I don't want to save too much.

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mrx
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I don't want to save too much.

Post by mrx »

With the new year check I realized I hit an amazing financial goal. I am 34 and I have $1M invested. I was doing some math, and it seems like even if I stop saving altogether and assume 7%/year market return I will end up with $5M at 55.

While this is a great news - along with maybe middle life crisis. I feel a sudden urge to stop saving and just enjoy life more. I am not interested in retiring in any sort, but I want to take advantage of the next 10 years while I am still "young" and "healthy" (Again, sometimes I feel like it's already too late to be young and healthy).

As of right now, I can't even spend all my income even if I wanted to. I make about $400k/year and I barely spends $200k.

I am thinking:
  • Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
  • Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
  • Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
Am I being too optimistic, should I do the dump thing and really slow down or should I take my colleagues advice and just keep accumulating money and retire earlier?
Last edited by mrx on Wed Jan 08, 2020 2:33 pm, edited 1 time in total.
Grt2bOutdoors
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Re: I don't want to save too much.

Post by Grt2bOutdoors »

Get married, problem solved.
You are being optimistic on 7% returns. Try 4-5%, your $5 million becomes what? $2.5-$3.0 million? Option 2 - good compromise, do what makes you happy.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
ohai
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Re: I don't want to save too much.

Post by ohai »

$5 million only seems like a lot now because you only have $1 million. When you have $5 million, you will want $10 million.
ponyboy
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Re: I don't want to save too much.

Post by ponyboy »

mrx wrote: Wed Jan 08, 2020 2:27 pm assume 7%/year market return
I wouldnt assume anything.
Jack FFR1846
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Re: I don't want to save too much.

Post by Jack FFR1846 »

Although I'd argue with your numbers, I'd answer your questions "sure". You make a boatload of money. Spending a bit more and saving a bit less is fine.
Bogle: Smart Beta is stupid
KlangFool
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Re: I don't want to save too much.

Post by KlangFool »

OP,

You have 1 million. What is your annual expense? 100K? So, your portfolio is only 10 times your annual expense. At your age, you need at least 33X in order to be FI. That means 3.3 million.

A) No, you did not save too much and you do not have a lot of money as compared to your annual expense.

B) If you are unemployed and the stock market drops 50%, how long can you survive?

KlangFool
MathWizard
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Re: I don't want to save too much.

Post by MathWizard »

KlangFool wrote: Wed Jan 08, 2020 2:33 pm OP,

You have 1 million. What is your annual expense? 100K? So, your portfolio is only 10 times your annual expense. At your age, you need at least 33X in order to be FI. That means 3.3 million.

A) No, you did not save too much and you do not have a lot of money as compared to your annual expense.

B) If you are unemployed and the stock market drops 50%, how long can you survive?

KlangFool
He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
bloom2708
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Re: I don't want to save too much.

Post by bloom2708 »

Keep saving.

$5 million 20 years from now is not $5 million today.

Stocks don't always go up. Averaging 7% is very (very) optimistic.

Dial saving back a bit if you are saving until it hurts.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
sailaway
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Re: I don't want to save too much.

Post by sailaway »

KlangFool wrote: Wed Jan 08, 2020 2:33 pm OP,

You have 1 million. What is your annual expense? 100K? So, your portfolio is only 10 times your annual expense. At your age, you need at least 33X in order to be FI. That means 3.3 million.

A) No, you did not save too much and you do not have a lot of money as compared to your annual expense.

B) If you are unemployed and the stock market drops 50%, how long can you survive?

KlangFool
OP says they are currently spending $200k, so halve those numbers! And realize that the generously projected $5m is barely 25x, so no where near "too much."

By the "age" guidelines (ie, 1x by 30, 3x by 40), OP is slightly ahead of schedule, but still not in danger of too much.
runner3081
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Re: I don't want to save too much.

Post by runner3081 »

Do whatever is within reason and makes you happy. If that is spending money, go for it... Spending money doesn't make me happy, as a data point :)
Triple digit golfer
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Re: I don't want to save too much.

Post by Triple digit golfer »

I get $4.1 million at a 7% return.

On a 5% return, drop it to $2.8 million.

Assuming a real return of 2%, $1.5 million. Can you last 40 years on $1.5 million?

