What is your FIRE number? Your expected FIRE expenses?

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Olaz
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What is your FIRE number? Your expected FIRE expenses?

Post by Olaz » Wed Jun 22, 2016 3:54 pm

Just curious how much income or net worth you all are striving for/had before hitting the "retirement" button.

Here are mine (note that I'm using a 3% SWR):

Bare-Bare Bones (career change): 150k USD portfolio, or 4.5k/yr
Bare-Bones: 250k USD portfolio, or 7.5k/yr
Buffer: 500k USD portfolio, or 15k/yr
Post-FIRE (Arbitrary) Goal: 1 M USD portfolio, or 30k/yr

Annual Expenses: ~7k/yr USD
Last edited by Olaz on Tue Sep 27, 2016 3:00 pm, edited 2 times in total.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Wed Jun 22, 2016 6:53 pm

At the time (March 2009, S&P500 bottom), my NW was 150k most of which was "good money" in taxable accounts. I was spending under $7000/year out of which $1500 were "wants" (martial arts training). At the time, I had a 9(*) year history/experience of spending under $7k/year. Half of this time (2000-2004) living as a single and half of it being married/living with another person with the same budget. I also had the established ability to make somewhere between $500-1000/month, scalable at will, by working some 4-8 hours per week [doing copy-editing]. I knew that the market was at least fairly valued if not slightly undervalued lending some confidence in the 4% rule. I was also involved with a non-profit being one of the founders.

(*) Actually this could be extended back to 1995(**) if you allow the ability to live in student dormitories. However, as these are usually only available to students, I don't usually include it even though I was already very frugal. If you include this experience, I had what amounts to 14 years of frugal <$7k experience already.

(**) Indeed, it could be extended even further since I lived at home with my parents before that but at that time I wasn't paying rent. OTOH, my income was pretty low too. I moved out when I was 20 or so.

At the time, 2009, I was quite cognizant that networth is too simplistic of a measure and that ready cashflow is really what makes or breaks FIRE. Since then I've yet to draw on my finances. See viewtopic.php?f=7&t=7869

I got married in 2006. We decided to split income 50/50 for tax reasons. The accounting is easier that way. Technically this has provided a safety buffer but I've never relied on it. Indeed, if we have gone with a more modern [millennial] split where people just share expenses rather than income, I'd be rather richer today since I've subsequently made quite a bit more money personally, but whatever ...

Post-ERE ...

I had enough FI-money to quit the copy-editing to focus on the ERE book. So I did that... in early 2010.

The ERE book turned out to sell more than the 50 copies I originally envisioned it would sell, in fact much more. Turns out, I've been making between $25k and 35k every year from that since 2011. Never expected that. Not sure how long this will continue. One the plus side, as far as my income is concerned, there are several [very big] bloggers using the ERE book as an inspiration for talking about extreme (50%+) savings, resulting in links back to the original source. On the minus side, a lot of my ideas are now becoming common knowledge and so this might not last. I'm already getting negative comments that my ideas can be found in a better form elsewhere ;-P Ha! Yeah, no shit, selling and presenting ideas are much easier than inventing them. So this is a good example of how impact and income don't always correlate in the long run. Anyway ...

Also, between 2012 and 2015 I had the opportunity to work in trading. I didn't get rich but maybe not surprisingly the salary [in industry] was somewhat better than in academic research. Since I was already FI, I could save 100% of my salary (or rather 50% since I was sharing it was DW, remember) including the royalties on top making my savings rate quite in excess of 100%+. Not too hard to imagine how someone who can FI on a salary in 5 years can "double up" on a higher salary in 3-4 years. Especially combined with a market run-up.

The expenses from moving from an RV in California to an apartment in Chicago stayed the same. Buying a house predictably lowered them as I've been telling the "but only if you live in an RV"-clowns all along. As a result, I'm currently at ~0.8% SWR. Together we're slightly over 1% SWR combined.

Was it luck ... or just applied ERE principles?

In any case, I'm back to "not working" since 11/2015, while DW is currently playing career until whenever she prefers not to. Currently, I don't have any alternative at-will sources of income. Does this mean they won't happen next year? I don't know. However, like in 2009, I still don't need them... but I also still find it hard to imagine me not making another cent from any Renaissance interests and serendipitous opportunities either.

