How many people here under 35 would really stop working if they had $1.5m-$2m?
With the recent bout of inflation/concerns about government's ability to maintain debt-to-GDP ratio + interest payments, I'd be worried that you're pretty much forced to constantly be worried about having to return to the workforce in some capacity (part time) eventually.
Working 20-30 hours a week in whatever industry it takes to make an extra $40k-$50k/yr to get by doesn't sound so bad.
There's something too daunting about the concept of "stop working, instead of seeing your net worth go up, you see it go backwards as you start to pull it/spend it during your otherwise prime earning years" I just can't convince myself is realistic for me (and maybe others) to actually pull off. Talk about online is one thing, but actually do/pull off?
If your net worth starts decreasing when you retire you retired a decade too early. I know "I want to spend just enough in retirement that my last check bounces" is a funny joke and all but you have no idea how long you'll live, and no financial advisor worth the paper their business card is printed on would suggest you spend more than your investments earn in retirement.
>no financial advisor worth the paper their business card is printed on would suggest you spend more than your investments earn in retirement.
Sounds like you have never heard of the 4% rule[0]. Further, there are reasons to withdraw funds above ordinary living expenses, such as for gifts and donations.
>you have no idea how long you'll live,
Of course you do, within a range of probability. And there is insurance available to minimize the risk of uncertainty.
There are at least two scenarios where that's definitely not true.
(1) Planned, time-limited expenses that decrease net worth. For example, a child's college education. If you've budgeted for it, this is fine.
(2) General market wobbles. My net worth increases or decreases by tens of thousands in a day, just because of what the market did. (No, I don't have all of my assets in the market, but enough.) If the long term trend is downward and/or not keeping up with inflation, that would be a worry, but a dip here and there is also fine.
Is net-worth decrease a problem outside of these scenarios? Even that depends. It's probably still "no" if there are more income sources (e.g. social security, inheritance from parents) that haven't kicked in yet and will make Number Go Up again when they do. Less obviously, if you're going to run out of money at 150, that's not likely to be a problem. If it's at 75, that very likely is a problem.
It really is possible to save too much, though few do. Telling people to plan for an infinite retirement, which is basically what you're doing, is also bad advice. There's no virtue in scrimping and saving more than you really need to.
> If your net worth starts decreasing when you retire you retired a decade too early. […] and no financial advisor worth the paper their business card is printed on would suggest you spend more than your investments earn in retirement.
Principal liquidation is just fine and has lots of theoretical/historical analysis to support it, with (tens of) millions of people doing it as we speak.
> If your net worth starts decreasing when you retire you retired a decade too early.
Every quarter you drawdown your networth decreases to cover your expenses. Then you hope it maintains/stays the same by the stock market predictably reliably recovering from your 1%/quarter (4% drawdown/year) sale/gets offset by dividends, etc.
To me it seems it might be noise but there is for sure a period where your net worth decreases as you spend your "nest egg". Especially more so if the market doesn't just go straight up over time on average.
>Working 20-30 hours a week in whatever industry it takes to make an extra $40k-$50k/yr to get by doesn't sound so bad.
I guess I question what these part-time, low stress jobs that pay median US annual wages are. They're presumably not driving for Uber or working in retail over the holidays.
If someone already has some sort of consulting/freelancing business, you can probably dial things back a bit. But it doesn't seem straightforward in general.
I do agree in general that deciding to step away from a full-time professional job --especially later career--is something you can't necessarily undo.
I'm 42. I have a number that when I hit it, I will stop because the math covers the rest of my life comfortably. It's not $2m but it's not a big number. At that point, I will spend all my time either tending to my small farm or with my family, enjoying the world.
I don't know what your job/jobs/current culture/past cultures have been like. Obviously every job will have some problems but... being unhappy 40 hours a week+ and then thinking about your job on/off when you step away/not being able to disconnect seems like an "inefficient" way to use your "precious 20s-30s-40s-50s", especially if you could operate at a lower-stress level (less politics, less people being mean/rude, etc.)
But... it's just a cruel side effect of needing to afford to live, right? Plain and simple?
