BiggerPockets Money Podcast - The 4% Rule Naysayers Are Wrong (We Retired at 47 Using It!)

Episode Date: February 7, 2025

Does the four-percent rule actually work? On paper, yes. So why don’t more people put it to the test? Today’s guest retired at forty-seven years old and is living proof that the math really does check out. Stay tuned to find out how! Welcome back to the BiggerPockets Money podcast! Bobby Beck has done what so many in the FIRE community are seemingly unable to do—he actually retired on the four-percent rule! What’s more? He did it while living in the Bay Area, one of the most expensive markets in the US. What gave him the confidence to leave his job and never look back? While “One More Year Syndrome” keeps many people from retiring early, Bobby’s mantra of “take a year” compelled him to take a leap of faith. Even though his retirement portfolio took a sixteen-percent hit right before he retired, he weathered the storm, and sure enough, the market rebounded! Now, Bobby lives the life people dream of when they discover FIRE. He has a comfy lifestyle, travels multiple times a year, and only checks his portfolio once a month. If you need the motivation to call time on your career and put your retirement date on the calendar, you don’t want to miss this episode! In This Episode We Cover How Bobby and his wife retired on the four-percent rule (at age 47!) Why the FIRE community overestimates how much they’ll owe in taxes How to beat “One More Year Syndrome” and actually retire early Growing your brokerage accounts and cash to avoid the middle-class trap The portfolio allocation that will give you the confidence to retire And So Much More! Links from the Show Mindy on BiggerPockets Scott on BiggerPockets Listen to All Your Favorite BiggerPockets Podcasts in One Place Join BiggerPockets for FREE Email Mindy: [e-mail] Email Scott: [e-mail] BiggerPockets Money Facebook Group Follow BiggerPockets Money on Instagram “Like” BiggerPockets Money on Facebook Sign Up for BiggerPockets Momentum 2025 to Reach FIRE Faster Maximize Your Real Estate Investing with a Self-Directed IRA from Equity Trust Learn How to Retire Early with Scott’s Book “Set for Life” Find an Investor-Friendly Agent in Your Area How Much Do You Need for Early Retirement? (How to Calculate Your FI Number) (00:00) Intro (01:03) Retired at 47! (05:49) Bobby’s Portfolio (08:35) Real Estate Investments (17:05) Withdrawals & Tax Strategies (26:45) 100% Stock Portfolio (34:36) What Does Your Life Cost? (39:47) The 4% Rule Works! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-605 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

A question Scott and I often ask ourselves is, do people really retire using the 4% rule? Is it actually possible? Today, we're joined by Bobby Beck, who retired at age 47 and is doing just that. So how has he done it? Let's find out. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen. And with me, as always, is my booming co-host, Scott Trench.

Well, a good conversation is looming today with Bobby Beck. who is a true 4% rule, early retiree. Couldn't be more excited to have him on the show today. Bigger Pockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone no matter when or where you're starting. And we really hope that you are zooming towards that goal. All right, enough of the terrible, I don't even know if those account as puns.

Let's not even give it that much credit. Bobby, welcome to the Bigger Pockets Money podcast. We are so excited to have you on today. thanks for joining us and thank you for reaching out with that wonderful email. Ah, it's a pleasure. Pleasure to be here. Bobby, tell us what was going through your mind when we put out that call to action about the skepticism about you existing and what prompted you to reach out and then we'd love

to hear about your portfolio. Sure. Yeah. For me, I wanted to reach out because it's kind of the promise of the financial independence movement in a lot of ways that we can save up an investable portfolio that's 25x, 25 times our annual expenses and live on 4% for 30 years with a 95% success rate. That is kind of the promise a little bit that, you know, the simple path to wealth, that a lot of we base our financial independence journey around. And I'm not the only one. There's a, that's what I want to be

clear. So I just wanted to reach out to let other people know that that works. I mean, it's working for us. Of course, I don't think financial independence is a straight line. I think there's, you know, life is lumpy, right? There's a lot of things that happen along the way and you need to make adjustments as you go. The, we'll talk a little bit maybe more about what the 4% rule is, but that was kind of based on a set it and forget it for 30 years. And, and that's kind of not how life works. So I think that for us so far, we've been financially independent and retired early for three years now. We're entering into our fourth year now. And we are living on the 4% rule and kind of plan to keep doing that if the market continues to support us in the ways that we see that