I also note that unlike last time, the market valuations are currently in deep-shit, but this time I have enough of a buffer and skill-level to avoid "riding the bus" (riding the rails ... getting rail-roaded ... ) if it comes to that.

As for the "ultimate goal", according to firecalc.com, we'll be worth somewhere between 10 and 24 million in present-USD 50 years from now :-P ... that is, insofar we don't change the lifestyle we've lived since 2004 AND insofar we never make another cent. So probably the end-result NW will be more than that... Our #firstworldproblem would be who to donate the excess to.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by IlliniDave » Wed Jun 22, 2016 7:01 pm

I have a number in a sense, it's large, and probably not very meaningful in and of itself.

I worked the problem from the bottom up, so I can talk about spending. I'm sizing my plan to support spending about $40K/yr post-tax (about $45K gross "income"). My goal is to spend about $30K/yr (close to what I'm spending now). Much of that will come from SS and the annuity. The residual will come from the stash (liquid financial assets), and I'd like the stash to be 40X the residual, so my minimum "number" ends up in the high 6 figures. If I work 35 more months I get a substantial bump in retirement bennies from the employer, and by then the stash might be oversized by $350K or so. Golden handcuffs.

This probably is not the best plan for everyone. It represents the optimal solution for me in terms of reconciling the dimensions of minimizing retirement age, making retirement once-and-for-all if desired, living a lifestyle I know I'm content with, acknowledging my conservative financial nature (i.e., sleeping well at night), and my legacy goals.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by rfgh » Wed Jun 22, 2016 7:09 pm

I am targeting three times my number. I will work longer so my two children never have to.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by JamesR » Wed Jun 22, 2016 9:02 pm

Jacob, based on the math, you FIREd at 4.67% SWR.. I think that should be highlighted more often ;)

I guess I feel people on this forum should have a bit more willingness to FIRE early rather than waiting until they exactly their number, whether it's 4% or 3% or 2% or a million bucks. Since they can make up for the difference in some way.

You mention the current market is bad, does that mean holding cash is more advantageous currently?


Zalo,

I think you're one of the more "extreme" people on this forum, so I think you can definitely consider a number in the $100k-200k range. It depends a lot on your portfolio allocation & whether you think you would have a high likelihood of producing incidental income.

Personally I'm aiming for something around $110k-120k. Expected expenses approx $600/mo. For that I would be able to rent my own room, eat out all my meals, and rent a motorbike in Chiang Mai, Thailand, or other affordable places. It would be a bit on the tight side, so I would still plan on generating some extra income through side projects anyways to grow the investments.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by JamesR » Wed Jun 22, 2016 9:18 pm

rfgh wrote:I am targeting three times my number. I will work longer so my two children never have to.
I assume you're joking - the impact of overprotecting your kids from work would be incredibly negligent & a form of abuse.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by rfgh » Wed Jun 22, 2016 10:46 pm

JamesR wrote:
rfgh wrote:I am targeting three times my number. I will work longer so my two children never have to.
I assume you're joking - the impact of overprotecting your kids from work would be incredibly negligent & a form of abuse.
You've been brainwashed to think that way, presumably by abusive parents.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by rube » Thu Jun 23, 2016 12:29 am

My target number is 45 years. Latest. <5 years from now.

NW should be than around 800K-900K + around 70K for pension which is accessible after 20-23 years. After 23 years social security will also kick in (if still exists).

This is for a family of 4 wit currently yearly expenses 30K. Can easily go down to 25K if needed. But we also have some plans which will cost some money (other house, college kids).

If we don't hit the expected NW by then I probably still pursue other things (then the tradional 'salaried man'). I expect to make some (little) money here and there anyway, which I have done always.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Thu Jun 23, 2016 8:16 am

JamesR wrote:Jacob, based on the math, you FIREd at 4.67% SWR.. I think that should be highlighted more often ;)
@JamesR - See this is exactly why I hate giving out numbers as they tend to be taken/copied out of context(*) Note that I said that I quit exactly at the market bottom (S&P500 was around 700). My NW had previously (in 2008) been close to 200k ... and because the market recovery was so fast, it was back up to 200k shortly after I retired. Note that I also said that $1500 were wants ... and specifying the frivolity/optionality of that want. So in terms of needs, the SWR was 3.66% for a brief period of time in Mar 2009... but a year earlier and a year later, it was under 3%. I also noted that I had an established source of good at-will income that covered my expenses with about 4 hours of work per week, i.e. it wasn't Walmart greeter with a 3 hour bus commute.