To be able to spend $200k a year, you'd need $5 million in today's dollars at age 55. If you saved nothing else, you'd need an 8% real return.

Keep saving. You are off to an excellent start. But keep saving.
HomeStretch
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Re: I don't want to save too much.

Post by HomeStretch »

MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
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willthrill81
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Re: I don't want to save too much.

Post by willthrill81 »

mrx wrote: Wed Jan 08, 2020 2:27 pm With the new year check I realized I hit an amazing financial goal. I am 34 and I have $1M invested. I was doing some math, and it seems like even if I stop saving altogether and assume 7%/year market return I will end up with $5M at 55.

While this is a great news - along with maybe middle life crisis. I feel a sudden urge to stop saving and just enjoy life more. I am not interested in retiring in any sort, but I want to take advantage of the next 10 years while I am still "young" and "healthy" (Again, sometimes I feel like it's already too late to be young and healthy).

As of right now, I can't even spend all my income even if I wanted to. I make about $400k/year and I barely spends $200k.

I am thinking:
  • Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
  • Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
  • Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
Am I being too optimistic, should I do the dump thing and really slow down or should I take my colleagues advice and just keep accumulating money and retire earlier?
What kind of career do you have? Is it one that realistically can slow down? You have said that you are not interested in retiring in any sort, which implies that you enjoy your work. If true, why would you want to slow down?

If you're spending $200k already, do you believe that spending another $20k, for instance, will make you significantly happier? There's a lot of research on this, and it indicates that that is unlikely to happen.

Why is making a budget stressful? If so, you're not doing it correctly. A budget is a tool to help you plan financially. Nothing about that should be stressful. Yes, sometimes you will spend more than you planned in one area, but if you're doing it correctly, you should also be sometimes spending less than you planned for. Alternatively, if you just don't like budgeting, then decide how much you want to save, automate those savings, and then just spend the rest freely, being sure to not go into debt and keeping an adequate reserve of funds on hand.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
KlangFool
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Re: I don't want to save too much.

Post by KlangFool »

OP,

It is very simple.

Save 1 year of expense every year. Spend as much as you saved. Then, you could be FI in less than 20 years if not earlier. Then, you could be free while you are still young.

KlangFool
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willthrill81
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Re: I don't want to save too much.

Post by willthrill81 »

HomeStretch wrote: Wed Jan 08, 2020 2:46 pm
MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
If you save 50% of your income, get a 5% real return on your investments, and assume 4% withdrawals, you become financially independent in about 17 years. The OP already has 5x saved, but he should probably shoot for 3% withdrawals if he retires early, so those roughly balance out.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
KlangFool
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Re: I don't want to save too much.

Post by KlangFool »

HomeStretch wrote: Wed Jan 08, 2020 2:46 pm
MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
HomeStretch,

That is not possible due to taxes. At 400K per year, the taxes probably is at least 100K per year.

KlangFool
Tigermoose
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Re: I don't want to save too much.

Post by Tigermoose »

What is the purpose of money to you? Answer that and you have your answer.
Institutions matter
ThankYouJack
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Re: I don't want to save too much.

Post by ThankYouJack »

I would do what you’re planning, slow down and figure out what makes you happiest. If you can still save well into 6 figures a year great!

Nothing like a good Bogleheads post to make a millionaire 30 something year old saving $200k / year feel scared, poor and that he doesn’t have enough ;)
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Chrono Triggered
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Re: I don't want to save too much.

Post by Chrono Triggered »

Money provides one with options, not answers.
J295
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Re: I don't want to save too much.

Post by J295 »

ThankYouJack » Wed Jan 08, 2020 2:00 pm

I would do what you’re planning, slow down and figure out what makes you happiest. If you can still save well into 6 figures a year great!

Nothing like a good Bogleheads post to make a millionaire 30 something year old saving $200k / year feel scared, poor and that he doesn’t have enough ;)
Indeed TYJack .....

OP ... well done and great issue for your to grapple with ..... find a nice balance that works for you .....

Might you ever wish you saved more? .... well, perhaps .... Might you ever wish you lived differently? ... well, perhaps .....

Dig in and find your sweet spot then go for it ..... then adjust your attitude and your well being down the road as life happens ...

