FIRE [financial independence/retire early]

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harvestbook
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Re: FIRE [financial independence/retire early]

Post by harvestbook » Wed Nov 29, 2017 7:37 pm

I embrace both Boglehead and FIRE principles but I'm not a purist by any means. I don't see any contradiction between the two. Reading the Mustache forum, it seems many of the people there use cheap index funds (there are some rentals people, but I think that's more of a case of them tending to be more active on the forum than representing a large swathe.) It's just as valuable to cut expenses as it is to earn or save more.

I'd call them Bogleheads who don't care if they have a nice car and generally want to have more freedom in the middle years rather than waiting until some magic day when the ship comes in and pensions roll and Medicare simplifies life. There's room for everyone to be happy. If we all pursued the same things, there probably wouldn't be enough of those things to go around. But time is the thing none of us can get back. Good luck to all.
I'm not smart enough to know, and I can't afford to guess.

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Veiled
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Re: FIRE [financial independence/retire early]

Post by Veiled » Wed Nov 29, 2017 7:54 pm

Traveler wrote:
Wed Nov 29, 2017 7:02 pm
So the 25X rule applies no matter one's age? I find it hard to believe that someone with $50K in annual expenses can retire with $1.25M at age 35. Now if that person with the same $50K in expenses was 50 or 55, the $1.25M is more likely enough to retire. That same $1.25M needs to last the 35 year old 50+ years, while it only has to last the 50 year old 35 years.
There's some thought that the 30 years the Trinity Study used could stretch out to "infinity." Unsure of the math myself.

I find myself agreeing heartily with many things upthread, especially that FIRE is a fruit of a 10-year bull and concern about what will happen when relatively small portfolios tank. I'm grateful for FIRE: I came to BH through the FIRE community. I like BH better because I want FI, but not necessarily RE. And I'll be prudent and frugal, but I stopped riding my bike to work because it made me miserable. OP, I will say that one of the popular topics in ChooseFI's facebook group is healthcare, and the FIRE community does include that as an expense in their 4% spending. Brad and Jonathan talk about it with US bloggers and recently covered expats/UK FIRE folks.

I think Meg77 said it best:
Meg77 wrote:I read a lot of FIRE blogs and enjoy them. There is no real difference in the way FIRE proponents define FI and the way Bogleheads do. Both groups generally embrace the 4% rule - though there is plenty of discussion/disagreement about exact asset allocation optimization targets, whether the 4% rule should be lowered to 3% when you're retiring super early, etc. The primary difference between the two groups is in level of expenses that is considered appropriate/desirable - and the speed at which retiring is a goal.
I like the creativity and aggressiveness of FIRE pursuers. It's also a pretty intentional community, which is good company.
Pardon me as I read these one hundred and fifty-seven SP vs LLC vs Scorp threads...

dbr
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Re: FIRE [financial independence/retire early]

Post by dbr » Wed Nov 29, 2017 7:59 pm

FWIW a lot of the perspective on what retirement finance is all about comes from the FIRE crowd. As an example FireCalc is called what it is for a reason even though it is just as or more useful as a tool for thinking about ordinary retirements. It was created by a principal on one of the retire early forums:

"The Retire Early Home Page is a treasure trove of resources and research about early retirement. It is hosted by John Greaney, the author of the spreadsheet that was the inspiration for FIRECalc in 1999. Later versions of his spreadsheet are at his website."

randomguy
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Re: FIRE [financial independence/retire early]

Post by randomguy » Wed Nov 29, 2017 8:17 pm

Veiled wrote:
Wed Nov 29, 2017 7:54 pm
Traveler wrote:
Wed Nov 29, 2017 7:02 pm
So the 25X rule applies no matter one's age? I find it hard to believe that someone with $50K in annual expenses can retire with $1.25M at age 35. Now if that person with the same $50K in expenses was 50 or 55, the $1.25M is more likely enough to retire. That same $1.25M needs to last the 35 year old 50+ years, while it only has to last the 50 year old 35 years.
There's some thought that the 30 years the Trinity Study used could stretch out to "infinity." Unsure of the math myself.


The math is that something like 70% of the time the 4% rule works forever (i.e. the account grows much faster than inflation and spending) versus the 95% or so that you get for 30 years. And in the other 25% you go tend to go broke between year 30 and 40. This assumes you are holding like 70/30 or 80/20. Go conservative and your failure rate goes up.

For a 35 year old the money really only has to last 30 years. The SS takes a huge burden off the portfolio (i.e. you and your spouse both get 1k/month and your expenses are 30k). Yes being older definitely helps but it isn't a huge factor. And 10-15 high income years early on are enough to fill up the to the first break point.

The big thing is that most FIRE people get jobs:). MMM and RootOfGood are not retired. They are both working jobs. Maybe in theory they could live on investments but they aren't actually doing it. The good thing with low expenses is you can get any job. Driving an Uber isn't going to help much with 150k/year expenses. Covering most of say 30k on the other hand is easy.