it is doing. So there's also this cool Facebook group called Finally Phi. So I joined it once we became Phi to kind of meet other financially independent people. And there are a lot of other financially independent people that are living on the 4% rule there. And I think people like myself and people on that particular forum thread on Facebook tend to be more maybe in the shadows. You know, we're not like, hey, we got this cool side hustle and all this kind of, you know, which is awesome. It's great. You know, we're kind of living our lives. So I just, that was what prompted me to kind of step forward and say, hey, I just want to make sure that other

people are aware that this is possible and other people are doing it. When's the last time you earned any type of active income whatsoever or had any type of income on your tax return that wasn't from your investments? Yeah, we both ended our jobs at the same time. in January of 2022 and then have been five since then, or 2021, sorry. And yeah, no other income is coming in, just our portfolio. I got some questions. I have a ton of questions. I'm not going to throw them all at you at once.

But let's talk about the, well, it's my elephant in the room. You retired in 2021. That was the middle of COVID, which had a ton of uncertainty. How did you mentally handle leaving during that? time frame because like the stock market in 2020 went down and then it went right back up. I think it was what three or six months it was back to to where it was before or almost back to where it was before. But there's so many people who are like, oh, I'm on the path of five. Everything is not COVID times. One more year. One more year. One more year. There's so many of one more years that they call it one more

year syndrome. So how did you leave in 2021? Well, my wife had already made the choice to leave her job in January of 2021. And it was in July that I sold, I had two companies that I was running. And I sold both of those companies in July. And then I had a six month kind of stay on and make sure things transition well. So my time period then became January as well. So I was kind of forced to stop work then. Originally, the plan was to sell one of my businesses and work on the other one. However, the people that acquired my business liked both businesses. And so they made an offer for both. And so it just wound up like my wife was already going to take a sabbatical. I sold my businesses, both of them.

And then we kind of looked at the numbers as we were kind of staring at the numbers a lot up until that moment. And we kind of realized we were pretty much just right at our fine number. And then we decided to just give it a shot. Like instead of let's take one more year, it was like, let's take a year. And be financially independent and see what it's like to retire early. and see if we like that and go from there. Okay, so what kind of businesses are we talking about here? Were these like small businesses?

Were you the sole owner? I had two partners in both businesses. One was a technology online education company, and the other one was the platform that ran that business. And so I spun that out into a second business because the platform, we built it from scratch and then could leverage that into other verticals. So what did your portfolio look like before you sold the company,

and what did it look like after you sold the company? you, were you in stocks and bonds beforehand or was the bulk of your wealth in this, in these companies? Yes. In 2017, my wife and I kind of had a, what we call our financial awakening. And the financial awakening was finding out that we were spending more than we were bringing in. And that was not going to sustain us. We weren't really investing in our future. We were doing a little bit in 401ks, but that was pretty much it. And the rest of it was just kind of spend as, as we wanted. And we realized that that wasn't sustainable and we had to make some changes. So at that point, our portfolio was largely a little bit of savings and a little bit of

401k. That was kind of pretty much it. My wife worked for one of the Magnificent Seven companies, so she also had some stock in that company as well. And then it was in January of 2018. That's when I found the financial independence movement, choose FI, all these different resources, Mr. Money Mustache, the mad scientist, Simple Path to Wealth. And at that moment, you know, I kind of came in and told my wife, we're going index funds. We're going to charge towards this thing called financial independence to retire early. And at first she wasn't on board. And then over time, she did get on board because we started just putting a lot of money into taxable brokerage account because we knew that was going to be the money that we could actually access the soonest

versus having to wait until we were 59 and a half to get access to some of the other accounts. So essentially we maxed out our 401ks at that point from 2018 forward. and then just put any kind of bonuses that we got, any extra income into the taxable brokerage account. And to this day, our portfolio still looks the same. It's super simple. We have single stock in one of the magnificent seven companies that my wife had. The rest of it is in VTSAX, VTI, in Vanguard Total Stock Market Index Fund. And then we have all our 401Ks are also in a total stock market fund as well.

and then we have some real estate. Real estate, I can explain what that means. It's not like Scott Trench style real estate. And then we've got cash. And that's our entire portfolio. We don't have a Roth IRA. Our income limits didn't allow us to do that. We found out later that we could do Backdoor Roth, but it was a little late.

