I complained a lot about the economy in 2021. I didn’t like the trillions in debt-driven government spending and the ensuing inflation. Still, I acknowledged that the markets continued to rise – as the ‘Trump Bump’ became the ‘Biden Bump’.
Yesterday, I tallied up how we finished the year with our portfolio. Our retirement savings were up an impressive +15%. Our gains were led by our equity holdings (S&P 500 +29% in 2021), but tempered by bonds, cash, and real estate loans.
I went into the year not expecting too much. After two years of fantastic returns in our portfolio (+42% from 2018 to 2020), I felt like we would probably finish flat. I should have guessed all of the money the government handed out would fuel equities growth.
So where do we sit after (almost) 6 years of early retirement? I’m happy to say we are well ahead of our (conservatively planned) goals. Our retirement nest egg is currently more than 1/3rd bigger than we expected it would be at this point.
That savings cushion has made it increasingly easy to pull the trigger on bonus vacations, home improvements, and even an extra vehicle. Our spending was about 20% higher in 2021 than I had planned. In the future, the majority of the surplus will be the basis of investing in our Florida Project, although we won’t likely jump into that for a couple more years.
All in all – with the pandemic continuing and economic challenges on the rise in 2021 – I am very grateful for where we sit. I sometimes cringe at the economic decisions our government leaders make, but I’m thankful we are well-positioned in our own finances.
How did your 2021 returns come in? Going to change your spending plans at all?
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MrFireStation 
Eric, congrats on the strong 2021. Like you, we came out ahead of our plans for the year. Over the last couple years, the strong market has put us a couple years ahead of our plans (retire-ish by end of 2024). We held too much cash in 2021 as I was expecting a semi-significant pullback. At 7% of our portfolio, i wonder if we were too cautious. Alls well that ends well, i guess.
We’ll dollar cost average the surplus cash into our core allocation model over the course of the first half of the year. At some point in the future, I’d love to hear your take via the blog on whether there’s a role for Crypto as a holding. I k now you’ve dabbled a bit.
At this point, it’s about .5% of our portfolio, but I’m starting to look at increasing that to 1-2%. (It would be a portfolio of about 6-7 different coins, with most of it in BTC and ETH). It’s suuuch a sketchy, wacky space, I’m a little hesitant to do anything there. But, the macro trend is hard to ignore and the growth potential is interesting and it fits the plan to have 2-3% of the portfolio in some high risk/high reward stuff (the other would be some units in a vc fund).
Hope all is well. It’s been fun reading the updates!
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Good to hear from you and glad you are making good time on your FIRE Journey! It’s been awhile since we met that snowy day in St Paul for a burger at the Bulldog. Everything pre-CV19 feels so long ago now.
Cryptos are just 0.2% of our portfolio. What I would call a only a ‘Hobby Share’. Long term, I’m not sure if BTC goes to $1M/coin or $0/coin. Frankly, both seem just as likely. Having a portfolio seems like the best call.
I think when you get to a certain age, it’s more important to protect your wealth than aggressively grow it. That said, taking your stake up to 1-2% doesn’t seem like it risks a lot. In our portfolio, our small crypto stake sits along with a number of investments in start-ups through an Angel group I’ve been involved in. Those stakes add up to 1.4% of our portfolio and are no less speculative than cryptos.
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We’ve seen similar results after five years of early retirement. We are a full two years ahead of our projected net worth in our original retirement plan.
We were up about 11% overall in 2021, also mostly driven by our equity portion of our portfolio. Our rental portfolio had its worst year in over a decade (ROI 8.5%). Mostly due to governmental over reach with eviction moratoriums forcing us to allow bad tenants to live rent free all year and then sneak out in the middle of the night once the moratoriums were lifted. Inflation has already forced up rents at the end of 2021, so it’s clear 2022 will be significantly better positioned without the eviction moratoriums and the new higher rents. We remain conservative in our approach (50% real estate, 20% equities, 20% bonds, 10% cash equivalents).
I don’t foresee any significant spending changes planned at this time. Other than to continue travel more once again, but that was already budgeted. Cheers to a great 2022!