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Veiled
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Re: FIRE [financial independence/retire early]

Post by Veiled » Wed Nov 29, 2017 8:37 pm

randomguy wrote:
Wed Nov 29, 2017 8:17 pm
The math is that something like 70% of the time the 4% rule works forever (i.e. the account grows much faster than inflation and spending) versus the 95% or so that you get for 30 years. And in the other 25% you go tend to go broke between year 30 and 40. This assumes you are holding like 70/30 or 80/20. Go conservative and your failure rate goes up.
I guess I should have said: I'm not sure whether I am comfortable with using that to justify RE for myself. I have seen multiple bloggers discuss the Trinity Study and its limitations and its power beyond 30 years. Appreciate the very concise refresher, though.
randomguy wrote:
Wed Nov 29, 2017 8:17 pm
For a 35 year old the money really only has to last 30 years. The SS takes a huge burden off the portfolio (i.e. you and your spouse both get 1k/month and your expenses are 30k). Yes being older definitely helps but it isn't a huge factor. And 10-15 high income years early on are enough to fill up the to the first break point.
But what do those who FIRE get in SS for so few years of work? Has there actually been much data on this? (Knowledge gap here.)
randomguy wrote:
Wed Nov 29, 2017 8:17 pm
The big thing is that most FIRE people get jobs:). MMM and RootOfGood are not retired. They are both working jobs. Maybe in theory they could live on investments but they aren't actually doing it. The good thing with low expenses is you can get any job. Driving an Uber isn't going to help much with 150k/year expenses. Covering most of say 30k on the other hand is easy.
I have heard this affectionately called "barista FIRE" or "FIOR" from the Money Monster blog. I think this is really the ideal. Have FI, work how/when/at what you want.
Pardon me as I read these one hundred and fifty-seven SP vs LLC vs Scorp threads...

mark39
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Re: FIRE [financial independence/retire early]

Post by mark39 » Wed Nov 29, 2017 8:51 pm

I just happened to listen to a "ChooseFI" podcast on my way to and from work today (oddly enough) where they spent a considerable amount of time talking about health care. They primarily spoke about the ACA but didn't go into too many specifics because of the differences in states so it just wasn't practical to get into it too much. But, in fairness, it was addressed on that episode.

Also, as a few others have already pointed out, most of what I've seen/heard/read about FIRE people isn't actually people that have retired early. They typically are still working but either feel like they don't have to or can take the leap to trying to follow their passions. I understand that but I just wouldn't be able to do it. I guess I just see too many possibilities of negative events. Even things that you know will happen like a new furnace, roof, etc that can cost thousands of dollars will seriously put a dent into a budget of $25-30k/year.

In know way was I trying to attack the FIRE community. In fact, I find it inspirational but I was just wondering if there was something I missed.
Then again, based on your post you may want to evaluate your spending and loosen the purse strings a bit. It's OK to spend according to your values - and your values can and maybe should be broader than basic security and future financial independence. Romantic relationships, self-improvement (physical or intellectual), exploration/adventure, and family are values that may cost money but are arguably worth pursuing and dedicating some resources toward.
You're exactly right. I actually had a thread last year asking everyone's opinion on the psychological stress of feeling like I can't spend very much and may be depriving myself by saving as much as I can. Btw, everyone was incredibly helpful.

jlcnuke
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Re: FIRE [financial independence/retire early]

Post by jlcnuke » Thu Nov 30, 2017 6:33 am

randomguy wrote:
Wed Nov 29, 2017 8:17 pm
Veiled wrote:
Wed Nov 29, 2017 7:54 pm
Traveler wrote:
Wed Nov 29, 2017 7:02 pm
So the 25X rule applies no matter one's age? I find it hard to believe that someone with $50K in annual expenses can retire with $1.25M at age 35. Now if that person with the same $50K in expenses was 50 or 55, the $1.25M is more likely enough to retire. That same $1.25M needs to last the 35 year old 50+ years, while it only has to last the 50 year old 35 years.
There's some thought that the 30 years the Trinity Study used could stretch out to "infinity." Unsure of the math myself.


The math is that something like 70% of the time the 4% rule works forever (i.e. the account grows much faster than inflation and spending) versus the 95% or so that you get for 30 years. And in the other 25% you go tend to go broke between year 30 and 40. This assumes you are holding like 70/30 or 80/20. Go conservative and your failure rate goes up.

For a 35 year old the money really only has to last 30 years. The SS takes a huge burden off the portfolio (i.e. you and your spouse both get 1k/month and your expenses are 30k). Yes being older definitely helps but it isn't a huge factor. And 10-15 high income years early on are enough to fill up the to the first break point.

The big thing is that most FIRE people get jobs:). MMM and RootOfGood are not retired. They are both working jobs. Maybe in theory they could live on investments but they aren't actually doing it. The good thing with low expenses is you can get any job. Driving an Uber isn't going to help much with 150k/year expenses. Covering most of say 30k on the other hand is easy.
It's actually a bit over 80% of the time that historically a 4% withdrawal rate will last 50+ years (you can play with timeframes by using Firecalc or other similar tools for instance). The thing that the ERE/MMM crowd are "planning" to rely on is "cutting back" or "going back to work" if there is a black swan event in the beginnings of their retirement. That's what makes them confident in it (even those who are already so lean on their budgets that there really isn't anything of note to cut out for them....).