Meaning, there's a decent chance to make it, but I wouldn't trust it. We're talking about crossing 30-35 years, in an exponentially changing world that is exceptionally volatile.
There will be multiple financial crashes. A swift change in government. A currency change. Hyper inflation. Almost anything is on the table in that time span.
I had a number and blew past it then set a bigger number and went past it too. I just enjoy doing cool technical stuff and working with interesting people. I’ve got an age now, 55, when I plan to retire, but even then I’m not sure I really want to not work. Thing is, I’ve always loved computers and doing awesome stuff with them, and it’s easier to do that in an organization. Thing is I’m starting to get more into electronics and embedded systems as I get older, and have some ideas about open source ultra low cost easy to self maintain and build irrigation and farm automation systems in developing countries. So I plan to shift my focus around 55 to less tech for techs sake and more tech for humanities sake, without regard for compensation.
I sort of let things drag out the past few years. Partly because of COVID (it's not like I could travel) and partly for other reasons. I wouldn't have been unhappy to get a severance or even just get pushed out at some point. But I used up a bunch of vacation time I had saved up and pretty much gliding to a comfortable endpoint. I didn't really need to additional money but figure I might as well take it if I can given working isn't really getting in the way of other activities.
There are tons and tons of really cool technical problems and projects out there that aren't financially lucrative but have huge positive benefits for people.
Having an experienced person volunteering to work on something would make a world of difference to many of these projects that have tangibly positive effects on people but struggle with funding.
what are the investments going to look like? 100% index funds? What if the market doesn't return 7-10%? What's your plan, draw down 4% a year, 1% a quarter?
S&P500 index fund has a 1.5% dividend, so you only need to draw 4 - 1.5 = 2.5% (0.625% a quarter), unless you'd let the dividends reinvest and then sell them off.
You can get treasuries/bonds yielding 4-5% for short term now, not sure about a 15-30 year outlook.
Annunities and other weird things (high dividend yield ETFs) are an option but anything other than trying to find 4%+ is not without risks.
Plus your expenses are $30k now. In 2020, what were they? $25k? They won't be $30k forever (as you know).
I just can't imagine being in a position where I need to sell off 1% of my portfolio quarterly to live no matter the conditions of the market. The stock market can perform like crap for years at a time. Your net worth in stocks can drawdown up to 40-50% in 'worst case scenarios'
Until you have a significant health issue that can drastically increase expenses, depending on insurance of course. Even with good coverage, you might be on the hook for bills that your provider denied coverage for.
You don't have to stop working. There are many interesting jobs that do not pay very well. Having a few million in your pocket give you the privilege to consider those jobs.
I'm 28 and I have ~$1.4 mil in assets (no house, just stocks / balanced portfolio). I've definitely considered not working for a while, I could easily take a year off and still support my wife and I. It's definitely allowed me to pursue jobs that I wouldn't take if I didn't have such a safety net.
'Rich, Broke, or Dead' made me realize that I was more likely to die early into retirement then I was to run out of money. In my case that made me realize that I'm not using my 30s effectively. I really like this visualization.
I feel like before retirement, in the US, many people’s concern should be having enough savings for their 50 to 65 years.
No Medicare, so you still need to buy insurance and pay for out of pocket maximums, and you are less and less employable for jobs that offer decent subsidized health insurance. Also, unless you qualify for significant ACA subsidies, premiums are going to be more than $1k per month per person.
And at the same time, most people will be getting their Type 2 Diabetes/Hypertension/Thyroid/etc diagnosis so their chronic medicines start.
If a married couple can both cross the age 65 line before hitting a big healthcare event, then they will probably be OK, but that is far from a guarantee.
As somebody in a similar situation, with this new information/perspective, what are you going to do about it? Quit your job and have unlimited free time for hobbies/travel/no responsibilities other than significant other/your own health/children (optional)?
No one working, everyone consuming, so we get either high inflation or high debt. If high inflation, old people need a strong welfare state or they die, so we get high debt. Young people need to pay for the debt of their elders, so high taxes. Productivity plummets because taxes are high and tax revenue decreases. Life gets worse for everyone.
