Sobering article for my 25 year old self

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
Top99%
Posts: 190
Joined: Sat Apr 22, 2017 9:30 am
Location: Austin, TX

Sobering article for my 25 year old self

Post by Top99% » Wed Nov 15, 2017 8:07 am

Hi,

For those of you starting out and contemplating spending money on fancy new cars, cable TV, $1,100 iPhones (on installment plan) etc. Vs saving more please do your self a favor and read this article https://earlyretirementnow.com/2017/11/ ... etirement/ If I had a time machine I would go back engrave this on the forehead of my 25 year old self. I made it through but I was *lucky* to have had my period of highest savings correspond with 2 market crashes. Without this luck I could have been looking at another decade to FI.

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.
Last edited by Top99% on Wed Nov 15, 2017 8:34 am, edited 1 time in total.
Adapt or perish

TheAncientOne
Posts: 77
Joined: Wed Jul 19, 2017 8:53 pm

Re: Sobering article for my 25 year old self

Post by TheAncientOne » Wed Nov 15, 2017 8:26 am

Excellent point. For all the discussions about asset allocations, S&P 500 vs. Total Stock Market, how much to put into international funds, lowest possible fees etc., the most important factor for most will be a) what percentage of their income that they save, and b) the willingness and ability of people to continue to invest at the same levels during economic and market downturns. Usually we can't control if we get laid off during a recession or have our income cut but we can manage our finances and our mindset so that we're not subject to despair when the size of our portfolios drops sharply, as it inevitably will a few times during our working lives.

MoldyCheese
Posts: 4
Joined: Thu Sep 08, 2016 7:36 am

Re: Sobering article for my 25 year old self

Post by MoldyCheese » Wed Nov 15, 2017 8:45 am

I think one should also take away that it takes time to retire early, even with a 50-60% savings rate. I'm still early in my career where the raw savings is moving a majority of the needle but even with a 50-60% savings rate it will take roughly 2 decades to achieve the 4% rule which many still argue is a bit too agressive for early retirees. It seems all the news is either you'll never retire or that people are working 5 years and retiring forever. Not enough realistic communication like this in my opinion, even if it isn't exciting news.

tibbitts
Posts: 7008
Joined: Tue Feb 27, 2007 6:50 pm

Re: Sobering article for my 25 year old self

Post by tibbitts » Wed Nov 15, 2017 8:55 am

Top99% wrote:
Wed Nov 15, 2017 8:07 am
Hi,

For those of you starting out and contemplating spending money on fancy new cars, cable TV, $1,100 iPhones (on installment plan) etc. Vs saving more please do your self a favor and read this article https://earlyretirementnow.com/2017/11/ ... etirement/ If I had a time machine I would go back engrave this on the forehead of my 25 year old self. I made it through but I was *lucky* to have had my period of highest savings correspond with 2 market crashes. Without this luck I could have been looking at another decade to FI.

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.
Your actual point seems to be that luck matters. As you point out, your highest savings/investing coming during market crashes dropped your FI age by a decade - thus higher returns was the determining factor. Virtually nobody can save 50% of their average $55k annual family income what with the normal mandatory expenses, so knowing that doesn't help them. Even a well-above-average $100k family income makes savings 50% of gross extremely difficult while leading even a modest lifestyle. But perhaps the most challenging factor facing 25-year-olds today is stagnant wage growth - many may already be at or nearing their peak earning years, while most of us older people experienced at least early-career wage growth, and many from earlier generations continued to see wage growth throughout their careers. A career of no wage growth coupled with 2% real annual investment returns will counteract that 50% savings rate - and may make a higher percentage of people wish they'd spent more, earlier. The "save more" philosophy really only works when you have an increasing amount to save from and when those savings buy you significant real returns, so I have difficulty enthusiastically recommending it for many younger people today.

Wagnerjb
Posts: 7030
Joined: Mon Feb 19, 2007 8:44 pm
Location: Houston, Texas

Re: Sobering article for my 25 year old self

Post by Wagnerjb » Wed Nov 15, 2017 9:10 am

Top99% wrote:
Wed Nov 15, 2017 8:07 am

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.

In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
Andy

User avatar
Top99%
Posts: 190
Joined: Sat Apr 22, 2017 9:30 am
Location: Austin, TX

Re: Sobering article for my 25 year old self

Post by Top99% » Wed Nov 15, 2017 9:13 am

tibbitts wrote:
Wed Nov 15, 2017 8:55 am
Top99% wrote:
Wed Nov 15, 2017 8:07 am
Hi,

For those of you starting out and contemplating spending money on fancy new cars, cable TV, $1,100 iPhones (on installment plan) etc. Vs saving more please do your self a favor and read this article https://earlyretirementnow.com/2017/11/ ... etirement/ If I had a time machine I would go back engrave this on the forehead of my 25 year old self. I made it through but I was *lucky* to have had my period of highest savings correspond with 2 market crashes. Without this luck I could have been looking at another decade to FI.

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.
Your actual point seems to be that luck matters. As you point out, your highest savings/investing coming during market crashes dropped your FI age by a decade - thus higher returns was the determining factor. Virtually nobody can save 50% of their average $55k annual family income what with the normal mandatory expenses, so knowing that doesn't help them. Even a well-above-average $100k family income makes savings 50% of gross extremely difficult while leading even a modest lifestyle. But perhaps the most challenging factor facing 25-year-olds today is stagnant wage growth - many may already be at or nearing their peak earning years, while most of us older people experienced at least early-career wage growth, and many from earlier generations continued to see wage growth throughout their careers. A career of no wage growth coupled with 2% real annual investment returns will counteract that 50% savings rate - and may make a higher percentage of people wish they'd spent more, earlier. The "save more" philosophy really only works when you have an increasing amount to save from and when those savings buy you significant real returns, so I have difficulty enthusiastically recommending it for many younger people today.
I certainly won't debate that many/most people can't save >50% of their *net* income. But, I have lost track of how many coworkers and relatives state they can't increase their savings but buy $1,000 phones and >$40,000 pickup trucks. I drive a less expensive car and spend far less on cell phone service than my comparably or even lower paid coworkers. They need to head over to MrMoneyMustache.com for some inspiration. Many people can save a lot more than they are and thus reduce the importance of luck. I certainly could have if I had read an article like the one above and become motivated to do so. One advantage young people do have is access to words of wisdom from people on Bogleheads and access to much less expensive investment options.
Adapt or perish