Best of luck.
Last edited by J295 on Wed Jan 08, 2020 3:16 pm, edited 1 time in total.
ohai
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Re: I don't want to save too much.

Post by ohai »

Even if OP meets his projections, I find that a $200k life is still pretty limited in terms of what you can experience in the world. Most people settle with this because it's still pretty good and it's hard to get much better. However, if OP can achieve a $300k or $500k life later, or freedom to do what people in this bracket could do, then maybe it is still worth pursuing a life of achievement, to the extent that work/life balance is not severely compromised.
carminered2019
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Re: I don't want to save too much.

Post by carminered2019 »

Grt2bOutdoors wrote: Wed Jan 08, 2020 2:30 pm Get married, problem solved.
that's way too funny !
sailaway
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Re: I don't want to save too much.

Post by sailaway »

ohai wrote: Wed Jan 08, 2020 3:16 pm Even if OP meets his projections, I find that a $200k life is still pretty limited in terms of what you can experience in the world. Most people settle with this because it's still pretty good and it's hard to get much better. However, if OP can achieve a $300k or $500k life later, or freedom to do what people in this bracket could do, then maybe it is still worth pursuing a life of achievement, to the extent that work/life balance is not severely compromised.
In my experience, people in that bracket just get bigger houses and boats and better cars. I don't seem them doing anything that involves more freedom.
KlangFool
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Re: I don't want to save too much.

Post by KlangFool »

ThankYouJack wrote: Wed Jan 08, 2020 3:00 pm I would do what you’re planning, slow down and figure out what makes you happiest. If you can still save well into 6 figures a year great!

Nothing like a good Bogleheads post to make a millionaire 30 something year old saving $200k / year feel scared, poor and that he doesn’t have enough ;)
ThankYouJack,

Correction. OP is spending 200K per year. Not saving 200K per year.

KlangFool
BeautifulDisaster
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Re: I don't want to save too much.

Post by BeautifulDisaster »

mrx wrote: Wed Jan 08, 2020 2:27 pm I am thinking:
  • Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
  • Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
  • Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
Am I being too optimistic, should I do the dump thing and really slow down or should I take my colleagues advice and just keep accumulating money and retire earlier?
Having every last cent go to saving is a miserable way to live, you should be spending money on family, charity and things that make you happy today. Find the right balance of today and tomorrow. You could also think of downsize your lifestyle expense in your retirement days from 200k to 100k by moving to a LCOL

Budget: If your savings is automated, what's the need? Just have your employer split your money into you brokerage account and your spending (bills / entertainment) into your checking / savings account. If at the end of the month you have money left over in your checking / savings account and you want to save it, save it. If you want to spend it, spend it.
ThankYouJack
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Re: I don't want to save too much.

Post by ThankYouJack »

KlangFool wrote: Wed Jan 08, 2020 3:32 pm
ThankYouJack wrote: Wed Jan 08, 2020 3:00 pm I would do what you’re planning, slow down and figure out what makes you happiest. If you can still save well into 6 figures a year great!

Nothing like a good Bogleheads post to make a millionaire 30 something year old saving $200k / year feel scared, poor and that he doesn’t have enough ;)
ThankYouJack,

Correction. OP is spending 200K per year. Not saving 200K per year.

KlangFool
What is the OP saving then?

Regardless of the exact number, he/she is saving a very significant amount.

The OP's goal isn't to be FI ASAP, but a lot of the replies alluded to this.

I think there's a lot of anxiety/concern of this forum even when things are going very well for a young person it's still not enough.
hen1230
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Re: I don't want to save too much.

Post by hen1230 »

mrx wrote: Wed Jan 08, 2020 2:27 pm I was doing some math, and it seems like even if I stop saving altogether and assume 7%/year market return I will end up with $5M at 55.
You should not assume you will get an average of 7% return for the rest of your life. The US might be the next Japan (in case you don't know, the Nikkei is still 40% down from its 1989 peak!).

You shouldn't be too bullish or too bearish. You should hedge against an equity bear market by increasing your allocation of Treasuries (IEF is great), and you should hedge against unexpected inflation by increasing your allocation to TIPS and gold (SCHP and IAU are great). The exact allocations are up to you.