One escape is that we have to drastically increase the retirement age. Getting rid of a welfare state wouldn't help, because they would still be consuming without being productive. Another solution is that we kill all old people. Another possibility is that innovation allows us to make investments that drastically increase productivity, but that's not guaranteed either.
As the problem gets worse, I think we will see this play out in formerly wealthy European countries and Asia, as their aging populations are further ahead than the US. Great opportunity for the US and third world countries to seize economic power from these places though.
A better escape we have is to drastically inflate the limits we have on immigration -- for workers.
Much of the supply of labor shortage that has led to inflation is in the food services, construction, landscaping industries; Of which, the US uses h2b migrant visa to seasonally fulfill some of; but that has led us to competition amongst the states, with a high fee, low local reinvestment rate.
Drastically increasing the retirement age only makes sense to us keyboard jockeys who rarely even see physical labor up close. Data shows that people in physical jobs start to break down physically in their mid 40s. It's silly to think that these people are going to work until they are 75.
> Another solution is that we kill all old people
I mean, let's be frank. We're talking about killing poor old people. Have you looked at Congress lately?
We need to ask, is our economic system here to serve the human species, or was the human species put on on this planet to serve our (current) economic system? Since modern capitalism has only existed since the Dutch East India Company, I think the answer is obvious.
Countries with debt in their own currency don't really have to pay it back. They can print the payments, at the cost of cutting the value of the currency by about half, through a period of intense inflation.
But only once. After that, nobody will lend to them, at least not at reasonable interest rates.
But if done intentionally, with a warning to the citizens that from here on, taxes will have to pay for expenses, it is quite doable for a country like the US to get out of almost any debt trap, at the expense of bond holders.
How would this even be possible, in an economy that is roughly 80% services? All there is to "consume" is the output of someone else's labor. If nobody is working, there is nothing to consume.
These are the numbers that matter, although there are wildcards like someone inventing a "Robot & Frank"-style affordable robot that can look after the elderly.
These numbers only matter if you plan on subsisting entirely off of social security in retirement, which even if you are maxing out your SS taxes every year and plan on living a minimum-wage level existence in retirement, is almost impossible mathematically.
If you're under 40 (maybe even 50), wrapping social security income into your retirement calculations is a fool's errand. I'm in my 30's and basically treating it as play money. If it's there I might use it to help buy a car or something in my 80s, but I'm assuming I'll get approximately $0 for everything I've paid in supporting today's retirees.
Living at 2/5-th of the expenses of those retired in the developed world today does not seem so tragic as some make it sound. In fact, I already live at around 40% of the average expenses of my peer group with little observable decrease in quality of life.
I'm sure you mean that in a financial way, but let's not forget about the social aspect.
I'm currently in a phase where the boomers in our family are moving into permanent elderly care, as well as a few that have passed on already. What is striking is their rich support system. Most have several siblings, partners of those siblings, their own children, partners of those children, grandchildren. So there's a relatively large amount of people able to contribute to the care, even if just by doing the occasional visit. If each does a little, that's still plenty for a humane type of care. A lot of this care is done by the women in the family whom in the post-boomer generation still often had the traditional role.
The social care will be dramatically different in the future. Most people have few siblings if any. Few children if any, whom may be less capable to help out as they're busy staying afloat. And most women aren't housewives anymore either.
In other words: you are mostly on your own compared to the current retirees.
Importantly, we should not use this to bash the elderly. Rather we should strive for a world where working two incomes until you're 70 is curtailed. We're over-asking people.
As old people stay healthier, there will be an increasing market of old-people-for-old-people services. Social media & the instant global marketplace have made a lot of new part-time-careers possible.
There's doom and gloom around the end of human labor and the advent of AI/Automation/AGI (call it what you will). But, people's taste ossifies in early-adulthood. Our generation, once old, is going to crave experiences from a pre-AI world, and the only ones with the ability to deliver on it will be fellow millennials.