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 9:13 am

More than anything, I would tell a 25 year old today to be a continuous learner and obtain all of the education, certifications, etc. they can to increase their marketability and maximize income. And then to continue retraining and retooling themselves and their skill set as they progress throughout their career.

goblue100
Posts: 355
Joined: Sun Dec 01, 2013 10:31 am

Re: Sobering article for my 25 year old self

Post by goblue100 » Wed Nov 15, 2017 9:29 am

Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am

In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.
Best wishes.
These articles are for the FIRE crowd. So if you only work 10 or 15 years, you won't get much SS, and it will only come into play after many years of retirement. I have the benefit of hindsight, and I'm glad this wasn't a "thing" when I was in my 20's, because I might have thought it was a good idea to be retired at 45. While I don't know what that alternate life would have been like, I believe it would have been too much of a good thing. And as you point out, living on extremely limited means for 60 years doesn't seem like much fun. I'm far from a spendthrift, but having a little fun is, well, fun. Now I'm contemplating retirement in two or three years, at 60'ish, which I think will be early enough.
Some people are immune to good advice. - Saul Goodman

fishmonger
Posts: 469
Joined: Fri Jan 31, 2014 2:20 pm

Re: Sobering article for my 25 year old self

Post by fishmonger » Wed Nov 15, 2017 9:36 am

Most folks who talk about saving 50% of income either are extremely high earners, or have other advantages that most don't - no student loans, cheap living arrangements, no dependents, inherited wealth, etc. Most average folks who have a household to support can get nowhere close to saving 50% of their gross income.

That being said, some of the best advice I got from this site was that people who are low savers spend too much on 3 things: house, car, entertainment. Sometimes all of the above. Really made me focus on those areas in my own life and it has helped tremendously

User avatar
TSquare
Posts: 38
Joined: Thu Jan 21, 2016 11:08 am

Re: Sobering article for my 25 year old self

Post by TSquare » Wed Nov 15, 2017 10:10 am

Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am

In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
Thank you for the dose of common sense.

SouthernCPA
Posts: 626
Joined: Wed Sep 23, 2015 10:20 am

Re: Sobering article for my 25 year old self

Post by SouthernCPA » Wed Nov 15, 2017 10:32 am

Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am
In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
I agree 100%. I just turned 30 and have been saving around 20% of our Income and live below ours means, but my wife and I still take vacations because we love to travel, I still have hobbies like fishing/boating and we enjoy going out to eat and enjoying the fruits of our labor. The thought of spending 15 years living like a freshmen in college and clipping coupons to give myself the "luxury" to retire at 45 to live like a college kid the rest of my life and clip coupons and eat rice and beans sounds absolutely miserable to me. Balance is key. The way we look at it is we only get so many trips around the sun in this life, I'd like to enjoy some of while I can. We will be fine and I don't feel like I'll be missing out on anything in life because I didn't "retire" at 45 to sit at home because I can't afford to do anything else.

Different priorities for different folks, I suppose. I think it also helps to have a career you don't absolutely hate.

Mitchell777
Posts: 841
Joined: Mon May 21, 2007 6:32 am

Re: Sobering article for my 25 year old self

Post by Mitchell777 » Wed Nov 15, 2017 10:38 am

I was always rather thrifty but I suppose how much to delay some gratification is up to every individual. Looking back, the biggest "mistake" I made was not putting a higher percent of my savings into equities while in my 20's and 30's. Anything above 50% got me worried. Growing up lower middle class, I didn't see many people invested in stocks/mutual funds and it somewhat scared me for awhile.

hightower
Posts: 360
Joined: Mon Dec 12, 2016 2:28 am

Re: Sobering article for my 25 year old self

Post by hightower » Wed Nov 15, 2017 11:14 am

I agree that the 50%+ savings target is probably more realistic for high earners. So is retiring early. It doesn't take as much of a sacrifice for me to save that aggressively. I feel like I'm living quite comfortably. As a physician, I aim to save more than 50% of what I make as well, but that's also because I don't see myself working as a physician forever, nor do I believe that physician's salaries are going to remain high. I see FI and early retirement as a way to protect myself from forces I can't control.

fishmonger
Posts: 469
Joined: Fri Jan 31, 2014 2:20 pm

Re: Sobering article for my 25 year old self

Post by fishmonger » Wed Nov 15, 2017 11:27 am

SouthernCPA wrote:
Wed Nov 15, 2017 10:32 am
Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am
In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
I agree 100%. I just turned 30 and have been saving around 20% of our Income and live below ours means, but my wife and I still take vacations because we love to travel, I still have hobbies like fishing/boating and we enjoy going out to eat and enjoying the fruits of our labor. The thought of spending 15 years living like a freshmen in college and clipping coupons to give myself the "luxury" to retire at 45 to live like a college kid the rest of my life and clip coupons and eat rice and beans sounds absolutely miserable to me. Balance is key. The way we look at it is we only get so many trips around the sun in this life, I'd like to enjoy some of while I can. We will be fine and I don't feel like I'll be missing out on anything in life because I didn't "retire" at 45 to sit at home because I can't afford to do anything else.

Different priorities for different folks, I suppose. I think it also helps to have a career you don't absolutely hate.
+1. My aunt and uncle retired in their early 50's and moved from Rhode Island to Bonita Springs, FL. Uncle was a teacher, my aunt always did secretarial work so neither of them were high earners (although my uncle has a generous pension). They are now in their late 60's and the lengths that they go to save money still is nuts to me - clipping coupons, figuring out each week what gas station has the cheapest gas by a couple of cents, they have a calendar of what restaurants are having promotions on what night, etc.

To each his own, but I have no desire to live like that, even if it's "early" retirement. I'd rather work 5 more years and live how I please

MI_bogle
Posts: 275
Joined: Mon Aug 01, 2016 3:56 pm

Re: Sobering article for my 25 year old self

Post by MI_bogle » Wed Nov 15, 2017 12:06 pm

Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am
Top99% wrote:
Wed Nov 15, 2017 8:07 am

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.

In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
Why does it always have to be this false dichotomy? Many people can save 50% of their income and NOT live like a miser. That number increases drastically if we're talking about 30% plus. Sure, it helps to be a higher earner, because the 50-60% that you are consuming means you have a higher standard of living while saving.
Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.
Very true statement. A lot of people would argue that they ARE doing that, while saving 50% of their income. YOU may not. And that's ok.