Your entire investing experience has been mostly concentrated inside one bull market, and you should not expect that to continue. It is possible that there are 10 more years of a strong US stock bull market, but it is also possible that US stocks take a deep plunge and fall more than 50% without recovering for 30+ years. Investing isn't as safe or certain as you think, so take some measures to protect your hard-earned money.
KlangFool
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Re: I don't want to save too much.

Post by KlangFool »

ThankYouJack wrote: Wed Jan 08, 2020 3:47 pm
KlangFool wrote: Wed Jan 08, 2020 3:32 pm
ThankYouJack wrote: Wed Jan 08, 2020 3:00 pm I would do what you’re planning, slow down and figure out what makes you happiest. If you can still save well into 6 figures a year great!

Nothing like a good Bogleheads post to make a millionaire 30 something year old saving $200k / year feel scared, poor and that he doesn’t have enough ;)
ThankYouJack,

Correction. OP is spending 200K per year. Not saving 200K per year.

KlangFool
What is the OP saving then?

Regardless of the exact number, he/she is saving a very significant amount.

The OP's goal isn't to be FI ASAP, but a lot of the replies alluded to this.

I think there's a lot of anxiety/concern of this forum even when things are going very well for a young person it's still not enough.
ThankYouJack,

<<What is the OP saving then?>>

My guess is around 100K per year with about 100K in taxes. Or much lower than 100K.

KlangFool
HomeStretch
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Re: I don't want to save too much.

Post by HomeStretch »

KlangFool wrote: Wed Jan 08, 2020 2:56 pm
HomeStretch wrote: Wed Jan 08, 2020 2:46 pm
MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
HomeStretch,

That is not possible due to taxes. At 400K per year, the taxes probably is at least 100K per year.

KlangFool
Hopefully OP will clarify if the $200k spend includes everything (such as income taxes, healthcare, lumpy expenses). I agree that total spending is possibly > $200k. When a poster says “I make xx and spend yy”, we often find that savings do not equal xx minus yy as some expense has been omitted from the spend $.
BanquetBeer
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Re: I don't want to save too much.

Post by BanquetBeer »

Depends if they include the taxes in their spending ($100k tax + $100k spend + $200k savings) or if the $200k is pure spend and the last $200k includes savings and tax.

If they spend $100k+tax they are in good shape. If they spend $200k+tax I wouldn’t change anything.

Are people really making the argument on this tread that we can expect ~2-4% returns before inflation over the next 15 years?!?

I’d accept 2-4% or 7% and ‘$5mill in 15 years wont be the same as $5mill today’ but not both at the same time for a pessimistic view. Combining them is too much - might as well spend it all now since investing will only loose real purchasing power in that case.
MathWizard
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Re: I don't want to save too much.

Post by MathWizard »

If OP just wanted to spend $200K in retirement, filing single, he needs to generate about $300K in taxable income from a tax deferred portfolio,
due to nearly $100K in fed and state income taxes. A little less if he is in a state with income tax, less if the income is not tax deferred, or is capital gains.)

At 25x , this means $7.5 million in today's dollars. If taxes are ignored, he still needs $5 millon.

Now OP is talking about spending more (if he is not saving he is spending), so if he spends $300K now and wants to keep his style of living,
he needs $7.5 million not counting taxes, so about $10 million pretax.

I think he needs to keep saving, or risk a large drop in standard of living when retired.
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Watty
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Re: I don't want to save too much.

Post by Watty »

mrx wrote: Wed Jan 08, 2020 2:27 pm As of right now, I can't even spend all my income even if I wanted to. I make about $400k/year and I barely spends $200k.
It was not clear if that $200K included taxes or not. If not then you may not really be saving a lot.

The last 12 years has also been a barely interrupted bull market. Sooner or later there WILL be a bad bear market that will reduce your stock portfolio by a third. You may not be as secure as you feel.
mrx wrote: Wed Jan 08, 2020 2:27 pm Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
One thing you could add to your list would be to hire people to do chores you do no enjoy like yard work or house cleaning. That would in essence be buying back some of your time.
mrx wrote: Wed Jan 08, 2020 2:27 pm If I ended up spending 300k a year instead of 200k a year.
You are likely at the point of diminishing returns when it come to spending more money.

Buying a house that had five bathrooms instead of two will add very little to your quality of life.

Commuting in a sports car that can go 150 MPH will not be any different than a car that can only go 120 MPH.