We also don't have an HSA just because we didn't take advantage of that in the time that we knew was available. We have to take a quick ad break. But while we're away, my dear listeners, if you're not already, please follow us on Instagram and Facebook. On both platforms, we are bigger pockets money, all one word. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going. And more importantly, where your tax refund can make the biggest impact. Because the goal isn't just a lot. look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like

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30-day trial at audible.com slash BPMoney. All right, let's jump back in with Bobby. Tell us about the real estate and can you lump in your primary residence and tell us about that as well? Sure. So we track our net worth in two ways. One is our total net worth and the other one is our financial independence net worth, our five net worth. And the total portfolio includes a rental property that we have in Mexico that we own outright. And the rest of that is our primary residence. All of that is included in our total net worth. And the fine net worth is it doesn't include the property that we have in Mexico and it doesn't include a certain amount of money in our primary residence. Our plan is to use the rental property and some of the equity in our current

house to buy a house in the future. So that we take out. And with those two things excluded, that's our five net worth. All the rest of it is invest. assets that we can pull from. So walk me through this concept of your future hope. I think that that's an important piece to the puzzle here and an interesting nuance. So are you saying that your current home is much, much bigger, nicer, more expensive, whatever than the future home you plan to live in and that you're including that portion of the equity in your five net worth because you plan to invest it? Is that the right way to understand that? That's correct. Yes. Our current house is large. And And it's nice and it's in an expensive area.

And our phi number was calculated based on living in the Bay Area, California. And so it's a very high cost of living area. We did move from a super high cost of living area in Silicon Valley to a lower cost of living area, but it's still a pretty high cost of living area. And we did that in preparation for financial independence and retiring early. We wanted to pay off this house in full and just be done with, mortgage. But the way that we have it is, yeah, our future residents will be smaller. It will be somewhere else. It might be in California. And that's kind of what we've planned for California

prices, but for a more smaller, modest home. I love that. And I want to call out that I kind of think about it the exact same way. Right. Now, my kiddo is two and yours is 13. So I imagine that my time horizon for living in my current house is closer to 20 years. And yours is a probably closer to seven, 10 years. So maybe right around there. So, but I love that framework where, hey, there's a house you might want to have where you're raising your kids in. And there's a house that you might want to have afterwards.

And now we can include a portion of our, of our home equity in our fine net worth. We had this whole debate. We have this debate over and over and over again hundreds of times on the bigger pocket, money podcast. Should you include your home in your financial independence number? I love the way you've answered that and said, no, I don't include it. except for this piece, which I do intend to actually use as part of my investment portfolio on an ongoing basis when I downsize my house. So I think that's an awesome answer to that question.

Yeah, I love the two different net worths. The total net worth. I mean, your house is worth X and you take away the mortgage if you have one. Let's say your house is worth $100,000. You have a $10,000 mortgage on it. That's $90,000 that's actually money that you should count towards your net worth. But separating it out for your fine net worth because in this situation, you wouldn't be selling the house that you're living in or you would be selling it, but then also taking that money someplace else. I really like that idea so much, the fine net worth. And that kind of quiets a lot of the naysayers who are like, well, you're not going to sell your house. You're not going to do this. You're not going to do that. Well, here, Bobby has fixed that problem for you. Also, for what it's worth. Right. And I'll be wrong on

this. Like, I'll be wrong about every macro prediction I make, but I'm going to make it anyways for this. I am 34 years old and my graduation class was the peak year in 2009 for high school graduates in the United States of America declined from there at that point. And my friends, my peers are all having kids later than previous generations, but they're having them. And in five, 10, 15 years, houses in good school districts are going to be, I think, in the most demand they'll ever be for that. So I wonder if your timing is going to be absolutely perfect for your financial independence journey with that on a real, real adjusted basis when you go to sell this thing in five to seven years, assuming that it's the reason you're living there

is because it's in a good school district for your kiddo on that front. So I wonder if you're going to actually be really well rewarded. That'll be cool to see. Yeah, definitely the reason to move here is where we were before. It was all private school from middle and high school. And that expense was just going to add so much extra. So yeah, we moved. to a lower cost of living area where the schools are outstanding. So yeah, I mean, that was the reason why we made that bet. So yeah, we'll see, we'll see how it works out. So walk me through the other property here. What is that? Can you give us just a little bit more detail on that? Does that produce any income or is it just for your use? Yeah, it is a rental property that we