Balance is always the key, yes. But, people value different things in life. Many people derive high life satisfaction from being minimalist and enjoying people, experiences, and low-cost lifestyles. Many people derive satisfaction from being heavy consumers. And all along that continuum in between the two extremes. I believe it's a common mistake to project your personal values on other folks' life satisfaction and spending plans. It's really easy to do

Studies have shown that people's happiness is rarely connected to how much money they spend, after a threshold has been reached (and that threshold is well under 100K)

goblue100
Posts: 355
Joined: Sun Dec 01, 2013 10:31 am

Re: Sobering article for my 25 year old self

Post by goblue100 » Wed Nov 15, 2017 12:11 pm

fishmonger wrote:
Wed Nov 15, 2017 11:27 am

They are now in their late 60's and the lengths that they go to save money still is nuts to me - clipping coupons, figuring out each week what gas station has the cheapest gas by a couple of cents, they have a calendar of what restaurants are having promotions on what night, etc.

To each his own, but I have no desire to live like that, even if it's "early" retirement. I'd rather work 5 more years and live how I please
I don't know but I would suspect that they don't see coupons and restaurant promotions as being a hardship. Just being good stewards of their money. Sort of a part time job.
Some people are immune to good advice. - Saul Goodman

stoptothink
Posts: 3782
Joined: Fri Dec 31, 2010 9:53 am

Re: Sobering article for my 25 year old self

Post by stoptothink » Wed Nov 15, 2017 12:24 pm

MI_bogle wrote:
Wed Nov 15, 2017 12:06 pm
Balance is always the key, yes. But, people value different things in life. Many people derive high life satisfaction from being minimalist and enjoying people, experiences, and low-cost lifestyles. Many people derive satisfaction from being heavy consumers. And all along that continuum in between the two extremes. I believe it's a common mistake to project your personal values on other folks' life satisfaction and spending plans. It's really easy to do

Studies have shown that people's happiness is rarely connected to how much money they spend, after a threshold has been reached (and that threshold is well under 100K)
End of thread. It is a losing game trying to project your values onto other people.

chevca
Posts: 711
Joined: Wed Jul 26, 2017 11:22 am

Re: Sobering article for my 25 year old self

Post by chevca » Wed Nov 15, 2017 12:31 pm

While I do wish I would have saved something... anything in my 20's, I'll take the fun and experiences I had over being able to retire early.

I had no balance between spending and saving back then. I'm happy with the balance I've found that way in my 40's. The divorces I went through were a much bigger hardship than blowing money in my 20's, when I wasn't making much anyway. Life can present plenty of set backs to knock any saver on their rear end. While the odds are low, there's no guarantee any of us make it past today. Don't ignore reasonable wants now to save everything for a future that may not come to be. Balance....

2015
Posts: 981
Joined: Mon Feb 10, 2014 2:32 pm

Re: Sobering article for my 25 year old self

Post by 2015 » Wed Nov 15, 2017 12:34 pm

stoptothink wrote:
Wed Nov 15, 2017 12:24 pm
MI_bogle wrote:
Wed Nov 15, 2017 12:06 pm
Balance is always the key, yes. But, people value different things in life. Many people derive high life satisfaction from being minimalist and enjoying people, experiences, and low-cost lifestyles. Many people derive satisfaction from being heavy consumers. And all along that continuum in between the two extremes. I believe it's a common mistake to project your personal values on other folks' life satisfaction and spending plans. It's really easy to do

Studies have shown that people's happiness is rarely connected to how much money they spend, after a threshold has been reached (and that threshold is well under 100K)
End of thread. It is a losing game trying to project your values onto other people.
+1
I am one of the most frugal people I know, but I would go back and tell my 27 year old self I'm sure glad he bought that brand new Mazda RX7 sports car (back when RX7's were worth having) because of the enjoyment it gave him. I would tell my 37 year old and 50 year old selves I'm glad they bought those MBZ's for the same reason. I'd also go back and thank my 50's selves for spending that ungodly amount on their daily cafe mocha habit, because it was the only thing that got me through those last years until early retirement. Now, in retirement, I'm having the time of my life.

whomever
Posts: 690
Joined: Sat Apr 21, 2012 5:21 pm

Re: Sobering article for my 25 year old self

Post by whomever » Wed Nov 15, 2017 12:44 pm

. A career of no wage growth coupled with 2% real annual investment returns will counteract that 50% savings rate
I don't get this. Let's assume a 0% real return. If you start a 'real' job by age 25 and save 50%:

-at age 50 you could retire and last until age 75 (long enough for max SS)
-at age 55 you could last (even with no SS) until 85, which is close to the median age at death)
-at age 60 you could last until 95 (even with no SS)

And 0% real over 50 years of investing seems pretty pessimistic.

We never thought saving 50% was a hardship, but that's because e.g. a 10 year old Civic was all the car we wanted. We'd just rather go hiking than have nicer stuff. Everyone's priorities are different, you have to do what makes you happy.

Admiral
Posts: 913
Joined: Mon Oct 27, 2014 12:35 pm

Re: Sobering article for my 25 year old self

Post by Admiral » Wed Nov 15, 2017 12:49 pm

This link has been posted many times. It's lots of math and charts to show that--Wow!--saving 50-60% of your income means you don't have to work very long. Yes, and if you save 100% (i.e. have a zero cost of living) you've already reached FI.

That's neither realistic nor likely for the vast majority of the workers in this country (who are NOT Bogleheads). I'd also add that few people probably WANT to retire after 15 years of working...a time when they are really just hitting their stride, finding what they enjoy doing, and starting to see a career and not just a job.

Just save as much as you can while still enjoying life. After all, you won't come out of it alive!

User avatar
iceport
Posts: 3333
Joined: Sat Apr 07, 2007 4:29 pm

Re: Sobering article for my 25 year old self

Post by iceport » Wed Nov 15, 2017 1:38 pm

fishmonger wrote:
Wed Nov 15, 2017 9:36 am
Most folks who talk about saving 50% of income either are extremely high earners, or have other advantages that most don't - no student loans, cheap living arrangements, no dependents, inherited wealth, etc. Most average folks who have a household to support can get nowhere close to saving 50% of their gross income.

That being said, some of the best advice I got from this site was that people who are low savers spend too much on 3 things: house, car, entertainment. Sometimes all of the above. Really made me focus on those areas in my own life and it has helped tremendously
I think the key here is the word "focus."

I emphatically agree that the feasibility of high savings rates is severely limited for most folks, due to individual combinations of multiple factors. However, it's also true that even when it should be easy to save more, the vast majority of people just plain don't choose to do it.