(*) It's also why I think blind faith in the 4% rule is super-dangerous. viewtopic.php?f=3&t=7868

Now compare that to someone who gets the "wrong" (or rather risky idea) that 4.67% is "what jacob did so he approves" and does it in this 2016 economy w/o any side hustles under the optimistic assumption that "something will be found later". Suppose then the market tanks from P/E 24 to P/E 19 and stays there for several years... a reasonable assumption (no QE for this cycle and interest rates can't be dropped further).

21% of NW is lost quickly... and SWR increases to 5.9%. Meanwhile, no at-will income exists and in a tanking economy, it's hard to find any since opportunities are fewer. The market stays flat for 6 years and then becomes normal again. Now 21%+6*4.7%=49.2% of the portfolio is gone. SWR is now at 9.5% with a historic 30 year success rate of just 2.6% failing in 97.4% of the cases. And it's only been 6 years :shock:

Result: Serious sequence-of-returns risk. This person will either spend the rest of his life being semi-retired or needing to go back to build up lost nest egg.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by cmonkey » Thu Jun 23, 2016 8:44 am

@jacob Thanks for sharing all that. I don't think I've seen you share that much. The book sales are particularly surprising! That's a lot of money. You need to get writing again ;)

I noticed one other time you stated that you have never touched your stash. I didn't dawn on me you were referring to just using the cashflow.

There are still some good buys out there if you look. LYB and CMI come to mind both being under P/E of 15 and good yield.

@Zalo as far as my numbers go NW from investments will be somewhere in the range of 400K to 420K on a SWR of ~3.5%. At the time I'll have lots of extra income from peer to peer investments that will be funneled into other investments for life. We'll ultimately reach 3% SWR a few years after I quit and 2% in my 40s.

I have also been pondering different SWR for different categories of spending (as others have been mentioning) and our SWR for our "needs" will be about 1.8% when I quit. So if we did nothing but pay our bills and buy food we are absolutely set for life at that point.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by ffj » Thu Jun 23, 2016 9:13 am

As Jacob has pointed out, it comes down to cashflow and whether that amount can be lived on without huge disruptions. This necessitates the retiree to be diligent and attentive to changes in cashflow. To be honest though, I can't imagine anyone on this forum blindly pulling 3 or 4 percent out of their portfolios without paying attention to the bottom line. Realistically, the amount one lives on each year will change with the valuations of their portfolios as there should be a line in the sand that one cannot cross if they wish to remain solvent. And I think everyone should develop other skills to off-set these fluctuations, in other words, side hustles.

The money has to be accessible, and your margin of success shouldn't be so thin that minor disruptions tank everything. Really, your final number could be anything.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Thu Jun 23, 2016 9:24 am

@cmonkey - All these numbers have been shared but mostly in an indirect scattered way. For example, you can see how many books I've sold on the front page of the blog. I've previously mentioned that I make $7/book in royalties and if nothing else, you can look up the fact that amazon pays 70% of the sales price (which can be found on amazon). Then you can just multiply and divide: 24000 books * $7 / 6 years ~ $28000/year.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by BRUTE » Thu Jun 23, 2016 10:50 am

@jacob: is brute understanding correctly that jacob lives on $7k/year on top of a paid-off house? or do the 7k somehow include paying for shelter?

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Thu Jun 23, 2016 11:04 am

@brute - It's currently $5k/year on top of a paid off house. Over half of these $5k are RE taxes (high in Illinois) and insurance(*).

In the past 15+ years, the $6-7k/yr has included rent instead of RE tax and home insurance.

The cost for my half of the house was 47k or so, so if you want to add imputed cost, I guess you can add 47k*0.03=$1400/year to that. Supposedly these houses rent for $1500/month, but that's irrelevant since that not the price owners pay---the NAVs in Chicagoland are/were much higher than the cost of the houses. That's why we switched to owning instead of renting.

(*) The only stuff I've bought this year is a pair of pliers and four router bits. Also gas money for two road trips and a couple of motel nights. About $300 total.

