Those on FIRE living from stocks: how do you manage finances afterwards?

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Not 100% what’s the best subforum to post this question, but I think stories is the closest.

My own story in case it’s needed: Single, on permit C, not FIRE’d yet, saving up towards it but trying to cope with several more years of working before I reach it. My current viewpoint is that after having FIRE’d, I’ll have to bite the bullet and live purely off the stock market (ETF’s) with capital gains and dividends as the only two types of income (+ living in own home which has mortgage), while trying to keep these liquid assets alive despite having 0 additional income than those stocks themselves. I’d also plan to have a year of living cost worth of cash reserve to survive through downturns.

But that’s just speculation, and I don’t seem to find much documentation from those who actually have already FIRE’d and how they’re managing this, most information is about saving pre-FIRE. But what when you’re actually withdrawing from your portfolio, to live.

If you have successfully FIRE’d in Switzerland, how are you managing your finances, especially the fact of having truly 0 extra income other than your own assets.

I’m especially interested in the case of living post-FIRE in Switzerland and not having any active side income from non-investments, but if you have any low-attention-requiring side income that’s also interesting to know (but it just doesn’t really answer some of the questions then, such as the ones related to not being able to buy new shares due to using them as your main income source)

Do you sell shares to pay your living cost, or live purely of dividends and don’t have to sell shares?

How much of your income comes from capital gains vs dividends?

What withdrawal rate are you using? (I’m counting on 3% currently)

Do you have any property, to live in yourself or to rent out?

If you have mortgages, do you do any amortizations, or purely pay interests and keep extending them indefinitely?

If you have to sell shares (live off capital gains), doesn’t it feel somewhat bad that your number of shares can only go down, not up (the value might hopefully increase over time in dollars, but the amount of shares wouldn’t if you have to live off them)?

Do you regularly rebalance your portfolio, how often?

Do you focus more on US shares (S&P 500, …), or world-wide (VT, …), Swiss, or other types of investments?

Do you see your savings increase or decrease over time?

Do you keep separate bank accounts for daily use, vs for cash reserve and investment related cash?

How regularly do you move cash from brokers to your daily use bank account?

Do you keep a cash reserve (not stocks), and how much percentage or how many months/years worth of living expenses in cash?

How do you manage the tax payments, that is having to have more than usual cash ready for the tax letter each year (if you’re not spreading it out, that is; but in general january does have a higher amount of bills, if not tax letter then health insurance etc…)?

Have you ever had any issues in Switzerland due to having FIRE’d, such as being prevented access to a mortgage, place of living, … due to not being able to show a proof of employment?

Do you live in a cheaper or more expensive canton or city in Switzerland?

Do you still have and use pillar 2 and 3a pension?

How many years have you successfully been able to live this way so far?

If you’re willing to share, how much in liquid assets do you have? I think perhaps with 2M CHF in the market all of the above is possible in Switzerland (with no kids), does that sound realistic?

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While that’s true, I think there’s still a lot of topic about safe withdrawal rate that are interesting to look at.

(e.g. whether 3% is actually safe, given an horizon that’s much longer than a typical retirement of 20-30y)

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are you basically trying to figure out if your own plans/approach make sense?

I think I’m trying to get some reassurance that it’s actually possible and there are people actually indeed doing this (living off assets right now, not just saving up for it for the future), as well as get a feel of what life after feels like. Having 0 active income and living off assets is a big leap

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I think this is understandable as it is something of a leap of faith and scary to go from increasing wealth to draining it away.

I have the same fears as I am in a job which once I leave, I will not be able to easily replace, so as a one-way move, I want to be sure it will go well.