will have on Airbnb. It just completed being built in December. And we went there in December this year, December, January to kind of see what it was like. And it's amazing. And we're so excited. about it. It's in a great area. And yeah, so it's going on the market as we speak. Photos have been taken, all that kind of stuff. So yeah, and I will say that that one property is way more work than our entire portfolio and it makes up a small percentage of our portfolio. So, I mean, it is, it's like property management and all the different things that go into it. So it's not something that we want to repeat. We don't want to do more rental properties. This was more in an area that we enjoy that we like, that's an appreciating kind of hot area. And so, yeah, the plan is just to hold that

and as we sell our primary residence in like seven years, we'll also look to sell that property at that time as well. So is this where I get an aha. No, this is not technically a true pure 4% of a portfolio. Just kidding. This is a small percentage of a overall portfolio, right? Yeah, and that house is index for, or it's like earmarked for a future residence. So, yeah, we don't, we think it's still true 4%. And walk me through your cash position relative to your annual spending with this portfolio. Yeah, our cash position right now is we have about two and a half years of cash in the bank to kind of weather the storm if the market goes down.

We can kind of use that to recoup. We did in the first three years post-R.E. Retiring early, we lived on cash to kind of let our portfolio. have a chance to kind of to see what happened. You know, we're always looking at sequence of return risk. We want to make sure that we're good, that we're not, you know, retiring into a down market. And of course, the moment that we retired in 2021, the market went down that year. So it was kind of a little scary for us. Yeah, I was going to say that your timing was actually terrible, right? Because you had a 22% or 25% drop or whatever it was from peak to bottom. And it sounds like

you retired right at that peak, essentially. So how was that emotively? Yeah, it was scary. But as everybody knows, I think, in this community in particular, you just stay the course. I have friends that are like, pull out, sell everything. And I'm like, no, I just stay the course. And luckily we did. It bounced back the next two years have been absolutely incredible. And now we feel like we do. We have a nice buffer that it makes us feel comfortable to proceed with the plan.

But it did. It was trying. It was a little moment of like, did we just do the wrong thing, you know? but so far so good. Okay, let's talk about your portfolio. How frequently are you checking in on your numbers? I'm not like Carl, your husband. I don't check it every day.

But yeah, no, we check it once a month. We have a meeting, my wife and I, the second Friday of each month, called our Freedom Friday's meeting. And in that meeting, we review our expenses from the previous month to see how we did to plan. Like, are we kind of on target? Where do we spend a little bit more? Like, do we need to make adjustments for next month? And we look at our overall net worth and how the portfolio is doing.

We can kind of like make adjustments as we go. And it also just gives us a moment to kind of reflect on the plan and keep it close to us so that we remember that like this plan is working, you know? So yeah, it's that we have 12 of those meetings per year and there's something that we both look forward to each month. And what is the actual mechanics of the withdrawal? Are you withdrawing every month or every quarter, every year? How does that work?

Well, we just did our first withdrawal ever for actually from our, from our portfolios, because the first three years we lived on cash. So that was pretty easy. We just had that in a high-old savings account and we would just move money over. And I would do that every three months to kind of do like every quarter. Now what we did for this year, since we sold stock, we sold six months of stock. So then I put three months of that in our checking account. And that's kind of what we did. we live off of and I put the rest of that three months into a high yield savings account just to get a little bit of interest there. When you retired three years ago, as Scott alluded to, you probably retired at the peak and then your portfolio went down. In terms of like your fine number or like starting starting number when you retired, where is your portfolio at now? Is it is it higher than or lower than when you started? Yeah, it's significantly higher than when we started. Yeah, it's significantly higher than when we started now. When we retired, we were pretty much right at FI, like our FI number. And so that was like, hey, we hit it. We're in January. You're not going to be working anymore.