If spending $200K a year does not make you happy then spending $300K a year will not either.
mrx wrote: Wed Jan 08, 2020 2:27 pm - along with maybe middle life crisis.
I mean this seriously and not in a snarky way but it might be good to get some counseling to talk over what you are going through.
MathWizard
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Re: I don't want to save too much.

Post by MathWizard »

BanquetBeer wrote: Wed Jan 08, 2020 3:56 pm Depends if they include the taxes in their spending ($100k tax + $100k spend + $200k savings) or if the $200k is pure spend and the last $200k includes savings and tax.

If they spend $100k+tax they are in good shape. If they spend $200k+tax I wouldn’t change anything.

Are people really making the argument on this tread that we can expect ~2-4% returns before inflation over the next 15 years?!?

I’d accept 2-4% or 7% and ‘$5mill in 15 years wont be the same as $5mill today’ but not both at the same time for a pessimistic view. Combining them is too much - might as well spend it all now since investing will only loose real purchasing power in that case.
I took the $200K as pure spend. I agree if taxes are included in the $200K. Perhaps OP will respond with what it is.
fortunefavored
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Re: I don't want to save too much.

Post by fortunefavored »

BanquetBeer wrote: Wed Jan 08, 2020 3:56 pm
Are people really making the argument on this tread that we can expect ~2-4% returns before inflation over the next 15 years?!?
We got even less from ~2000 to ~2013, admittedly only 13 years.

I echo the original poster needs to figure out what they want from money, then build their life around that. Maybe it's spending more, maybe it isn't. Only she/he can tell, but operating off "feelings" when it comes to money is rarely a good idea.
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Brianmcg321
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Re: I don't want to save too much.

Post by Brianmcg321 »

Whatever you were saving before, just save half now until your 40.

Then when your 40 save half of that.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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2pedals
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Re: I don't want to save too much.

Post by 2pedals »

Watty's post makes perfect sense to me. If $200k/year is not enough to light your life what makes you think $300/year will do the trick? Many families are extremely happy with a lot less.
ThankYouJack
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Re: I don't want to save too much.

Post by ThankYouJack »

HomeStretch wrote: Wed Jan 08, 2020 3:54 pm
KlangFool wrote: Wed Jan 08, 2020 2:56 pm
HomeStretch wrote: Wed Jan 08, 2020 2:46 pm
MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
HomeStretch,

That is not possible due to taxes. At 400K per year, the taxes probably is at least 100K per year.

KlangFool
Hopefully OP will clarify if the $200k spend includes everything (such as income taxes, healthcare, lumpy expenses). I agree that total spending is possibly > $200k. When a poster says “I make xx and spend yy”, we often find that savings do not equal xx minus yy as some expense has been omitted from the spend $.
Yeah, that would be helpful. I was thinking the OP was including taxes in expenses, because he/she also said:
If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more
Let's say the OP saves $100k/year until age 55. Firecalc's average at 55 would be $7.6M. 4% of that is over $300k.

The OP is doing phenomenal yet this thread makes it seem like he/she can't loosen the strings.
HomeStretch
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Re: I don't want to save too much.

Post by HomeStretch »

ThankYouJack wrote: Wed Jan 08, 2020 4:18 pm The OP is doing phenomenal yet this thread makes it seem like he/she can't loosen the strings.
A $1 million portfolio at age 31 is phenomenal. If OP’s total spend was $30k per year, it would be easy to agree that OP could stop or reduce savings. But with an annual spend of $200k (or more), it’s hard to encourage OP to loosen the strings any more than s/he already is. Even if OP is saving $200k per year, it will take another 28 years of saving $200k per year to get to a portfolio of $6.7 million which at 3% is $200k per year of income.* That’s assuming OP continues to be employed for 28 more years.

* This is all expressed in today’s dollars to make the math easier to follow.
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ruralavalon
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Re: I don't want to save too much.

Post by ruralavalon »

You are doing very well. Don't forget to enjoy your life.

Your assumption of a 7% return may be too high. Morningstsr (1/10/2019), "Experts Forecast Long-Term Stock and Bond Returns: 2019 Edition".

This seems reasonable: "Spend more money on things I like, gifts to my family, charity, and more travel make me happy".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
hen1230
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Re: I don't want to save too much.

