This week has been a lot of traveling, visiting family, and childcare, with both kids out of school/daycare. So I haven’t gotten much (*cough* any *cough*) analysis done this week.
2022 has been a wild year, and not too great for the markets. Hopefully 2023 will be better!
I know a lot of people/economists believe a recession is headed our way next year, due to the Fed tightening the screws on the economy to try to kill inflation (which it absolutely should do).
BUT, I’m more convinced than ever that NO ONE knows the future. Some folks might guess correctly sometimes (just like you can guess coin flips correctly), but no one REALLY knows. Even the Fed.
That’s why it’s vital to ignore all the predictions, and keep investing as if every day your investments are slightly more likely than not to gain in value.
Time in market >> Timing the market.
It’s essentially like the opposite of a slot machine in Vegas – you’ll see volatility, but the odds are stacked in your favor and over time you’ll reap rich rewards.
I’ve got a variety of smaller scope and larger scope items I’d like to tackle next.
I need to take care of some code “housekeeping”, which is relatively easy, boring, and very important for maintaining my sanity.
Next, instead of stress testing both methods with a range of expense levels, I’d like to test with a range of expense change rates – so seeing how both methods perform when your expenses (in current day dollars) go up or down by a particular percentage each year.
These two medium scope ideas I had in the Future Work section of the stress testing initial results post:
- If the TPM reaches the point of employing the numerical integration subroutine to obtain the needed cash with minimal taxes/penalties, try reducing standard income such that we can sell more post-tax lots and stay within the 0% LT cap gains brackets. That could potentially provide more cash with zero additional taxes, since LT cap gains are a fraction of the cash you would receive when selling, vs 100% of the pre-tax account withdrawals counting as standard income. Employ a similar numerical integration method for this approach as well, taking finite steps until reaching an optimal amount of standard vs LT cap gain income. Assess impact.
- It appears the IRS generally requires a 20% withholding for any early withdrawals for taxes, so I’d like to add that to the TPM and Traditional methods to see what impact it has.
I’ve been discussing the TPM method for a while now. I first wrote about it in the Withdrawing Money After FIRE post, where I showed a graphical diagram of how it works. I also linked to the FIRE Withdrawal Strategy Algorithms page I created that lays out the algorithm as it stood back then.
However, I’ve made a number of changes and upgrades to the TPM method (as well as the Traditional method) since then, so I need to update the FIRE Withdrawal Strategy Algorithms page accordingly. And while I’m at it, I may either modify that page or create a new page/post that makes it as easy as possible to understand and execute the TPM method – including for me when I’ve forgotten all these details in the future!
Next, I’d like to return to social security income, which the Social Security Administration refers to as retirement insurance benefits (RIB). Because already writing two previous articles about it is clearly not enough!
All the analysis I’ve done so far assumes you take RIB at the standard full retirement age of 67, but I’d like to do some analysis for a wide range of scenarios to see whether you might want to take RIB earlier or later. And I’m particularly interested in the impact your start date/age has on spousal benefits.
A post about when to start RIB has been my number one request for a future topic so far. But, it’s going to require that I code up the method for how RIB is computed, including for spouses – not sure how easy that’ll be to track down and implement.
Once I have that “Compute RIB” method in place, something else I’ve wondered about for a long time is how retiring early via FIRE impacts RIB. E.g., if you retire at age 40 or 50 instead of 65 or 70, how much smaller can you expect your RIB to be? And how does that impact your time to FI during your saving phase?
Finally, I’d really like to look at the impact of big unexpected expenses during an early retirement. E.g., what if you develop an expensive medical condition that forces you to hit your max out of pocket with your health insurance every year? What happens if you get a ton of huge house repair bills in a single year?
No Shortage Of Ideas
I just looked at my content bank board, and I have 86 other major post ideas! I definitely won’t be running out of analysis to do and content to write any time soon!
Happy holidays and see ya in 2023!