courageous enough to FIRE; if they can gamify finances and make early retirement a reality, they can do whatever they need to if the need arises again in retirement. Once you have FIRE’d you have cleared some kind of hurdle and you won’t go backward again. Sure, you’ll fall, but the getting up comes naturally. Those who FIRE have a Growth Mindset.
The Growth Mindset in Life After FI
I’m just going to stop growing the day I retire and never do nothing new again.
Retirement = Death
To me, that is what most critics of FIRE blab as they shame those of us ingenious enough to FIRE. It’s like they want you to think that you don’t grow at all once you retire. You stagnate.
My growth mindset made me decide that I needed to work again (even though dear lord I just early retired a year ago!) since Fait brought me a nine percent variable loan. Now, interest rates have to go down (if there is really bad inflation many will be hurt worse than me) and I’d rather have a variable than a fixed loan in the current interest rate environment. Trust me (I’ll show you my crystal ball). And since giving up W2 income I am ineligible for a traditional mortgage. Lending standards are high, credit is tight and even I heard about the recent bank failures.
Personally, 9% is too high. Sure, lots of folks pay monthly carried credit card interest of 22.9% and up but those folks don’t read this blog. Let me ask you this: what interest rate is too high for you? When would you work extra hard to squash debt: 3% no way. 22% for sure.
Where are you? 5, 7, 9, 11, where? I think nine is an easy call for me, but that’s probably why I’m rich in the first place.
Remember that I’m FIRE transitioning to coast FIRE so it’s not like the skills aren’t easily available. Physicians have done it hundreds of times in their careers. The growth mindset. After all I’m a pseudo-physician.
Transitioning to Coast FIRE
Since I’m transitioning from FIRE to Coast FIRE, I might as well pull out all the stops. I’m trying to do mortgage acceleration. If you haven’t heard of it before, it can be sold as a product to unsuspecting folks or can be used to pay off your house and save money. Some countries routinely use mortgage acceleration loans to save clients money. How about that? Fiduciary Banks?
I have margin loans with USb and Schwb, and neither is adequate for mortgage acceleration. Schwb has a higher rate so I’m paying it off; transferring money takes 3-4 days. Meanwhile, I pay 25 cents per every 1k I borrow per day. So, it costs me a dollar to transfer over 1k to pay off my debt. That dollar that I lost compounds over the life of the loan; that is unacceptable. Especially since you have to remember to log in again 4 days from now to transfer the money once the cash clears.
Meanwhile, USb requires approval from my personal banker to use the dividends from the margined account to pay off the loan. Seriously? Would I re-invest the dividends or have them sit around in cash while I’m paying you 8% interest? Honestly, they both won’t work if I seriously was thinking about mortgage acceleration. Even though I’ve already got a couple interest-free credit cards I’m living off of for the next 6- 22 months.
I’ve already drained my pre-tax accounts of bonds and bought stocks instead. If I’m paying 8-9% interest on a loan on equities in my brokerage account, why own bonds or cash?
FI and Growth Mindset
The basic point is that if you are clever enough to reach FI (or understand this blog), you win the game. Even if you have to go back to “work,” don’t tell me you couldn’t find something to do that is just fine. It might even kick ass or support your preferred way of life. Once you know how to make your first million, you can make another. And you have a terminal degree behind your name.
I got to FI by relentlessly investing in the stock market from 2006 until FIRE in 2021. It was as simple as maxing out my 403b/401k and accidentally picking a low-cost index fund that I didn’t sell.
Though an inauspicious year to retire, remind me what the stock market did if you dollar cost averaged into low-cost index funds and you had a 50-60% savings rate for the last 12-15 years? It’s impossible not to FIRE if you run those numbers; that’s how good the market has been.
Do you think we heard more about FIRE in 2021 than now? I think so; maybe that’s because the market corrected. But, we all planned for it! We understand sequence of returns risk (and retirement date risk).
From FI to Coast FIRE
I’m drowning in debt at a variable interest rate somewhere between 8-9%. I think it will come down at some point and I don’t want a fixed-rate mortgage (most folks who FIRE cannot even get one). I’m ready to start doing something else. Like most physicians who FIRE, I already have a few irons in the fire. 1099 income is good, fun, and easy if you know what you want. That’s the pseudo-physician in me.
Drowning in 9% variable debt (the loan, by the way, is less than 9% of my net worth), I’m happily going back to work. And the point is that most people who retire early don’t stop earning money. Nor are they cheap; they spend money on what they value.
Quit with the idea that retirement is death. You change all the time in retirement. Especially if you FIRE.
Instead, notice that the situation has changed. The market has been punishing those fully invested for the last few years. Me, since I have a margin loan, I’m leveraging the future growth of the stock market to buy a house.
How about that for optimism? I will get a margin call on my loan if the market crashes 60-70% from here. That’s my black swan. The upside? I get a fun little ditty that helps pay off a 9% loan.
But since I’m retired, I’m just going to do what is fun rather than work. I’m not working again. And I will always work. That’s the false dichotomy of retirement.