I think the main take-away is not whether my costs are $5k or $7k or $9k ... the point is that they're very low compared to both SWR and financial cash flows---I deliberately try to keep my dividend income from getting too high, but at $17k/year I still have plenty of head space. The other point is that things are too complicated to be summarized with a single NW number. It is for the same reason that companies report their finances using both balance sheet, cash flow, and income statements.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by vezkor » Thu Jun 23, 2016 2:31 pm

Striving for $500,000 invested income-producing assets. This allows for $1667/month at 4% swr or $1250/month at 3% swr. I plan to have the following estimated monthly costs (pulled 24 months of budget history and rounded, so I could also just live differently i.e. car-less in retirement):
Rent: $500
Transportation: $200
Food: $100
Utilities: $100 (including internet)
Entertainment: $100
Gifts: $100
Communication: $20
Health Insurance: ????

I'm 26 now, and at my current $$ accumulation rate I won't reach that net worth until 2028 (age 38). So most of my focus is currently on increasing my income to reach $500,000 sooner. Working at a fortune 500 company right now, so health insurance PERSONALLY costs me $36/month at this point in time. I need to do much additional research to figure out what I'll be wanting/needing when I pull the trigger and go FI... also I expect the system to change drastically over the next decade, so anything I learn today might very well be obsolete by 2025 anyways. :)

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by JamesR » Thu Jun 23, 2016 5:16 pm

jacob wrote:
JamesR wrote:Jacob, based on the math, you FIREd at 4.67% SWR.. I think that should be highlighted more often ;)
@JamesR - See this is exactly why I hate giving out numbers as they tend to be taken/copied out of context(*) Note that I said that I quit exactly at the market bottom (S&P500 was around 700). My NW had previously (in 2008) been close to 200k ... and because the market recovery was so fast, it was back up to 200k shortly after I retired. Note that I also said that $1500 were wants ... and specifying the frivolity/optionality of that want. So in terms of needs, the SWR was 3.66% for a brief period of time in Mar 2009... but a year earlier and a year later, it was under 3%. I also noted that I had an established source of good at-will income that covered my expenses with about 4 hours of work per week, i.e. it wasn't Walmart greeter with a 3 hour bus commute..
Yeah I wasn't trying to take it out of context, it's more motivational than anything. It was clearly based on the times, the market state, the at-will income capability, and the $1500 luxury overhead. I guess the fact that you were even lower than 4% prior to retirement is also a good indicator.

BTW, I guess I would've calculated that math as: (1-4.7%)^6 * (1-21%) = 0.59% left of the investment egg after 6 years, and 7.89% SWR. But I that's only because I'm considering the SWR each year for the withdrawal amount, so it shrinks as the portfolio does :P. That way it forces the early retiree to scramble for income and/or drop the luxury expenses.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Did » Fri Jun 24, 2016 4:19 pm

@jacob Appreciate the sharing and honesty.

Would you have been as content if you hadn't earnt another cent post ERE, or would you consider seeking increased income due to serendipity or following interests an essential part of the strategy. This may be a result of following interests like hiking for example or long term vagabonding.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Fri Jun 24, 2016 4:58 pm

@Did - I consider serendipity an essential part of the ERE strategy. I see ERE as something quite different from "extremely ER" both in terms of skill-set and attitude when it comes to earning and spending. I see ERE as multidimensional and E-ER as fairly one-dimensional. It's too bad that I picked the confusing terms/word/title I did when I started the blog.

I have done quite a few things that didn't result in any or many cents ($0-$500 total over several years): bike repair, wood working, sailing, martial arts and non-profit environmental work. The only two things that serendipitously resulted in money was the book and the quant work. And the only dependable part time/scalable/proven income I already had was copy-editing.

So out of 8 attempts in 6 years, 1 was proven, 2 were successful, and 5 failed. And this is from a guy who put in effort to generate value. This is why I worry when E-ER affinities don't put in that much effort and yet pull the plug while pushing the numerical envelope.

Lets suppose the two serendipitous incomes had failed... In that case, I could have focused more on monetizing the blog. It currently makes $100-300/month because ERE readers are so tightwaded that affiliate income is a no-starter. Still it's money. Copy-editing was by far my best lead and bike repair was my second-best lead. And the markets recovered nicely. So I could have done well being around 2%, working a few hours per week copy-editing, and repairing a bike or two each month.