Post by hen1230 »

BanquetBeer wrote: Wed Jan 08, 2020 3:56 pm
Are people really making the argument on this tread that we can expect ~2-4% returns before inflation over the next 15 years?!?

I’d accept 2-4% or 7% and ‘$5mill in 15 years wont be the same as $5mill today’ but not both at the same time for a pessimistic view. Combining them is too much - might as well spend it all now since investing will only loose real purchasing power in that case.
The reason most people invest is out of necessity: because we simply won't have enough retirement savings if we put our salary in a bank account. If OP can save so much that he can have a comfortable retirement without investing aggressively, why should he risk most of his net worth in the stock market?

He should certainly invest to beat inflation, and then make some real returns on top of that, but that would not be out of necessity.
retiredjg
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Re: I don't want to save too much.

Post by retiredjg »

mrx wrote: Wed Jan 08, 2020 2:27 pm I am thinking:
  • Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
  • Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
These things seem reasonable to me. You should not stop saving, but I'm not sure you have to save as much as you do.

Promotions often mean enjoying work less - sometimes much less - so don't chase promotions that don't offer something (other than money) that you really want. Do you want to do what you wanted for a living or do you want to supervise problems who are not going a good job of doing what you actually wanted to do for a living?

[*]Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
Not sure you need a budget, but why not loosen up on spending while still keeping track for a year or so? Then you can actually see or measure if spending more is stupid or productive.

Am I being too optimistic, should I do the dump thing and really slow down or should I take my colleagues advice and just keep accumulating money and retire earlier?
Early retirement is a good thing if you want that. If you love what you do, early retirement doesn't offer anything worth having unless it means you get to do it as a volunteer.

Keep in mind that your "colleagues" may be living way beyond their means and could not afford to slow down and enjoy life more. They may have become slaves to their spending. You are not living beyond your means.

Or they may be just so focused on "success" they have no idea what they are giving up to "be successful". Listen to colleagues, yes, but do not place too much importance on what most of them have to say.
rbaldini
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Re: I don't want to save too much.

Post by rbaldini »

Set a concrete savings goal, and meet it. Revise every year. I don't care if you save 5% or 50% - just set a number that allows you to retire whenever you want to.

Do whatever you want with the rest of the money. If you want to spend it, spend it. It literally doesn't matter.
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JoeRetire
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Re: I don't want to save too much.

Post by JoeRetire »

mrx wrote: Wed Jan 08, 2020 2:27 pmI am 34

sometimes I feel like it's already too late to be young and healthy
Are you unhealthy?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Longdog
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Re: I don't want to save too much.

Post by Longdog »

KlangFool wrote: Wed Jan 08, 2020 2:56 pm
HomeStretch wrote: Wed Jan 08, 2020 2:46 pm
MathWizard wrote: Wed Jan 08, 2020 2:38 pm He said " I barely spends $200k" so $200K annual, so he has perhaps 5x annual expenses.
Based on that, I would argue that he should keep saving at nearly the rate at which he
has been.
+1.

OP, your $1 million portfolio may grow to $5 million by age 55. But your current $200k spend will also increase by age 55 due to 24 years of inflation.

Your income is $400k and you spend $200k. That means you are saving $200k per year, is that right? IMO you will need to keep saving at this rate for a number of years to support your current spend rate, as adjusted for inflation, at age 55. At a 3% withdrawal rate, you need a $6.7 million portfolio to support $200k spend (all in today’s dollars).
HomeStretch,

That is not possible due to taxes. At 400K per year, the taxes probably is at least 100K per year.

KlangFool
Between social security, federal, and state income taxes, probably more like $125k to $150k, assuming it’s earned income.
Steve
ThankYouJack
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Re: I don't want to save too much.

Post by ThankYouJack »

HomeStretch wrote: Wed Jan 08, 2020 4:28 pm
ThankYouJack wrote: Wed Jan 08, 2020 4:18 pm The OP is doing phenomenal yet this thread makes it seem like he/she can't loosen the strings.
A $1 million portfolio at age 31 is phenomenal. If OP’s total spend was $30k per year, it would be easy to agree that OP could stop or reduce savings. But with an annual spend of $200k (or more), it’s hard to encourage OP to loosen the strings any more than s/he already is. Even if OP is saving $200k per year, it will take another 28 years of saving $200k per year to get to a portfolio of $6.7 million which at 3% is $200k per year of income.* That’s assuming OP continues to be employed for 28 more years.