And I just sold my companies. Like, we don't have any income, but we're pretty much right at our FI number. So again, let's give this a try and see how it works. First year was a little scary, but we liked our new life that we were cultivating. And so we decided to give it a second year. and then the second year it actually bounced back fully and then some so we did pretty pretty well it went down 15% in the first year it came up 19% in the second year and in year three it came up 16% so it's kind of it's it's doing quite well right now we're feeling good about the buffer now that that there actually is buffer there what do you guys do for health insurance you love there we are on the ACA covered California yeah we love it it's been amazing for us could you give us

like an idea of what that costs and how you plan for that? Sure. Okay. Well, this is a little bit of a hack. Like our first three years, we lived on cash. So our income that we had was relatively low. So we were able to have subsidies cover a big portion of that. However, what we did in those first years is we did sell some stock from the magnificent seven single stock that we have and moved it into the total stock market index, because we don't like having a lot of our portfolio in a single stock, even though it is one of the great ones right now. We don't know if that will always be the case,

so just being safe, we would sell some, but we'd always look at the tax situation, what the taxable event would be, what the impact is to the ACA subsidies. So we did quite well, I'd say for a family of three, for the first three years, we spent about $500 on a month, month on healthcare. And then going forward, and this year we are living off of our portfolio. That's jumped up to about $1,100 a month for the family of three. But we did factor in,

actually, it's cheaper than what we factored into our overall fine number. So that works for us. I got to say, I'm a little jealous here. I mean, living in California with a paid off house, no income that you have to realize, essentially, or very, very low income that you have to realize in a high net worth sounds pretty awesome. in the Bay Area. It sounds like a pretty good, pretty good little sup you got there on that front. And I think, you know, there's a problem with California, of course, for folks in your situation is the super high taxes, but you don't have to deal with that anymore. Was that a factor, though? Did you pay that on the front end with the sale of your business in a pretty, in a pretty

meaningful way? One of my businesses was an LLC and the other one was a C-Corp. And the taxes on the C-Corp are great, because if you hold that company for three years or more, then you get an exclusion of this qualified small business stock, which essentially means that the first, we didn't get this, but the first 10 million is tax-free. So anything you make in that is completely tax-free if it's a C-Corp. The LLC, on the other hand, is a flow-through entity, as a lot of us now. So that kind of came and hit the personal taxes. So yeah, we paid a big chunk on the LLC side. So the sale of the business, let's say it was $1 million, $2 million, whatever it was, right, that is all ordinary income is what you're saying on the LLC sale.

That's correct, yeah. So that's a big misnomer for folks. People think they're going to be favorable with tax tribute when you sell a business. Depends on that front. And the C Corp is not a pure all either because all the income that is just you're paying corporate, you know, corporate income tax rates on all the income in the C corp for the entire time you have it. And you're getting taxed if you distribute a dividend to yourself from the C corp.

So there's no free lunch from a tax perspective. It's just a guess about whether the business. business will be worth more in a few years on a total sale basis when you go to SLOC Corp or whether you're going to generate more income for the LLC argument. Exactly, yeah. You paid into the system, and you did your part. Yes. To reduce the federal deficit a few years ago when you sold your business in a very,

very meaningful way. And now, and then for the next two or three years, you had low income and were able to qualify for subsidized ACA care. It seems like the American taxpayer benefited greatly from that trade over the last couple of years. So thank you. Thank you, Bob. Because some people like to get snippy in the comments about whether high net worth individuals should qualify for low-income subsidies on insurance in there.

I just wanted to point that out that this is not one of those cases of Bobby mooching on the system. This is Bobby did his part here. No, thanks for saying that. It's something I think about a lot, too, is just, you know, you get a lot of the questions around. Like, what are you going to do? how are you going to contribute? Like, you're not contributing anymore, that kind of thing. But yeah, I mean, with my company, I ran it for 16 years,

and I will say that we definitely paid our fair share and taxes along the way and at the end. So I do feel like we contributed in a meaningful way to that. Yeah, and also people have no problem, you know, take playing all these crazy games to reduce their income tax burden. And then they get all snippy about taking the ACA benefit on that front. So I think that's another debate for another time. We have to take one final ad break, but first I want to tell you about Momentum 2025, Bigger Pockets, Virtual Investing Summit.

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Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockes. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle.

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Thanks for sticking with us. Well, you're playing under the established rules. When you have a tax deduction, that's because the IRS said, if this applies, then here's your deduction. Likewise, the ACA is saying, if your income is this, then you get these. these benefits. It doesn't say anything about net worth. It doesn't address that at all.

And in fact, if your income goes low enough, the state will put you on Medicaid. So when I was on the ACA, I actually was doing some tweaking to make sure that I stayed above the Medicaid subsidy line because I didn't feel that that was a program that I qualified for. And again, that's my personal opinion.