At my old workplace, we enjoyed a rare and extreme escalation in compensation a decade ago that proved to be revealing. As fortune would have it, we received a base pay increase (commensurate with increased hours of work) of over 14%, phased in over 2 years. For me, it was a simple matter to bank the entire amount. For others, focused on other things, their spending increased to spend it all. Fast-forward 5 years, and many folks were once again struggling to make ends meet. So even when an easy opportunity presented itself on a silver platter, those that lacked a healthy perspective on personal finances, or who lacked any financial goals, could not see their way to take advantage of it.
"Discipline matters more than allocation.” ─William Bernstein

DrGoogle2017
Posts: 706
Joined: Mon Aug 14, 2017 12:31 pm

Re: Sobering article for my 25 year old self

Post by DrGoogle2017 » Wed Nov 15, 2017 2:10 pm

I agree that balance is key. The important thing is to save early and just be aware that for every dollar you spend, you need to earn $2. No need to be extreme in anything.
This is why many people give up on savings because it becomes an insurmountable task if people think they should save a huge percentage.

fishmonger
Posts: 469
Joined: Fri Jan 31, 2014 2:20 pm

Re: Sobering article for my 25 year old self

Post by fishmonger » Wed Nov 15, 2017 2:43 pm

iceport wrote:
Wed Nov 15, 2017 1:38 pm
fishmonger wrote:
Wed Nov 15, 2017 9:36 am
Most folks who talk about saving 50% of income either are extremely high earners, or have other advantages that most don't - no student loans, cheap living arrangements, no dependents, inherited wealth, etc. Most average folks who have a household to support can get nowhere close to saving 50% of their gross income.

That being said, some of the best advice I got from this site was that people who are low savers spend too much on 3 things: house, car, entertainment. Sometimes all of the above. Really made me focus on those areas in my own life and it has helped tremendously
I think the key here is the word "focus."

I emphatically agree that the feasibility of high savings rates is severely limited for most folks, due to individual combinations of multiple factors. However, it's also true that even when it should be easy to save more, the vast majority of people just plain don't choose to do it.

At my old workplace, we enjoyed a rare and extreme escalation in compensation a decade ago that proved to be revealing. As fortune would have it, we received a base pay increase (commensurate with increased hours of work) of over 14%, phased in over 2 years. For me, it was a simple matter to bank the entire amount. For others, focused on other things, their spending increased to spend it all. Fast-forward 5 years, and many folks were once again struggling to make ends meet. So even when an easy opportunity presented itself on a silver platter, those that lacked a healthy perspective on personal finances, or who lacked any financial goals, could not see their way to take advantage of it.
You're talking about two separate issues. I wholeheartedly agree that most folks don't make saving a priority. However, the OP (and some follow up comments) saying that "many" or "most" can save 50% of their income do not live in the real world.

Bottomline, folks should save as much as they can, as early as they can.

User avatar
rocket354
Posts: 119
Joined: Mon Dec 14, 2015 12:31 pm

Re: Sobering article for my 25 year old self

Post by rocket354 » Wed Nov 15, 2017 3:10 pm

MI_bogle wrote:
Wed Nov 15, 2017 12:06 pm
Wagnerjb wrote:
Wed Nov 15, 2017 9:10 am
Top99% wrote:
Wed Nov 15, 2017 8:07 am

This article is one of the most compelling arguments for saving as much as possible I have found. Hopefully it will help some folks avoid getting into their 50s and suddenly realizing they have little hope of making it to financial independence. The good news in this article is if you save >50% investment returns have surprisingly little impact on the years to FI.

In my opinion, this is a horrible idea. First of all, it totally ignores that most people will get Social Security. Second of all, it ignores that many people will get an employer match in their 401k plans. Both of these issues accelerate the time to FI. But most importantly, why save >50% of your income and live like a miser? Just so that you can retire early and live like a miser for another 40-50 years? Not for me. Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.

I started saving in my mid-20's with a target to get to 25x expenses by age 55, which I achieved despite my expenses increasing substantially later in my career. I saved 10-15% of salary and got a 6% match for most of my career and I invested in equities early...gradually adjusting my AA as I aged.

I don't see the need to inject panic in the lives of 20 years olds - just balance.

Best wishes.
Why does it always have to be this false dichotomy? Many people can save 50% of their income and NOT live like a miser. That number increases drastically if we're talking about 30% plus. Sure, it helps to be a higher earner, because the 50-60% that you are consuming means you have a higher standard of living while saving.
Enjoy life, save an appropriate amount, and enjoy the fruits of your hard work. Balance is the key for me.
Very true statement. A lot of people would argue that they ARE doing that, while saving 50% of their income. YOU may not. And that's ok.

Balance is always the key, yes. But, people value different things in life. Many people derive high life satisfaction from being minimalist and enjoying people, experiences, and low-cost lifestyles. Many people derive satisfaction from being heavy consumers. And all along that continuum in between the two extremes. I believe it's a common mistake to project your personal values on other folks' life satisfaction and spending plans. It's really easy to do

Studies have shown that people's happiness is rarely connected to how much money they spend, after a threshold has been reached (and that threshold is well under 100K)
There are a few false dichotomies in those lines of thinking. Why are the options either:

1) Live like a miser until retirement, then continue to live like a miser
2) Live like a "normal" human being until retirement, then continue to live like a "normal" human being?

Someone can definitely live like a miser well past the 25x point (where x is the miser level) and get to the 25y point (where y is the "normal" level) and then live out their life how they see fit. And they will get there faster than the person who started out saving at the normal level.

Also, someone can live normal until retirement and then not have a choice about living like a miser. Layoffs, health issues, ageism, obsolescence of skills, divorce, etc, can all impact one's financial well-being. If you save 15% now figuring that will be enough by age 55...well maybe it won't be once a few of the above occur. Then you've lived a normal life, but don't have much of a choice except to work until 70 (or beyond), or accept your rice and beans fate.

That's why I choose the miser-> normal option. If life throws me curveballs (which it already has) then I'll still be ahead of where I need to be to have a comfy, and hopefully early, retirement.

User avatar
iceport
Posts: 3333
Joined: Sat Apr 07, 2007 4:29 pm

Re: Sobering article for my 25 year old self

Post by iceport » Wed Nov 15, 2017 4:00 pm

fishmonger wrote:
Wed Nov 15, 2017 2:43 pm
iceport wrote:
Wed Nov 15, 2017 1:38 pm
fishmonger wrote:
Wed Nov 15, 2017 9:36 am
Most folks who talk about saving 50% of income either are extremely high earners, or have other advantages that most don't - no student loans, cheap living arrangements, no dependents, inherited wealth, etc. Most average folks who have a household to support can get nowhere close to saving 50% of their gross income.