I actually did achieve FI as a single person (before kids) as income from my investments (real estate and stocks and bonds) exceeded my monthly outgoings. So salary went straight into more investments. So while this showed it was ‘possible’ it still didn’t really give me confidence since:

  • I hadn’t actually retired so still avoided various costs: AHV on retirement, accident insurance etc.
  • While not retired, I still have the safety net of an income and still seeing my bank balance go up each month

I think in the end you have to:

  • Trust in the numbers; and
  • Trust in yourself so that even if it goes wrong, you will be able to make money again

In a way, I think I’m being silly in worrying about running out of money. Even when I was a kid, I was entrepreneurial and was making money on various different things. I think you just need to overcome the fear, esp. when the stakes are higher, i.e. now I have to worry about wife and kids too. As a single person, I’d be OK with living in a van if the worst came to the worst, but now the minimal viable fallback plan is much more expensive!

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I’m pretty close to FIRE, still employed 50% this year and possibly 10% exclusively with remote work starting next year, but maybe also completely without a job in a couple of months (and currently no intention of getting another one).

I plan to live off dividends as my portfolio size and composition allows for that and as I also feel much more comfortable with this approach than having to live off capital gains (and deal with withdrawals at the time of capital losses).
In theory, it shouldn’t matter much, in practice, I personally can’t comfortably wrap my head around constantly withdrawing from my nest egg.

No property and thus no mortgage.

I irregularly and opportunistically rebalance my portfolio, i.e. when I see positions getting so overweight that their dividend yield gets close to 1%. E.g.: sold some Broadcom in July 2024 at USD 173.70 and moved the capital gain into higher yielding companies.

I focus on US companies with a side of Canadian and GB ones. Just because those countries seem most shareholder friendly and tax treaties with Switzerland work fine. No stock picked Swiss companies, but (plenty) via ETFs in tax sheltered accounts (aka pillar 2 and 3a) and some via VXUS in a taxable account.

I see my liquid assets increasing over time, with a few bumps here and there, e.g. dipping a little as work income decreases significantly next year or even goes to zero, increasing a fair bit as I lump sum withdraw from pillars 2 and 3a.

Definitely separate accounts for daily use versus investment related. Cash reserves can be at either place.
My cash reserves are on average about half a percent of my liquid assets. This works for me because I see those dividends come in very reliably every month – I feel they’re more reliable than my work income. YMMV.
Also, should I suddenly need a fair bit more:

  • in good times:
    • I’m sure there’s almost always some company that is overvalued in my portfolio – perhaps not as overvalued that I would sell without the need for cash – but in a dire personal situation I’d shave off a bit.
    • I guess there’s also the option of a margin loan or Lombardkredit, though that would be my last resort.
  • in bad times: I also hold a bunch of highest-grade bonds that I’d sell a portion of. Usually bonds go up during bad times (though in the most recent crisis, bonds went down as well as the Fed started to hike rates due to inflation …).

Tax payments: the withholding tax and the taxed-at-source reimbursement after I’ve filed taxes allow me to mostly pay my taxes. The rest I fill up with money from dividend income.

No experience with issues due to having FIRE’d.

I live in the city of Zurich.

Pillar 2 and 3a still wait for me turning 60 to collect them (lump sum, as mentioned).

Liquid assets are about CHF 3.5M.

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The other thing is how many contingencies you will provide for e.g. if you are single, do you get enough to FIRE assuming you will not be single and have kids? If married, do you account for the possibility of divorce, losing half your assets, paying alimony and having increased costs? I have older parents with health issues and wonder if I need to stay employed in case they need expensive care. My neighbour had to put both parents into care paying 5 figure sum per month for each parent.

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The average Swiss salary is around 6700 CHF/month, how can anyone reasonably afford that even while working? Is there no health insurance for this?

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If your work and employer allows for it, go for part time work first. It helped me get more comfortable with the idea and implementation.

When you’re close to FIRE, tell your employer that you currently need more spare time for personal reasons, don’t let them know you plan to eventually stop completely.
This leaves you with more options on the table, even if you may not immediately be able to go back to working full time if things don’t pan out as you had imagined.

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Is it though? The very fact that you’re able to read, write and think coherently tells me you’d be able to get some simple job again if need be :stuck_out_tongue_closed_eyes:

It’s not as if you are sentenced to no income forever once you FIRE. And in the end, there’s still social security. So much fear…

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But that’s the goal though, currently being sentenced to being employee (in a good job, admittedly, but probably not possible to get back when leaving it)

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A goal yes, but not your one-way destiny, no?