If somebody else wants to be on the Medicaid program, even though they have in high net worth, that's your business. I don't know why all these people are in your business and oh, you didn't do your fair share. You're playing by the rules. These are the rules and I'm going to play underneath them. And also I would like to point out that there are some very, very, very, very wealthy people who pay very, very little in taxes because they pay tax professionals to find all of these, I don't want to say loopholes, but to find all of these like rules to work within so that they are reducing their taxable income. Frankly, I'm a better steward of my money than Uncle Sam is. Sounds like you're able to do probably most of the things you want to do, travel pretty frequently, eat out frequently, have some toys. Is that, is that right? Yeah, I mean, I think, you know, Paula Pants thing is you can have anything or you can buy anything, but not everything. I mean, I think that's how we look at it as well. Living in the Bay Area is a high cost of living area. So there are certain things that just cost a lot to exist. But yeah, I mean, I think, yeah, we travel. We do about four big family trips. We do one just my wife and I trip and then I do usually one or two solo trips on my own to kind of go explore and fulfill that adventure value that I have. I do a lot of long distance backpacking and stuff.

So yeah, I mean, we've kind of created our life to be the life that we want. There definitely, believe it or not, there are things that we have had to kind of cut back on overall. But I mean, I think we are very happy with the life that we have and we definitely feel incredibly grateful that we are here in this position. Well, congratulations on it. It seems like a wonderful environment that you've created, and it sounds very, very sustainable for this.

I will ask this, because I've been noodling on this one, too, I believe, and I think your portfolio is a reflection of this, that the fire community does not, even though the 4% rule calls for a 6040 stock bonds portfolio, and I believe the fire community, by and large, does not invest in a 60-40 stock bond portfolio. They're all in stocks, essentially. Is that true for you? Yes. I mean, we're 70% in stocks. Okay, so you do have a 30% allocation to bonds.

Well, 30%, 10% is in cash and 20% is in real estate, but 70% is in stocks. Your stock portfolio is no, no bonds. How does that, you know, I, I, I, I, I, I, I, I woke up a few weeks ago and was like I was in the same relatively same similar kind of asset allocation as you at that point. I was like, I cannot handle the idea of a 50% loss on my stock portfolio at this point, even though, yes, I'm beyond the 4% rule. And, you know, all these, I just don't want to, I don't want to go through that for an emotional standpoint. And so I'm reallocating that to real estate. What, where are you just, are you comfortable with that? Is that not a, is that not a risk or not an issue? for you psychologically in terms of how you think about your portfolio?

Yeah, I mean, I'm definitely, we think about that for sure. I think the way that we look at it is that most recessions tend to last, like, what, eight to 12 months. I mean, of course, it takes time for it to recover as well. But we do have that cash buffer for us that feels pretty good. It should give us a little bit to weather that storm. So that's kind of the way that we look at it right now. and the growth that we've had, of course, it's a gamble, right?

I mean, unfortunately, it's not something we can predict. Like, how is the market going to do? Is it going to pass performance doesn't equal future gains, right? So, like, we have to be aware of that that is a true possibility in our portfolio. But I think the way that we've done it is just buffered in that cash position. That's how we look at it right now. Okay. And I love the fact that you, and of course, now,

several years in, you're ahead of your 4% withdrawal rate number. So you actually have a big, a nice cushion on top of that at this point. But you were, you retired, you fired at the 4% of where that was a serious risk and then experienced the 20-ish percent decline or say, what was it, 16% you said for your portfolio, decline in net worth that followed that and still felt comfortable and went through that. So that's not, that was why I was so interested to talk to you here. and hear about that, you know, it seems like if you can handle that, that, that risk, which you literally went through, you should be pretty good. Yeah, I mean, I think, you know, there's the J.L. Collins' meditation that you need to listen to, right? It's like he does a little

thing about stay in the market. And, you know, you just got to believe that staying in the market is the path, you know, and as hard as it can be. That's just something that my wife and I have have fully embraced, you know, for good or for bad. And we've experienced a little bit of the bad, but, you know, hopefully it'll be somewhere in the middle or good, but, you know, you never know. Mind, do you have any last questions before we adjourn here? Yeah, back to that 6040 stock bond portfolio that Bill Bingen said would last you for 30 years. Do you have any thoughts about putting into a bond fund in the future? You have the cash right now. You have the, real estate right now. I don't feel any pressure to put money into bonds because I,