In my experience, a lot of the FIRE folks are driven by paranoia and a *lack of fulfillment in their present life.*
____________________
I've been fortunate enough to have hit my limits of hedonism. A 5 star hotel relaxes me just as well as a shack. An honest meal is fulfilling irrespective of the Michelin stars to its name. My people welcome me whether I bring chocolate or not; and our conversations are just as warm over lemonade as it may be over fancy whisky.
The hedonistic treadmill is infinite. It's cliche, but all good wisdom sounds like cliche. If you stop looking, you'll find yourself knee deep like low-tide on a beach.
A pursuit, your people, health, a roof and a warm meal. FIRE gives you time, money and access to those 5 things that matter. But, in the absence of them, no amount of $$ FIRE $$ is going to make you happy.
The first world has solved most of its issues. However, we tie happiness to owning more material belongings than our peers. In that case, FIRE will not be promised release It will merely be a moving goal post on the horizon, that keeps you going through an unfulfilling present.
Why do you think that I will live till pensioner age? Based on my date and location of birth, I'm lucky if I kick around for another decade or so (and I will be still very, very far from retirement)
I think this is brilliant although obviously would need a lot of work to be actually useful.
My 'funny' observation is that the misery line stays at zero as long as you have money... that doesn't really match my knowledge of the ageing process. I think misery goes up at a gradual rate from age... 25?
Brilliant is a stretch, but agreed on the misery line. I'd expect it to go up exponentially once the pension runs out and you start using savings, and maybe linearly as your pension starts to decrease.
Provided I never sell my house I can't create a scenario in this where my retirement doesn't work out. If I have to rent though? It's a very different situation.
If you rent you need to spend less on housing in the early days, and invest the difference. If you do this all along you should be fine. However if like many who rent you just taking your savings from rent (vs a house - including not just the payment but also property taxes, insurance and maintenance) and party you are in trouble. Houses can be a great forced savings plan. (so long as you don't cash our refinance like many do, you don't move too often, and a bunch of other fine print things)
Renting isn’t cheaper than buying at nearly any point from 2008 to 2020 in any US city. Renting being cheaper than buying is a “new” phenomenon and still debatable since renting doesn’t result in equity and can never result in ownership. A house isn’t just an asset, it’s a place to live.
A lot of people probably underestimate how much a house costs even if you ignore mortgage (or have paid it off). It varies of course but I figure it's a good $1,000/month and that probably understates various infrequent but expensive maintenance items.
My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year.
In terms of inflation? Owning the house has already made that a lot less painful.
Readit News
Alternative sites:
https://engaging-data.com/fire-calculator/
https://engaging-data.com/will-money-last-retire-early/
It helped me retire early (along with fire calc)
With the recent bout of inflation/concerns about government's ability to maintain debt-to-GDP ratio + interest payments, I'd be worried that you're pretty much forced to constantly be worried about having to return to the workforce in some capacity (part time) eventually.
Working 20-30 hours a week in whatever industry it takes to make an extra $40k-$50k/yr to get by doesn't sound so bad.
There's something too daunting about the concept of "stop working, instead of seeing your net worth go up, you see it go backwards as you start to pull it/spend it during your otherwise prime earning years" I just can't convince myself is realistic for me (and maybe others) to actually pull off. Talk about online is one thing, but actually do/pull off?
Sounds like you have never heard of the 4% rule[0]. Further, there are reasons to withdraw funds above ordinary living expenses, such as for gifts and donations.
>you have no idea how long you'll live,
Of course you do, within a range of probability. And there is insurance available to minimize the risk of uncertainty.
[0]https://www.fool.com/retirement/strategies/withdrawal/4-perc...
(1) Planned, time-limited expenses that decrease net worth. For example, a child's college education. If you've budgeted for it, this is fine.
(2) General market wobbles. My net worth increases or decreases by tens of thousands in a day, just because of what the market did. (No, I don't have all of my assets in the market, but enough.) If the long term trend is downward and/or not keeping up with inflation, that would be a worry, but a dip here and there is also fine.
Is net-worth decrease a problem outside of these scenarios? Even that depends. It's probably still "no" if there are more income sources (e.g. social security, inheritance from parents) that haven't kicked in yet and will make Number Go Up again when they do. Less obviously, if you're going to run out of money at 150, that's not likely to be a problem. If it's at 75, that very likely is a problem.