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We have some domestic trips planned for 2022, but are still holding off on going overseas. We were ready to start booking something and then the Omnicron lockdowns happened.
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Amazing that you were able to do that well despite the government interference that allowed some of your tenants to live rent free. Where in your estimation are rental real estate values since things are opening back up to the point to where non-paying tenants can be evicted again? I recall your mentioning in another post that you were able to push through an 18% rent increase this year. Do rental properties in your area already have the ability to increase rents baked into their valuations? Is this the time for rentals to shine?
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I hope Mr. Firestation doesn’t mind a quick real estate discussion on his blog! But I’ll try to answer your questions quickly.
The thing with rentals is it’s all location specific and very cyclical. We live in a rural mid-Atlantic area and the prices have definitely appreciated greatly here (as a result of our recent rent increases). Prices are primarily driven by investor returns on rentals. Because of this rent appreciation, price points on properties are very high now. I think our area is definitely in a high price cycle, and it’s hard to find good entry points as a result for new investors. So we are holding and waiting for the next down cycle (or an occasional depressed sale) to purchase additional units. We focus on our area because we know it well. I think that is important in our business model. It helps in recognizing good deals when you know your market inside and out, and gives me an edge on controlling my entry points. I know others who purchase out of our state and have done well. It’s just not a model that we are comfortable with, so we focus on a very specific area. I hope this answers your questions.
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Discuss away. Happy to learn!
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My overall was almost exactly the same as yours. During up markets, our incomed focused strategies lag, but we don’t go down as much in a down market. Growth in the dividends portion of my portfolio supports a 4% annual increase.
The people who seem to be concerned about the massive debts that the federal government all seem to have one thing in common. They have children and are concerned for their children’s future.
“A good man leaves an inheritance for his children’s children.” Proverbs 13:22
Hopefully, 2022 brings us a “New Contract with America” that balances the Federal Budget again.
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I think Jack Kemp or Steve Forbes might have been the last two major party candidates not from the Paul Family that have campaigned on balancing the budget. The deficits have gotten SO large it seems most people just expect them now.
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If countries could over spend their way to success, Argentina and Venezuela would be the leading economies in the world. Their profligate spending has taken both from being at about the Top 5 wealthiest countries in the world when they started, to their current depressed state.
Gingrich and his Contract with America provided Slick Willy with the adult supervision he needed to have a balanced budget (sort of). I added the sort of qualifier because they were still spending excess Social Security taxes and was ‘investing’ in government bonds.
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15.3%
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Solid year!
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Interesting how close Chief, Dave and I were to each other.
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ThomH, These side conversations about what is working and what isn’t working is where the magic happens. We are always sniffing around for the next bargain before it gets discovered by others.
Sounds like the Mid-Atlantic area is maxed out. So is the People’s Republic of California. I look at what real estate is going for in my neighborhood and ask myself, “Would I be a buyer today? And answer is a resounding, hell no.”
I have a friend who cashed out of his rental real estate in the Green Bay area right before China Virus hit and is happy that he avoided having to house non-paying tenants while continuing to make mortgage payments. He is sitting on his money waiting to buy when people want to sell.
The only areas where I am seeing ‘value’ right now are oil and gas, pharma and some insurance companies. I am projecting they will pay in the low teens. Back in 2010, I found household names that would yield in the low 20s.
Sounds like many of us are waiting for a fat pitch. As a group, we are the people who were willing to delay gratification in order to reap the benefits in the future of early retirement.
Thank you for your reply.
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Klauswentzel, I am happy to respond and enjoy the sidebar! I hope you find your fat pitch in 2022!
We have certainly found that patience is key in real estate investing. We built a decision matrix years ago for our property investments and it has served us well through the years, and kept us from making bad investments. Real estate has been the only place that I have consistently driven double digit returns over long periods.
Outside of real estate, I’m essentially a boring index investor and take what the market averages will bare. 😉 It has worked pretty well for us as we celebrate our fifth year of early retirement.
Cheers to a successful 2022 for all here!
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