That being said, some of the best advice I got from this site was that people who are low savers spend too much on 3 things: house, car, entertainment. Sometimes all of the above. Really made me focus on those areas in my own life and it has helped tremendously
I think the key here is the word "focus."

I emphatically agree that the feasibility of high savings rates is severely limited for most folks, due to individual combinations of multiple factors. However, it's also true that even when it should be easy to save more, the vast majority of people just plain don't choose to do it.

At my old workplace, we enjoyed a rare and extreme escalation in compensation a decade ago that proved to be revealing. As fortune would have it, we received a base pay increase (commensurate with increased hours of work) of over 14%, phased in over 2 years. For me, it was a simple matter to bank the entire amount. For others, focused on other things, their spending increased to spend it all. Fast-forward 5 years, and many folks were once again struggling to make ends meet. So even when an easy opportunity presented itself on a silver platter, those that lacked a healthy perspective on personal finances, or who lacked any financial goals, could not see their way to take advantage of it.
You're talking about two separate issues. I wholeheartedly agree that most folks don't make saving a priority. However, the OP (and some follow up comments) saying that "many" or "most" can save 50% of their income do not live in the real world.

Bottomline, folks should save as much as they can, as early as they can.
I think we're in complete agreement here. I guess the point I should be making is that the financial means to save and the desire to save are both necessary, but each is insufficient alone, for an individual to save successfully.
"Discipline matters more than allocation.” ─William Bernstein

randomguy
Posts: 5027
Joined: Wed Sep 17, 2014 9:00 am

Re: Sobering article for my 25 year old self

Post by randomguy » Wed Nov 15, 2017 4:02 pm

rocket354 wrote:
Wed Nov 15, 2017 3:10 pm


That's why I choose the miser-> normal option. If life throws me curveballs (which it already has) then I'll still be ahead of where I need to be to have a comfy, and hopefully early, retirement.
Problem of course is the opportunity cost that you pay by insuring against layoffs, health issues, ageism,.... . A lot of people would rather take some risk of future bad out come not to give up opportunities that will never repeat themselves. You will never have a second chance to take your 6 year old to disney land so you have to decide if spending 4k now and pushing off retirement by a month is worth it or not. You can go down the list of everything you spend money on and decide that. Everyones values there are going to differ.

randomguy
Posts: 5027
Joined: Wed Sep 17, 2014 9:00 am

Re: Sobering article for my 25 year old self

Post by randomguy » Wed Nov 15, 2017 4:08 pm

iceport wrote:
Wed Nov 15, 2017 4:00 pm
fishmonger wrote:
Wed Nov 15, 2017 2:43 pm


You're talking about two separate issues. I wholeheartedly agree that most folks don't make saving a priority. However, the OP (and some follow up comments) saying that "many" or "most" can save 50% of their income do not live in the real world.

Bottomline, folks should save as much as they can, as early as they can.
I think we're in complete agreement here. I guess the point I should be making is that the financial means to save and the desire to save are both necessary, but each is insufficient alone, for an individual to save successfully.

People shouldn't save as much as possible. For most people that is just a stupid way to live. Would you really suggest a family of 4 live in a studio apartment so that they can save as much as possible? That fits a very small percentage of the populations goals. People need to save enough to meet their goals while balancing it with how they want to live life. For most people that is in the 10-25% range.

User avatar
rocket354
Posts: 119
Joined: Mon Dec 14, 2015 12:31 pm

Re: Sobering article for my 25 year old self

Post by rocket354 » Wed Nov 15, 2017 4:11 pm

randomguy wrote:
Wed Nov 15, 2017 4:02 pm
rocket354 wrote:
Wed Nov 15, 2017 3:10 pm


That's why I choose the miser-> normal option. If life throws me curveballs (which it already has) then I'll still be ahead of where I need to be to have a comfy, and hopefully early, retirement.
Problem of course is the opportunity cost that you pay by insuring against layoffs, health issues, ageism,.... . A lot of people would rather take some risk of future bad out come not to give up opportunities that will never repeat themselves. You will never have a second chance to take your 6 year old to disney land so you have to decide if spending 4k now and pushing off retirement by a month is worth it or not. You can go down the list of everything you spend money on and decide that. Everyones values there are going to differ.
Very true, and I would lean towards Disneyland. However, you can choose whether you take your 6 year old, and then a year later your 7 year old, and then a year after that your 8 year old, etc to Disneyland every year. Or maybe it's Bermuda the next year. Or Europe. And buy him/her every marked up mickey mouse doll, and stay in expensive hotels, and eat lavish meals, etc, etc.

One can live frugally and still do just about anything. Just not everything, as the old saying goes.

I may go the miser route, but I still eat fine (cook myself 98% of the time and no rice and beans on my menu), and I still do a decent amount of domestic travel. I could do more international, and probably will soon. I have hobbies. But they fit within my budget, and still allow me to save > 50% of my gross income. I've found the balance that works for me and my long-term goals.

User avatar
DaftInvestor
Posts: 3220
Joined: Wed Feb 19, 2014 10:11 am

Re: Sobering article for my 25 year old self

Post by DaftInvestor » Wed Nov 15, 2017 4:18 pm

AZAttorney11 wrote:
Wed Nov 15, 2017 9:13 am
More than anything, I would tell a 25 year old today to be a continuous learner and obtain all of the education, certifications, etc. they can to increase their marketability and maximize income. And then to continue retraining and retooling themselves and their skill set as they progress throughout their career.
:beer
Most excellent advise.
- Make $50K a year and save 50% - you are saving $25K a year.
- Make $300K a year and save 15% and you are saving $45K a year and ENJOYING life along the way.
The best advise you can give to someone started out is not to save and live as frugally as possible but rather to do their best to maximize/boost their income so they can save more for the future AND have a chance of enjoying life along the way rather than wait until they hit some magical FI number.

At least for me - I wouldn't be happy up until FI if I spent my life living like MMM claims to (or used to claim to). My fear is I would die young having never experienced a calving glacier; European travel, the joy on my kids faces at Disney, etc.

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 4:39 pm

Folks,

1) If you are 25 years old, you are betting on N number of years of working life. Then, you save accordingly. If you bet it wrong or you hit a period of unemployment last longer than your savings, you will be wiped out.