we've reached our fine number and Carl retired. I'm continuing to work. We're not living off of our portfolio right now. But even when we start to, I don't feel the need to put any money in the bond fund. The way that I think about it is that our high yield savings account is yielding more than the bonds right now. So for me, it makes sense to keep it in the high-yield savings account. Once that flips and the ratio changes, we are definitely comfortable looking at T-bills, treasury bills, putting our money there. So we're kind of looking at. And that, again, is why it's not just a straight line. Like, you have to make decisions as you go. And one of the decisions we have right now is that bonds don't make sense for our portfolio at this time,

but the high-yield savings account is kind of filling that need right now. Just to give the academic counter argument to that, because I do not know any bonds. And, you know, I pull a bunch of bigger pockets money listeners and they just can't do it. They can't do it because the bond yield is so low on there. And I think if you really want to get technical, if you look at like a Vanguard bond, total market bond fund, the yield, the interest is like $3.6 or something like that on the price. But the yield to maturity, what your actual return is, is like closer to $4.6. So it is a little higher than the interest rate on pretty much all savings accounts and most money market accounts, but it's not enough of a spread for folks to be that interested in it. But I think the academic argument is in the event of a really disastrous recession where prices plunge, the Fed would then lower rates dramatically and that would increase the equity value of the bond portfolio, which would not happen to the dollars in the cash position or in a treasury, for example, unless it's not a short term treasury.

So that would be the academic argument for it allocating some to bonds. But to your point and to your real example here and the data that we've collected on all the bigger pockets money listeners through our YouTube polls, nobody does that. It's very tiny fractions of people actually do that. And I don't. I think that it comes down to your level of risk. And I'm very fortunate to be in a position where I don't have to live off my portfolio right now. I'm still trying to, now it's a game. I'm still trying to grow my portfolio just to see what I can do with it.

Like is the knowledge that I have collated and that Carl and Carl has collated is this knowledge. Can we turn that into bigger money? And bonds aren't going to get us bigger money. They're smaller money. Yeah. Smaller money podcast for bonds. Well, it's been announced it here. But yeah, I will say that in some ways in a lot of similar, in a similar situation to Bobby,

I am making a different decision and I'm reallocating a big chunk of my index fund portfolio to a rental property because I can't handle it the same way mentally that Bobby can. Bobby will probably be richer than me in 20 years and perform better. But I just wouldn't sleep well over the next five or seven with that same allocation personally. Well, and I think that's really important. It's how you can sleep. Yeah, and that's the thing that being retired early, it affords you. you the chance to like open up new doors right like you know whether it's health or spirituality

like you get to ask new questions that are kind of difficult to ask when you're inundated with work every day you know i think phi is one of those things like when you reach it it's like you won the game of life you know not really but like when you take money off the table and you're not really feeling like you have to think about it it just opens up life you have to then look at yourself and deal with the things that, you know, deal with the personal development that you might need to do and deal with the health things that you might want to take care of. And, you know, that that is such a luxury that is the biggest thing for me that I'm so grateful for that this community has unlocked for me.

One last question here, because I think it's going to be on the minds of some listeners. You sold a business, presumably making millions in the sale to make this happen for this. what would you say that that is more common in the group that you're part of on Facebook or among the other people you know, maybe in high cost living areas, then just a high income earner achieving five? Is it just more common among the people who retire at your age that there's typically a business sale as a component of that? Not from my experience.

Nope. It seems just like people saving. And everybody has a different cost of living. That's the key. Once you know your expenses, that's like the goal, right? Like you're like, oh, now I know what my life costs. Now I multiply that by 25, and now I've got that amount of money, that's my fine number. And once I get that amount of money and investable assets, I can essentially live on that and for about 4% of that.

And so somebody's life in somewhere else might be significantly less, but it's the amount that they save that gets them to that goal. And I think the real key, a lot of times on different groups and stuff, people post like their entire portfolio and then they ask if they can retire and they're missing the key number. The key number is what is your life cost? Like that's like step number one. Like if you do that, you're like you now have the goal. Like you now know what you're marching towards and then getting to FI is just a matter of following the steps. Like you follow the steps each day, each week, each month, each year. And little by little you get there. It's just a matter of time. It's a long schlag and longer for some than it is for other.