It really is possible to save too much, though few do. Telling people to plan for an infinite retirement, which is basically what you're doing, is also bad advice. There's no virtue in scrimping and saving more than you really need to.
Completely wrong:
* https://en.wikipedia.org/wiki/Trinity_study
* https://en.wikipedia.org/wiki/William_Bengen
Principal liquidation is just fine and has lots of theoretical/historical analysis to support it, with (tens of) millions of people doing it as we speak.
Every quarter you drawdown your networth decreases to cover your expenses. Then you hope it maintains/stays the same by the stock market predictably reliably recovering from your 1%/quarter (4% drawdown/year) sale/gets offset by dividends, etc.
To me it seems it might be noise but there is for sure a period where your net worth decreases as you spend your "nest egg". Especially more so if the market doesn't just go straight up over time on average.
I guess I question what these part-time, low stress jobs that pay median US annual wages are. They're presumably not driving for Uber or working in retail over the holidays.
If someone already has some sort of consulting/freelancing business, you can probably dial things back a bit. But it doesn't seem straightforward in general.
I do agree in general that deciding to step away from a full-time professional job --especially later career--is something you can't necessarily undo.
But... it's just a cruel side effect of needing to afford to live, right? Plain and simple?
To not worry about that, I'd want at least $5mm in the bank, but I would still work just to keep myself sane.
"it's never enough"
Meaning, there's a decent chance to make it, but I wouldn't trust it. We're talking about crossing 30-35 years, in an exponentially changing world that is exceptionally volatile.
There will be multiple financial crashes. A swift change in government. A currency change. Hyper inflation. Almost anything is on the table in that time span.
There are tons and tons of really cool technical problems and projects out there that aren't financially lucrative but have huge positive benefits for people.
Having an experienced person volunteering to work on something would make a world of difference to many of these projects that have tangibly positive effects on people but struggle with funding.
90% invested, 10% cash?
what are the investments going to look like? 100% index funds? What if the market doesn't return 7-10%? What's your plan, draw down 4% a year, 1% a quarter?
S&P500 index fund has a 1.5% dividend, so you only need to draw 4 - 1.5 = 2.5% (0.625% a quarter), unless you'd let the dividends reinvest and then sell them off.
You can get treasuries/bonds yielding 4-5% for short term now, not sure about a 15-30 year outlook.
Annunities and other weird things (high dividend yield ETFs) are an option but anything other than trying to find 4%+ is not without risks.
Plus your expenses are $30k now. In 2020, what were they? $25k? They won't be $30k forever (as you know).
I just can't imagine being in a position where I need to sell off 1% of my portfolio quarterly to live no matter the conditions of the market. The stock market can perform like crap for years at a time. Your net worth in stocks can drawdown up to 40-50% in 'worst case scenarios'
This is a feature of capitalism, not a bug. Capitalists benefit by having a large pool of laborers desperate to sell their labor.
For in-depth planning, I like ficalc.app, and cfiresim.com is good, too.
No Medicare, so you still need to buy insurance and pay for out of pocket maximums, and you are less and less employable for jobs that offer decent subsidized health insurance. Also, unless you qualify for significant ACA subsidies, premiums are going to be more than $1k per month per person.
And at the same time, most people will be getting their Type 2 Diabetes/Hypertension/Thyroid/etc diagnosis so their chronic medicines start.
If a married couple can both cross the age 65 line before hitting a big healthcare event, then they will probably be OK, but that is far from a guarantee.
Deleted Comment
When you are retired, there will be about 2 people supporting you.
No one working, everyone consuming, so we get either high inflation or high debt. If high inflation, old people need a strong welfare state or they die, so we get high debt. Young people need to pay for the debt of their elders, so high taxes. Productivity plummets because taxes are high and tax revenue decreases. Life gets worse for everyone.
One escape is that we have to drastically increase the retirement age. Getting rid of a welfare state wouldn't help, because they would still be consuming without being productive. Another solution is that we kill all old people. Another possibility is that innovation allows us to make investments that drastically increase productivity, but that's not guaranteed either.