2) For most people, they doubled down by buying a big and expensive (3 X their gross income or more) by betting that their income will grow and they will be continuously employed until retirement age. Many of them are wiped out by our frequent recession.

3) So, at 25 years old,

A) How long will you be continuously employed?

B) How will be you affected by the recessions that occurred at least once every 10 years?

Place your bet by deciding how much to save and spend. I wish you best of luck. You will only know how it will work out in the future.

KlangFool

iamlucky13
Posts: 733
Joined: Sat Mar 04, 2017 5:28 pm

Re: Sobering article for my 25 year old self

Post by iamlucky13 » Wed Nov 15, 2017 4:50 pm

whomever wrote:
Wed Nov 15, 2017 12:44 pm
We never thought saving 50% was a hardship, but that's because e.g. a 10 year old Civic was all the car we wanted. We'd just rather go hiking than have nicer stuff. Everyone's priorities are different, you have to do what makes you happy.
Not just priorities, but life circumstances, especially income, but also sometimes expenses beyond a person's control like those resulting from chronic health issues.

I don't mean to single your post out in particular, but it got me thinking about how conversations here often seem to gloss over just how much our individual perspectives can vary. I thought I'd compare my own case to highlight this.

I think my spending habits are similar to yours - my Civic is 15 years old. My wife's car is newer but will be kept for a similar length of time. Home is below median cost, income is above median for my area. We're both healthy. Hiking and DIY projects are two of my main hobbies. My wife loves lattes, but is not a daily drinker - maybe once a week. A lot of our furniture was bought used or inherited, etc.

My retirement savings rate including employer match is about 1/3 of yours (15-20%). I've been doing a fairly deep dive into my budget recently because I'd like to increase that rate, but realized I'm actually at my limit if ignoring the bonuses that so far have been pretty regular, but are currently in doubt due to business conditions in the industry I'm in.

We certainly do have costs we could cut, but I'm hardly talking about tropical cruises, luxury cars, and the latest and greatest smartphones and TV's. The easy stuff is things like Netflix. Putting $10/month from a savings like that into my retirement spreadsheet pulls my predicted retirement forward by a little over 5 weeks - hardly a revolution. I might gain another 5 weeks if I told my wife the thermostat can not be set above 68 in the winter, but I value my life too much to try that. I know owning a second car is a much more significant expense, but we don't live in an area where it can be eliminated without pretty significant lifestyle changes, and the cost of moving to such an area would eliminate the potential savings. I could quite easily reduce my charitable contributions to gain a significant savings bump, but as you mentioned, we all have our own priorities, and that's one of mine.

Basically, 50% savings rate isn't even a twinkle in my eye, and even 25% would take some major adjustments. I'd guess based on income and local cost of living I'm in a better financial position than about 2/3 of Americans, and maybe more like 80-90% if factoring in actual spending habits.

I'm led to infer 50% savings rate was easy for you because you had significantly higher income than I do, and therefore, than most other Americans.

It's clearly true that practices like trading in and financing a new car every time you pay off the last one have a really major affect on one's ability to save. But for most people, eliminating those expenses doesn't move them from the left edge of the charts in the OP's link to the middle. It moves them from off the chart to the left edge. For about half of Americans, even getting to the roughly 15% rate that should provide a comfortable retirement after a 40 year career is probably an actual hardship, rather than a self-inflicted one.

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 4:56 pm

Folks,

IMHO, the real sobering thought for a 25 years person is that for many people, it is unlikely that they will be continuously fully-employed until retirement age. They are likely to be unemployed for 6 months to 1 year if not longer. Recessions will occur regularly. They will be affected by one or more recessions. If they are not financially prepared, they will be wiped out.

I have the fortunate or unfortunate circumstances of never work in any stable job and/or economic environment. So, I save in order to survive.

So, instead of working 40 years until retirement, you only have 20 years of working life, do you save enough to survive? That is a truly sobering thought.

KlangFool

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 5:15 pm

KlangFool wrote:
Wed Nov 15, 2017 4:56 pm
Folks,

IMHO, the real sobering thought for a 25 years person is that for many people, it is unlikely that they will be continuously fully-employed until retirement age. They are likely to be unemployed for 6 months to 1 year if not longer. Recessions will occur regularly. They will be affected by one or more recessions. If they are not financially prepared, they will be wiped out.

I have the fortunate or unfortunate circumstances of never work in any stable job and/or economic environment. So, I save in order to survive.

So, instead of working 40 years until retirement, you only have 20 years of working life, do you save enough to survive? That is a truly sobering thought.

KlangFool
This is nonsense.

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 5:18 pm

DaftInvestor wrote:
Wed Nov 15, 2017 4:18 pm
AZAttorney11 wrote:
Wed Nov 15, 2017 9:13 am
More than anything, I would tell a 25 year old today to be a continuous learner and obtain all of the education, certifications, etc. they can to increase their marketability and maximize income. And then to continue retraining and retooling themselves and their skill set as they progress throughout their career.
:beer
Most excellent advise.
- Make $50K a year and save 50% - you are saving $25K a year.
- Make $300K a year and save 15% and you are saving $45K a year and ENJOYING life along the way.
The best advise you can give to someone started out is not to save and live as frugally as possible but rather to do their best to maximize/boost their income so they can save more for the future AND have a chance of enjoying life along the way rather than wait until they hit some magical FI number.

At least for me - I wouldn't be happy up until FI if I spent my life living like MMM claims to (or used to claim to). My fear is I would die young having never experienced a calving glacier; European travel, the joy on my kids faces at Disney, etc.
:sharebeer

Nyc10036
Posts: 250
Joined: Wed Oct 05, 2016 6:29 pm

Re: Sobering article for my 25 year old self

Post by Nyc10036 » Wed Nov 15, 2017 5:20 pm

I may not have saved 50% in my younger days, but I am glad I saved 20-25%.
After I hit age 50 I have found jobs are harder come by.

Nyc10036
Posts: 250
Joined: Wed Oct 05, 2016 6:29 pm

Re: Sobering article for my 25 year old self

Post by Nyc10036 » Wed Nov 15, 2017 5:20 pm

AZAttorney11 wrote:
Wed Nov 15, 2017 5:15 pm
KlangFool wrote:
Wed Nov 15, 2017 4:56 pm
Folks,

IMHO, the real sobering thought for a 25 years person is that for many people, it is unlikely that they will be continuously fully-employed until retirement age. They are likely to be unemployed for 6 months to 1 year if not longer. Recessions will occur regularly. They will be affected by one or more recessions. If they are not financially prepared, they will be wiped out.