Take away the copy-editing and I'd actually would have been drawing down. However, I think the more that's taken away, the more I would have focused on generating more leads---probably in the bicycle direction. Maybe I'd gotten a part time job as a mechanic for the hell of it. I like to get paid for my hobbies.

It's pretty hard to predict/say exactly what I would have done if things had gone differently, but I'm pretty sure I would have responded in productive ways rather than just optimistic/hopeful ways. My point is that I adapt and that I keep throwing mud at the wall to see what sticks if any. Whereas, I notice that this attitude is not that common. The thing is: I operate from a position of avoiding failure at all costs. This is also how ERE is designed. It's a robust system designed to be resilient. Rah-rah optimism with buy&hope is pretty much the anti-thesis. To me, FI is just backstop safety-net. It's not something I depend on. At all.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by BYC » Fri Jun 24, 2016 11:06 pm

@Jacob
I deliberately try to keep my dividend income from getting too high, but at $17k/year I still have plenty of head space
In what sense do you mean this? Is it just to reduce exposure to high yielding stocks where the dividend is at greater risk of being cut, or do you have a deeper aversion/problem with dividend payers?

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Did » Sat Jun 25, 2016 1:02 am

@jacob Thanks.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Dragline » Sat Jun 25, 2016 1:18 am

jacob wrote:@Did - I consider serendipity an essential part of the ERE strategy. I see ERE as something quite different from "extremely ER" both in terms of skill-set and attitude when it comes to earning and spending. I see ERE as multidimensional and E-ER as fairly one-dimensional. It's too bad that I picked the confusing terms/word/title I did when I started the blog.

I have done quite a few things that didn't result in any or many cents ($0-$500 total over several years): bike repair, wood working, sailing, martial arts and non-profit environmental work. The only two things that serendipitously resulted in money was the book and the quant work. And the only dependable part time/scalable/proven income I already had was copy-editing.

So out of 8 attempts in 6 years, 1 was proven, 2 were successful, and 5 failed. And this is from a guy who put in effort to generate value. This is why I worry when E-ER affinities don't put in that much effort and yet pull the plug while pushing the numerical envelope.
This reminds me of:

"Spock: Random chance seems to have operated in our favor.

Dr. McCoy: In plain non-Vulcan English, we've been lucky.

Spock: I believe I said that, Doctor."

But that's really not what I mean overall -- the real lesson is that continued efforts at things that are much less than certain but within the realm of possibility are likely to yield favorable results in the long run -- this is essentially a confirmation of the 80/20 rule in broad application.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Sat Jun 25, 2016 7:18 am

@BYC - It's mainly taxes. Otherwise I very much prefer dividend payers. I don't buy any company which doesn't pay a dividend.

@Dragline - Luck is when opportunity meets preparation. Both of these distributions can be affected. The long run principle of "reaping what you sow + a random factor" is called ergodicity.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by Dragline » Sat Jun 25, 2016 7:48 am

jacob wrote: I don't buy any company which doesn't pay a dividend..
That's so 19th Century of you. ;) https://www.youtube.com/watch?v=6nNAgNtMedo
jacob wrote:@Dragline - Luck is when opportunity meets preparation. Both of these distributions can be affected. The long run principle of "reaping what you sow + a random factor" is called ergodicity.
A good part of life is all about the fractals, baby. http://bookstore.ams.org/cbms-120

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by jacob » Sat Jun 25, 2016 7:55 am

@Dragline - This would pertain to the sequence of functions on page 68. It's probably easier to think of ergodicity as the outcome of rolling a loaded dice multiple time and people having some influence over how their load their dice.

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Re: What is your FIRE number? Your expected FIRE expenses?

Post by DutchGirl » Sat Jun 25, 2016 8:56 am

So I guess I'm between the leanfire and poshfire group :-) . Some explanation of that: on reddit, I see people throwing numbers like $1 million and $4 million around for their target FI(RE) amount as if it's nothing. Here, I see people aiming for $150k or retiring on $200k.

I have about $100k now and need some more to call myself retired. I'm aiming for 300k euros (which is something like $333k apparently today). That would mean I'd have 1000 euros/month to spend with a 4% withdrawal rate. I'm currently spending more than that, but by the time I'm getting close I hope to have reduced my spending :-) (Some of it currently is workrelated, definitely).

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