As the problem gets worse, I think we will see this play out in formerly wealthy European countries and Asia, as their aging populations are further ahead than the US. Great opportunity for the US and third world countries to seize economic power from these places though.
Much of the supply of labor shortage that has led to inflation is in the food services, construction, landscaping industries; Of which, the US uses h2b migrant visa to seasonally fulfill some of; but that has led us to competition amongst the states, with a high fee, low local reinvestment rate.
You misspelled psychopathic.
Drastically increasing the retirement age only makes sense to us keyboard jockeys who rarely even see physical labor up close. Data shows that people in physical jobs start to break down physically in their mid 40s. It's silly to think that these people are going to work until they are 75.
> Another solution is that we kill all old people
I mean, let's be frank. We're talking about killing poor old people. Have you looked at Congress lately?
We need to ask, is our economic system here to serve the human species, or was the human species put on on this planet to serve our (current) economic system? Since modern capitalism has only existed since the Dutch East India Company, I think the answer is obvious.
But only once. After that, nobody will lend to them, at least not at reasonable interest rates.
But if done intentionally, with a warning to the citizens that from here on, taxes will have to pay for expenses, it is quite doable for a country like the US to get out of almost any debt trap, at the expense of bond holders.
How would this even be possible, in an economy that is roughly 80% services? All there is to "consume" is the output of someone else's labor. If nobody is working, there is nothing to consume.
https://m.youtube.com/watch?v=KTJn_DBTnrY&t=835s
If you're under 40 (maybe even 50), wrapping social security income into your retirement calculations is a fool's errand. I'm in my 30's and basically treating it as play money. If it's there I might use it to help buy a car or something in my 80s, but I'm assuming I'll get approximately $0 for everything I've paid in supporting today's retirees.
I'm currently in a phase where the boomers in our family are moving into permanent elderly care, as well as a few that have passed on already. What is striking is their rich support system. Most have several siblings, partners of those siblings, their own children, partners of those children, grandchildren. So there's a relatively large amount of people able to contribute to the care, even if just by doing the occasional visit. If each does a little, that's still plenty for a humane type of care. A lot of this care is done by the women in the family whom in the post-boomer generation still often had the traditional role.
The social care will be dramatically different in the future. Most people have few siblings if any. Few children if any, whom may be less capable to help out as they're busy staying afloat. And most women aren't housewives anymore either.
In other words: you are mostly on your own compared to the current retirees.
Importantly, we should not use this to bash the elderly. Rather we should strive for a world where working two incomes until you're 70 is curtailed. We're over-asking people.
Deleted Comment
There's doom and gloom around the end of human labor and the advent of AI/Automation/AGI (call it what you will). But, people's taste ossifies in early-adulthood. Our generation, once old, is going to crave experiences from a pre-AI world, and the only ones with the ability to deliver on it will be fellow millennials.
In my experience, a lot of the FIRE folks are driven by paranoia and a *lack of fulfillment in their present life.*
____________________
I've been fortunate enough to have hit my limits of hedonism. A 5 star hotel relaxes me just as well as a shack. An honest meal is fulfilling irrespective of the Michelin stars to its name. My people welcome me whether I bring chocolate or not; and our conversations are just as warm over lemonade as it may be over fancy whisky.
The hedonistic treadmill is infinite. It's cliche, but all good wisdom sounds like cliche. If you stop looking, you'll find yourself knee deep like low-tide on a beach.
A pursuit, your people, health, a roof and a warm meal. FIRE gives you time, money and access to those 5 things that matter. But, in the absence of them, no amount of $$ FIRE $$ is going to make you happy.
The first world has solved most of its issues. However, we tie happiness to owning more material belongings than our peers. In that case, FIRE will not be promised release It will merely be a moving goal post on the horizon, that keeps you going through an unfulfilling present.
My 'funny' observation is that the misery line stays at zero as long as you have money... that doesn't really match my knowledge of the ageing process. I think misery goes up at a gradual rate from age... 25?
In terms of inflation? Owning the house has already made that a lot less painful.