I have the fortunate or unfortunate circumstances of never work in any stable job and/or economic environment. So, I save in order to survive.

So, instead of working 40 years until retirement, you only have 20 years of working life, do you save enough to survive? That is a truly sobering thought.

KlangFool
This is nonsense.
Not nonsense!!!!!

User avatar
ray.james
Posts: 859
Joined: Tue Jul 19, 2011 4:08 am

Re: Sobering article for my 25 year old self

Post by ray.james » Wed Nov 15, 2017 5:28 pm

Somewhat striking point of the article is, as savings rate rises lets say above 20%; 60/40 vs 100/0 as an allocation is pretty much a small blip over 10 year time period. That is a great point IMO to grasp.
Second, during early retirement, sequence of return risk in the first decade plays a big role.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 5:29 pm

^

It's absolutely nonsense that a 25 year old, who is otherwise healthy, ready, willing, and able to work, will only have 20 years of time to accrue earnings. So what are all of these people aged 25-65 doing when they aren't working for 20 years? This is fear mongering.

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 5:37 pm

AZAttorney11 wrote:
Wed Nov 15, 2017 5:29 pm
^

It's absolutely nonsense that a 25 year old, who is otherwise healthy, ready, willing, and able to work, will only have 20 years of time to accrue earnings. So what are all of these people aged 25-65 doing when they aren't working for 20 years? This is fear mongering.
AZAttorney11,

Please note the word that I used: fully-employed.

https://www.washingtonpost.com/national ... 11c8263430

<< Ellen Tara James-Penney, a lecturer at San Jose State University, has been sleeping out of a car for about a decade, ever since she lost her housing while an undergraduate at the school where she now teaches four English courses, a job that pays $28,000 a year. Home is an old Volvo.

“I’ve basically been homeless since 2007, and I’m really tired,” she said. “Really tired.”

She actually got her start in the high tech industry, before being laid off during the tech meltdown of the early 2000s. Like many who couldn’t find work, she went to college, accumulating tens of thousands of dollars in student debt along the way.

Now 54, she grades papers and prepares lesson plans in her car. Among her few belongings is a pair of her grandmother’s fancy stiletto pumps, a reminder to herself that “it’s not going to be like this forever.”>>

KlangFool

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 5:50 pm

KlangFool wrote:
Wed Nov 15, 2017 5:37 pm
[quote=AZAttorney11 post_id=3620191 time=<a href="tel:1510784947">1510784947</a> user_id=61729]
^

It's absolutely nonsense that a 25 year old, who is otherwise healthy, ready, willing, and able to work, will only have 20 years of time to accrue earnings. So what are all of these people aged 25-65 doing when they aren't working for 20 years? This is fear mongering.
AZAttorney11,

Please note the word that I used: fully-employed.

https://www.washingtonpost.com/national ... 11c8263430

<< Ellen Tara James-Penney, a lecturer at San Jose State University, has been sleeping out of a car for about a decade, ever since she lost her housing while an undergraduate at the school where she now teaches four English courses, a job that pays $28,000 a year. Home is an old Volvo.

“I’ve basically been homeless since 2007, and I’m really tired,” she said. “Really tired.”

She actually got her start in the high tech industry, before being laid off during the tech meltdown of the early 2000s. Like many who couldn’t find work, she went to college, accumulating tens of thousands of dollars in student debt along the way.

Now 54, she grades papers and prepares lesson plans in her car. Among her few belongings is a pair of her grandmother’s fancy stiletto pumps, a reminder to herself that “it’s not going to be like this forever.”>>

KlangFool
[/quote]

You can’t be serious. You’ve got a sample size of one. I’m sure there are other sob stories of people who made terrible life choices.

Why don’t you look at historical data provided by the BLS? What’s the historical unemployment rate and underemployment rate? Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 5:59 pm

AZAttorney11 wrote:
Wed Nov 15, 2017 5:50 pm
KlangFool wrote:
Wed Nov 15, 2017 5:37 pm
[quote=AZAttorney11 post_id=3620191 time=<a href="tel:1510784947">1510784947</a> user_id=61729]
^

It's absolutely nonsense that a 25 year old, who is otherwise healthy, ready, willing, and able to work, will only have 20 years of time to accrue earnings. So what are all of these people aged 25-65 doing when they aren't working for 20 years? This is fear mongering.
AZAttorney11,

Please note the word that I used: fully-employed.

https://www.washingtonpost.com/national ... 11c8263430

<< Ellen Tara James-Penney, a lecturer at San Jose State University, has been sleeping out of a car for about a decade, ever since she lost her housing while an undergraduate at the school where she now teaches four English courses, a job that pays $28,000 a year. Home is an old Volvo.

“I’ve basically been homeless since 2007, and I’m really tired,” she said. “Really tired.”

She actually got her start in the high tech industry, before being laid off during the tech meltdown of the early 2000s. Like many who couldn’t find work, she went to college, accumulating tens of thousands of dollars in student debt along the way.

Now 54, she grades papers and prepares lesson plans in her car. Among her few belongings is a pair of her grandmother’s fancy stiletto pumps, a reminder to herself that “it’s not going to be like this forever.”>>

KlangFool
You can’t be serious. You’ve got a sample size of one. I’m sure there are other sob stories of people who made terrible life choices.

Why don’t you look at historical data provided by the BLS? What’s the historical unemployment rate and underemployment rate? Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”
[/quote]

AZAttorney11,

A person could not be 4.5% unemployed. We are not a statistic.

<< Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”>>

I do not suggest. This happened to many of my peers. They are permanently unemployed or under-employed at their 40s and 50s.

KlangFool

marcopolo
Posts: 320
Joined: Sat Dec 03, 2016 10:22 am

Re: Sobering article for my 25 year old self

Post by marcopolo » Wed Nov 15, 2017 6:11 pm

DaftInvestor wrote:
Wed Nov 15, 2017 4:18 pm

Most excellent advise.
- Make $50K a year and save 50% - you are saving $25K a year.
- Make $300K a year and save 15% and you are saving $45K a year and ENJOYING life along the way.
The best advise you can give to someone started out is not to save and live as frugally as possible but rather to do their best to maximize/boost their income so they can save more for the future AND have a chance of enjoying life along the way rather than wait until they hit some magical FI number.