Also, do you stand to inherit anything? Any AHV to expect?

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AHV after a few decades of course (if it still exists by then :)). Inheritence: while possible, it’s not something I want to depend on or take into account

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Ok, just saying, it’s not a one-way ticket where you make a decision at one point that will make or brake everything :smile:

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I find your questions very technical, and some of them will answer themselves once you have made the step.

The psychology of RE is an entirely different thing. Like @Compounding mentions: you are not forced to exit the workforce at once. And maybe there is joy in something else that provides a moderate or sizeable income. You will always have to answer to some people or institutions, so it is a fallacy to think you will be totally free after RE.

I have done RE a few months at a time and usually lived in Zurich from available cash. As my partner always was working, getting apartments never was an issue. But it’s a valid thought that it might need a bit of explaining as a RE person. Understand that dividends are income taxed and capital gains are untaxed (for now). Selling a few shares every now and then makes more sense to me.

My wealth is in ETFs/stocks, gold, cash (about 2 years of living costs) and a bit crypto. No debt or real estate. So mostly the money has to work. I’m counting on 3.5% annual return after inflation.

I withdrew most capital from my pension pillar 2 fund when I was working in the EU. Also all from pillar 3. There is a bit left in pillar 2, but I might withdraw that as capital as well at age 60 or 65, to avoid income tax as much as possible.

I’m 58 and live on CHF 5000 expenses per month (excluding taxes) and given my spreadsheet, my moderate wealth will support me indefinitely, provided I can reach 3.5% annual returns. I count on AHV at age 65 and a small state pension from 3 years of Luxembourg work.

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That‘s a flawed way of thinking about withdrawal rates.

You need more than 3.5% annual returns to sustain a 3.5% withdrawal rate safely.

As you will run into problems during bear markets when you consume capital.

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He never said that his withdrawal rate was 3.5%.

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And there’s nothing from with depleting capital, there’s still an upper bound how many years you need to fund.

(Tho personally I find it really hard to estimated how expense might grow with age, eg how much would a retirement home cost, how many years, etc)

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So instead are you planning to pass your nest egg to someone else ?
If you are not selling your shares during your lifetime then it seems that you personally are not benefitting from your capital and any gains from it, besides the dividends.

Otherwise there is no point in passing away as a millionaire. You might as well withdraw from your capital as you get older. This would also lower the required capital to FIRE, as you would not soley have to rely on dividends to cover your living costs.

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Rather than thinking about documentation about people who are FIREd and happy, should you not discuss this with people who are Retired (or Retired early) and happy?

In the end it is the same thing with just an extended time frame. They also do not have new income and they also need to live from their accumulated capital.

In addition, I feel you are bringing an unnecessary stress on yourself by making FIRE a goal. You can just focus on wealth growth and accumulation & one day you will have so much money that you would feel that it is enough for the life time. Then you retire, that is it.

How exactly to do this will be very similar to what retired folks do. They invest their money in higher income portfolios, lower risk portfolio & also consider an annuity. It all depends on how much money they have and how long they need to live of it. And what else exist in their life to support if things go south (friends, family , children etc).

I can tell you that even though it might sounds weird but the last point is very big differentiator for retired people and their anxiety levels. I know people tend to focus almost unilaterally on wealth but a safety net can be a big advantage.

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Indeed I am. At least a sizeable portion of it.

Apart from just being able to sleep better with this approach, I also like the optionalities it provides.

Perhaps said someone else would like to buy a house in their 30’s or 40’s but does not have enough money to put down? I’ll be able to help out.

Perhaps once I’m in my seventies I still like traveling, but I then prefer business or first class to make the travel more bearable. Chipping off a bit of the nest egg then is a thing that I will mind less at that age.

Anyway, for now it’s really more of a psychological thing. I totally follow your argument of spending down your nest egg on a rational level, but my approach has to work for me – and chipping off the nest egg at the start of RE just isn’t for me.
YMMV, of course.

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