I am really enjoying the book and wish I had started with it. I do need very clear explanations and thought processes--they help my often scrambled brain and they are certainly helping at this point.
I do disagree with a small segment--that is the case against "long term strategies," 401ks, etc. I believe this may be due to some things not holding over for someone who wants to retire early and needs income immediately, and may also be due to bias against the finance industry--which I don't blame anyone having worked in this industry the entirety of my career.
My main issue is that regardless of how early you are retiring, you likely plan on living over 20 years in which case long term strategies do make sense. I think that the discussion of "buy and hold" is taken from people who are the bane of my existence--such as Dave Ramsey, who try and make things as easy as possible to his audience while leaving out very important disclosure. It's why you see 60 year olds still having 100% in an S&P 500 index fund. The real strategy is that you develop three different buckets, a cash bucket (sort of like an emergency savings in your investment portfolio)--an intermediary bucket like certain types of bonds, and an equity bucket. As you get older, the cash (short term) and intermediary bucket grow larger, slowly. This is so you are not dependent on the market to meet your needs. Cash is typically 3-5 years worth of expenses, and the bonds depend on your risk profile. It is true bonds do not always behave the way we want them to, especially in the sort of zero-interest and even negative interest rates we've seen recently, but the losses from them are generally far less than would be from equity. So as Jacob talks about decoupling, bonds allow a intermediate play that allows you to have some flexibility with the market and allows you to be more strategic with equity. Strategic in the sense of taxes (sometimes it makes sense to take a loss for tax reasons) or to give you time to sell when you believe the equities you hold are overvalued.
Because this cash/bond portion will be growing larger and larger as you get closer to "retirement"--which I agree does not make as much sense for early retirees, but the idea is that you will not just be automatically investing certain amounts into the market, but you will also be selling slowly over time instead of all at once when you need the funds. I would take this strategy with me into ERE. I would likely even segregate certain accounts--one for post 59.5 and once for my needed earnings. If my needed earning have an allocation of 5-10% cash at all time, as equities increase I would need to continuously sell them--from there comes strategy of when (which bonds allow me the choice) as well as which ones which allows me to think about valuation/tax reasoning/etc. For this reason, my long term account would likely have a higher rate of return as it would be taking on more risk since I do not need the bond/cash bucket, but I would not expect my current strategy that I'm drawing from to make the kind of returns that index-fund gurus say you should always be making.
A lot of tax strategies are not needed if you are living at or below poverty levels, but one thing that I think should always be used is 401ks/IRAs. This is simply because you will not pay any capital gains on these earnings and that is huge. If you only are allowed a pretax 401k, you have two options--in one you can have that be your "long term" strategy bucket for after you turn 59.5. Or you can do a roth conversion over time. Given most on this forum will be at a significantly lower tax bracket, it may make sense to max out pretax 401k and then do roth conversions slowly once they are at a smaller tax bracket.
Roth IRAs are interesting in that the amount that you put in can always be taken out without penalty, but the earnings are subject to penatlies taxes. However, they are not subject to penalties and/or taxes for certain things such as disability/ first time home purchase / or the big one--HEALTH INSURANCE PREMIUMS--or you can even calculate an amount over a certain period of time in periodic payments.
So there really is more flexibility with these accounts than is often perceived. Although with your employer, you may be limited to pretax 401ks and limited investment options (or you may not, every plan is different)--once you leave you can roll it to an IRA to invest however you like and/or you can convert it to roth strategically over time, which gives you even more flexibility.
I also do not agree that most will be able to find better values unless investing is a passion and an interest of yours, like Warren Buffet you are reading all the prospectuses and earnings reports for hours a day. This may be a bias of talking to the "average" investor, but certainly, there is a reason why dead investors tend to make the best investors.
The argument that the system may fail entirely is one I'm more willing to engage in than finding better ways to leverage the system. While I do not personally believe the system will fail in our lifetime (by that I mean great depression levels and never coming back), I do believe it will at one point. This is where I think the idea of a "renaissance (wo)man" makes sense and should be invested in. Ultimately, if the system fails, neither your emergency savings, the cash you hide in a hole in your backyard, the gold bars that you maintain--none of that will matter. It is far better to invest in a grain silo and grain if that is your plan. Or, as many in this forum do, become permies and learn a wide variety of skills. (If I take the grain silo literally, the amount of investment to keep it free of pests while waiting for collapse, and then the amount needed to secure it so you aren't killed once people are starving death and can still make a profit seems like too much of an expense/risk for me, while having the skills needed to survive will not make you as big of a target--but hey, that's risk/reward right
)
I tend to like to plan on both happening. I have witnesses the system fail me many times over, yet it has largely still held intact itself. If it exists, I plan on benefitting from it and using every loophole I can as far as taxes/planning/etc. I agree that financial planning does not really exist for early retirees who are willing to drop out of consumption, but I still think you can creatively use strategies to navigate early retirement. I suppose in the same way Jacob is very interested in researching and studying individual equities--I am extremely interested in IRS code and learning about the various loopholes to get as much as I can out of my assets while giving the government as little as possible. Doing so while living at poverty level income is even more exciting and gives a huge opportunity to reduce taxes in whatever form. If I do end up disabled at one point, something that I honestly do not want happening--but if I were to, I think I may have even more opportunity and I am researching that currently.
--------------------
Onto the Renaissance Wo-man building of my life
As we have gotten rid of our air conditioning, (we did buy one for our room)--I am looking for ways to optimize our current house. I have completely blocked off one southern facing room--my writing/hobby room. I do love this room, but do not need to utilize it currently. I would like to block the kitchen off completely but be able to bring it back into the house during winter. (was reading thread about outdoor kitchens). Kitchen could effectively be completely blocked from rest of the house and just put screens on all windows/doors and have it perpetually opened to the outdoors during warm months. Then "Open" The windows and doors to bring it back "inside" during cool months when we need pipes to not freeze and the warmth from the stove will be welcomed. Before taking on a big project and learning how to effectively close it off with construction, I would like to learn how to sew. In England, they use door curtains to prevent drafts. I want to learn to sew curtains in general and would block this part of our home off with heavy curtains on both sides of the wall.
Also would like to increase insulation in our attic. Have done preliminary research on how to do so--but need to take it step by step.
Want to chart how where the sun interacts with our home throughout the day and learn more about how that influences heating/cooling of our house.
M wanted to buy a draft stopper for the bottom of out bedroom door now that we have portable AC there. I have found they are pretty easy to sew and can be done so by hand. I think I would like to become relatively good at sewing by hand before moving on to buying an electric.
---------------------
Have thought recently about saving enough in cash to take 1-2 years off of work and simply seeing if I can make it as "Working Man" as is said in the book. That is, finding projects and the like for income and living off of that income only. Just a time for me to explore income outside of salary. If I had healthcare taken care of--which I would need about 6-7K a year for I believe, I'd have more flexibility with what I can do with my life. Maxing out HSA and building up a cash reserve while pondering this possibility.