At least for me - I wouldn't be happy up until FI if I spent my life living like MMM claims to (or used to claim to). My fear is I would die young having never experienced a calving glacier; European travel, the joy on my kids faces at Disney, etc.
Great advice!
Once in a while you get shown the light, in the strangest of places if you look at it right.

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 6:12 pm

KlangFool wrote: AZAttorney11,

A person could not be 4.5% unemployed. We are not a statistic.

<< Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”>>

I do not suggest. This happened to many of my peers. They are permanently unemployed or under-employed at their 40s and 50s.

KlangFool
So you don't want to use objective, third party data for the entire labor force to verify your claims -- you'd rather focus on personal experiences and anecdotes, am I understanding that correctly?

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 6:21 pm

AZAttorney11 wrote:
Wed Nov 15, 2017 6:12 pm
KlangFool wrote: AZAttorney11,

A person could not be 4.5% unemployed. We are not a statistic.

<< Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”>>

I do not suggest. This happened to many of my peers. They are permanently unemployed or under-employed at their 40s and 50s.

KlangFool
So you don't want to use objective, third party data for the entire labor force to verify your claims -- you'd rather focus on personal experiences and anecdotes, am I understanding that correctly?
AZAttorney11,

This is a personal finance forum. We offer personal finance advice. A person cannot be 4.5% unemployed. So, how could a 4.5% unemployment number matters to an individual?

KlangFool

KlangFool
Posts: 7220
Joined: Sat Oct 11, 2008 12:35 pm

Re: Sobering article for my 25 year old self

Post by KlangFool » Wed Nov 15, 2017 6:47 pm

Folks,

So, the fundamental problem is this.

A) A person at 25 years old could save 15% if and only if he is fully-employed over the next 40 years. But, if this turns out to be not true for this person after 20 years and this person has only 5 more years of working life, the person does not get a second chance to fix the mistake.

B) A person at 25 years old could save 30% and assume that he is fully-employed over the next 20 years. If after 20 years, the person is still fully-employed. This person could save nothing and live pay check to pay check and he will be fine.

So, why would you choose? (A) or (B)? Or, something in between?

KlangFool

AZAttorney11
Posts: 429
Joined: Wed Jan 21, 2015 12:12 pm

Re: Sobering article for my 25 year old self

Post by AZAttorney11 » Wed Nov 15, 2017 6:52 pm

KlangFool wrote:
Wed Nov 15, 2017 6:21 pm
AZAttorney11 wrote:
Wed Nov 15, 2017 6:12 pm
KlangFool wrote: AZAttorney11,

A person could not be 4.5% unemployed. We are not a statistic.

<< Again, it’s absurd to suggest that someone who is 25 and wants to work to 65 will only have 20 years of “full employment.”>>

I do not suggest. This happened to many of my peers. They are permanently unemployed or under-employed at their 40s and 50s.

KlangFool
So you don't want to use objective, third party data for the entire labor force to verify your claims -- you'd rather focus on personal experiences and anecdotes, am I understanding that correctly?
AZAttorney11,

This is a personal finance forum. We offer personal finance advice. A person cannot be 4.5% unemployed. So, how could a 4.5% unemployment number matters to an individual?

KlangFool
If that is your stance, then debating further with you on this topic will not be productive.

whomever
Posts: 690
Joined: Sat Apr 21, 2012 5:21 pm

Re: Sobering article for my 25 year old self

Post by whomever » Wed Nov 15, 2017 7:14 pm

Not just priorities, but life circumstances, especially income, but also sometimes expenses beyond a person's control like those resulting from chronic health issues.
Iamlucky13: I vociferously agree. Divorce is another big pothole we've seen people go through. An unlucky layoff can be a big monkeywrench, too. And we didn't have kids; they are an expensive hobby :-), both with the direct costs and things like houses in good school districts costing more.

I was mostly thinking of coworkers who made more - sometimes much more - than we did (salaries were public), and over the years couldn't understand why we weren't replacing cars and furniture, etc ("I can't believe you're still driving this junker"), while they had bleeding edge electronics and cars etc. Then when we retired in our late 50's, they couldn't understand how we afforded it.

And, again, I'm not suggesting that our way is right and theirs is wrong; just that ours was right for us. Our passions, like reading and hiking, just happen to not cost very much.

Olemiss540
Posts: 230
Joined: Fri Aug 18, 2017 8:46 pm

Re: Sobering article for my 25 year old self

Post by Olemiss540 » Wed Nov 15, 2017 7:44 pm

I love how the early retirement crowd poses such a threatenening dichotomy for many on BHs. Things like the fact that these people are self deprecating and causing unnessecary suffering to themselves because their "kids will never get to experience DISNEYLAND" or will have to exercise daily (ride a bike) to get to work!

I find the FIRE literature to be very insightful, and while it hasn't led me to sell all of my belongings and move my family into a tent, it HAS made me more conscientious about materialism and savings rate.

The simple truth being sold by these outlets is that there is no greater impact to ability to retire than savings rate. I could not agree more. 30 years ago, when someone told you they were planning to self fund retirement instead of counting on their union protected blue chip pension, CRAZY TALK! Now the consensus is that social security will be there to help transition you through your golden ages (I am not so sure).

Contentment is a virtue that seems somewhat neglected on this forum, and even more so in the general population. Anything that challenges people (the bulk majority of non bogleheads whom do not consider retirement savings a priority given the overwhelming data to the contrary) should be welcomed if only to get the population to start to realize a 5% savings rate or constant consumer debt (credit cards, new cars) is the path to a surefure miserly lifestyle in retirement (think alpo).

Interesting that bogleheads saving 20% of their income with an astute knowledge of personal finance feel targeted by these publications. The reality is that the larger majority with barely any nest egg at 40 are the ones really targeted since that is a MUCH larger target audience..... /rant.

User avatar
DaftInvestor
Posts: 3220
Joined: Wed Feb 19, 2014 10:11 am

Re: Sobering article for my 25 year old self

Post by DaftInvestor » Wed Nov 15, 2017 7:53 pm

Olemiss540 wrote:
Wed Nov 15, 2017 7:44 pm

Interesting that bogleheads saving 20% of their income with an astute knowledge of personal finance feel targeted by these publications. The reality is that the larger majority with barely any nest egg at 40 are the ones really targeted since that is a MUCH larger target audience..... /rant.
You think a 40 year old with hardly any savings is on the early retirement website? They are reading politics, sports, pop-culture, watching TV, or playing video games.

Post Reply