But yeah, I think everybody's journey is different. For us, it was the sale of a business and also the single stock that my wife had in her company that kind of allowed us to get to this kind of in an accelerated pace. Let me also point out something else here that is a really important concept. Your house is paid off. Presumably that payoff came around the same time as your business sale. In 2020, we, yeah, I guess around that time, yeah. And I don't know what the mortgage was, but would it be fair to say that a hope in that area would come with at least a $6,000 mortgage today? That's correct.

Yeah. Let's say a $7,000 mortgage payment times 12 for the annual. That's $84,000 just principal and interest for that. If you want, if your portfolio, if you're living off the 4% rule, you need another $2.1 million on top of what you got just to pay your mortgage payments. on that front. So that's, I want to call that out here. You talk about spending being a key variable. At some point, a decision was made for Bobby to, for that to be mortgage free, instead of investing some very large number in the market, which would have led to a much larger net worth in 10 to 20 years and a very different looking Tuesday. Is that, is that a fair way to say it?

Yeah, absolutely. Yeah. I think for us, we were living in a different area in the Bay area. that was significantly more expensive. When we sold that home, the equity that we had from that, we were able to take that and buy the house that we're in now in cash and have some leftover and put that back into the market. And if you had instead taken out a mortgage and put it in the market, you might be richer, but you would be working, I believe. Yeah, we would definitely be working.

And I know at that time mortgages were still like 3%. So I look at that sometimes and I'm like, oh, maybe that wasn't the smartest decision. but ultimately it allowed us to get to freedom faster. I think those are the paradoxes of fire here. If you do that, you will be less wealthy and you'll be freer. And that's like, how do you make that decision? Well, you made that whatever set of decisions you made around that, you were right.

Because I think a lot of people hear that Tuesday and they're like, that's what I am trying to do. So congratulations for living the dream, Bobby. Yeah, I think that's another thing about life is like, I know that there's a lot of people that have the one more year syndrome. and I think sometimes, every time, like when you make a leap in life, life catches you. It might be completely different than you think it's going to be. But for me, I've always just believed that if I make this leap, I'll figure it out. Like if it doesn't work out, something else new will happen and it will work out. And that for me is just a mantra that I have.

I have several little mantras in my life that have helped me through this journey and made life incredible. and that's one of the big ones is just knowing that life will always catch you on the other side. It might look different, but it will catch you. I think that's a great philosophy. I think that is going to be true in most cases, and it's even truer when your house is paid off. All right, Bobby, this was a lot of fun. I really appreciate your activity in our Facebook group, and I also appreciate you coming on the show to share your story that it is actually possible to retire on the 4% rule without extra income.

So thank you so much for your time today. Oh, it's a pleasure. Thank you for having me. Oh, it was a lot of fun. Okay, and we'll talk to you soon. All right, thank you. All right, Scott, that was Bobby, and that story was a lot of fun. I'm really glad we had him on because he just reinforces my opinion that you absolutely can retire on the 4% rule.

Yeah, I like the fact that he didn't quite retire the 4% rule. He's got a run the property. He's got a big pile of cash on there. So I'm still, you know, I still am technically correct, but mostly wrong. on this one. So I think that was great for him to come on and email me and love the adherence to and then the rewards of on a day or day to day, from a lifestyle lifestyle perspective that he's reaping from the 4% rule. So I think it's fantastic. And, you know, I'll be waiting now for the 4% rule early retiree who still hasn't paid off their mortgage

and lives on the 4% rule. So that's the next one. Please email me if you are or know that person right now with a true stock bond portfolio, relatively small cash position, no other meaningful assets, and has not paid off your mortgage and are living in a retired lifestyle. I'll be interested to see if that person exists. Okay. Well, I do have somebody coming up who is living off the 4% rule, and I'm going to dive deeper into his numbers. I don't know if he has a mortgage paid off or not.

So that'll be just as big a surprise to you as to our listeners, Scott. But yeah, if you know of anybody, if you are living off the first, percent rule with no other sources of income. Dividends don't count, but everything else counts. No other sources of active or even passive-ish income. Email Mindy at biggerpockets.com or Scott at biggerpockets.com because we want to talk to you. All right. That wraps up this fantastic episode at the Bigger Pockets Money podcast. He is the Scott Trench and I am Mindy Jensen. Sake. See you around the playground.