* This is all expressed in today’s dollars to make the math easier to follow.
How do you figure it'll take 28 years to reach $6.7 million? Seems like a pretty pessimistic return. I like using FireCalc or cfiresim to get a quick estimate for projections.

I'm thinking the OP pays a ton towards taxes and housing (VHCOLA?). But that's an assumption. Some helpful questions would be:

How much is the OP paying in taxes?
How much is going towards housing?
How much in expenses does the OP anticipate in retirement?
Last edited by ThankYouJack on Wed Jan 08, 2020 5:01 pm, edited 2 times in total.
supersharpie
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Re: I don't want to save too much.

Post by supersharpie »

ohai wrote: Wed Jan 08, 2020 2:32 pm $5 million only seems like a lot now because you only have $1 million. When you have $5 million, you will want $10 million.
Eh, everyone is different.
retire57
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Re: I don't want to save too much.

Post by retire57 »

ohai wrote: Wed Jan 08, 2020 2:32 pm $5 million only seems like a lot now because you only have $1 million. When you have $5 million, you will want $10 million.
So very true. :greedy
retire57
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Re: I don't want to save too much.

Post by retire57 »

Be selfish by giving more. The best use of :moneybag :moneybag :moneybag IMO.
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mrx
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Re: I don't want to save too much.

Post by mrx »

Thank you for all the great insights. I am adding few points for clarification:
  • I am married with two kids age 7 and 10 who do sports, private schools, hobbies. In 20 years, I would like to think they will not be a financial responsibility so I can downgrade lifestyle even more.
  • I work in tech at a senior position, I love writing code and building things. I hate the higher level politics and arguing. By slowing down I probably meant move to a smaller team and downgrade my role to just work on coding. Drawback is that I won't get the next $100k/year promotion.
  • My numbers were very approximate, my bad. I didn't realize numbers would matter that much. We save about $150k in 401k, IRA, taxable. Which means taxes and other spendings together are $250k.
  • I actually do not feel like I am saving very hard, I am lucky that I almost do everything I want to do and still end up saving a lot. Again, my dilemma was that maybe I should make an explicit effort to do more things with this money if it will not be used at all.
  • Thanks for the reality check, there is a lot of wisdom in this forum and that's why I like it so much.
  • and also thank you ThankYouJack for clarifying that even though people here are cautious, I am actually off to a great start.
JBTX
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Re: I don't want to save too much.

Post by JBTX »

mrx wrote: Wed Jan 08, 2020 2:27 pm With the new year check I realized I hit an amazing financial goal. I am 34 and I have $1M invested. I was doing some math, and it seems like even if I stop saving altogether and assume 7%/year market return I will end up with $5M at 55.

While this is a great news - along with maybe middle life crisis. I feel a sudden urge to stop saving and just enjoy life more. I am not interested in retiring in any sort, but I want to take advantage of the next 10 years while I am still "young" and "healthy" (Again, sometimes I feel like it's already too late to be young and healthy).

As of right now, I can't even spend all my income even if I wanted to. I make about $400k/year and I barely spends $200k.

I am thinking:
  • Slow down on career. Stop chasing more promotions that will just add more piles my savings and consume so much time and stress.
  • Spend more money on things I like, gifts to my family, charity, and more travel make me happy.
  • Stop making a budget, tracking it, and stressing out about it. If I ended up spending 300k a year instead of 200k a year. What difference would it make? I will still be saving an extra 100k/year which will even push the $5M by 55 years old more. It just feels like I will be at a point where I am putting money in the bank that will never see the light.
Am I being too optimistic, should I do the dump thing and really slow down or should I take my colleagues advice and just keep accumulating money and retire earlier?
$200 annual expenses today would be approx $400k per year when you are 64. $300k would be $600k.

$5 million wont long with spend rate of $600k per year and likely won't support $400k a year. What it will support, safely, is approx $200k per year (which is $100k per year in today's dollars.

So you have 2 choices:

- continue to work and save
- work less and spend a lot less.

Working less and spending more won't work.
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