28X, however, (which doesn't take that much longer to get to) historically would result in around a 98% chance of success.

Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.

IF, however, you plug those "not so impressive" SS numbers into the calculations for a 25x expenses retirement, their chance of success goes up to around 88% (still not exactly a "sure thing" by any means), and the 28x expenses goes to 99% historically.

Da5id
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Re: FIRE [financial independence/retire early]

Post by Da5id » Thu Nov 30, 2017 8:24 am

jlcnuke wrote:
Thu Nov 30, 2017 6:33 am
Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.
I'm not so sure that you are doing it right on SS. There are bend points in the earning curve used to compute PIA for Social Security, and it is not linear as you are implying above. If you had 25 years of high wages, I think you will get more that you suggest.

A bigger risk is that SS rules will change for someone who is quite distant from retirement. The assumption that any program will persist unchanged into perpetuity seems shaky. Discussing the details of that veers off topic and into politics, but making concrete decisions in the present that strongly depend on the fact that Social Security/Medicare/ACA/government program X will have no changes far in the future seems like a bad move IMHO.

indexonlyplease
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Re: FIRE [financial independence/retire early]

Post by indexonlyplease » Thu Nov 30, 2017 9:03 am

I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.

aristotelian
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Re: FIRE [financial independence/retire early]

Post by aristotelian » Thu Nov 30, 2017 9:16 am

indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.
It's not for everyone but there are good reasons to consider it. I want to enjoy my prime years. Sitting at a desk and in meetings all days is slowly killing my body as well as my soul. I would very much like to be done by age 50.

Health care is an issue. In a worst case scenario, one could work at Starbucks or travel/move to a country that does not have employer based health care system (i.e. just about any other country in the world). I agree it is better to be on the safe side when it comes to retirement planning. However, let's face it, someone who has $2M-$3M in the bank is never going to be in poverty.

mak1277
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Re: FIRE [financial independence/retire early]

Post by mak1277 » Thu Nov 30, 2017 9:26 am

indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.
I don't get the sense that early retirees are significantly cutting expenses back after they retire. It seems more like people who are happy living on 25-30k per year already and realize that there's no point in working more if they're happy with their current lifestyle.

And I think it's hilariously easy to say "why not enjoy the work you do?" Some people just don't like to work and want to be in control of their time at an earlier age. Personally, I couldn't dream up a better job than the one I have (low stress, high autonomy, great pay)...but I plan to leave it as soon as I can.

mnnice
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Re: FIRE [financial independence/retire early]

Post by mnnice » Thu Nov 30, 2017 10:14 am

Da5id wrote:
Thu Nov 30, 2017 8:24 am
jlcnuke wrote:
Thu Nov 30, 2017 6:33 am
Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.
I'm not so sure that you are doing it right on SS. There are bend points in the earning curve used to compute PIA for Social Security, and it is not linear as you are implying above. If you had 25 years of high wages, I think you will get more that you suggest.

A bigger risk is that SS rules will change for someone who is quite distant from retirement. The assumption that any program will persist unchanged into perpetuity seems shaky. Discussing the details of that veers off topic and into politics, but making concrete decisions in the present that strongly depend on the fact that Social Security/Medicare/ACA/government program X will have no changes far in the future seems like a bad move IMHO.
More wages past the second bend point doesn’t increase your benefits much. Many of us will get more if we work more but we have long since passed the first bend point and are not likely to max out the second regardless of if we make zero, 20k, or 70k per year for the next 20 years. For me The first bend point is was met by about 30, but I am unlikely to ever max the second. Proudly Barista FIREd.
8-)

jlcnuke
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Re: FIRE [financial independence/retire early]

Post by jlcnuke » Thu Nov 30, 2017 10:36 am

Da5id wrote:
Thu Nov 30, 2017 8:24 am
jlcnuke wrote:
Thu Nov 30, 2017 6:33 am
Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.
I'm not so sure that you are doing it right on SS. There are bend points in the earning curve used to compute PIA for Social Security, and it is not linear as you are implying above. If you had 25 years of high wages, I think you will get more that you suggest.

A bigger risk is that SS rules will change for someone who is quite distant from retirement. The assumption that any program will persist unchanged into perpetuity seems shaky. Discussing the details of that veers off topic and into politics, but making concrete decisions in the present that strongly depend on the fact that Social Security/Medicare/ACA/government program X will have no changes far in the future seems like a bad move IMHO.
The SSA.gov calculator for determining benefits is what calculated that actually... and the 35 year old retiree in the example didn't have 25 years of high earnings, he had just over a decade of decent earnings, another close to decade of [poor - admin LadyGeek] earnings, and more than a decade of no earnings going into the SSA calculations.

I'm not saying that the MMMers or ERE crowd's assumption that 4% SWR will work for 50+ year retirements is right, safe, or a good move, I'm just explaining the rationale and calculations I see them use to justify that thought.

flyingaway
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Re: FIRE [financial independence/retire early]

Post by flyingaway » Thu Nov 30, 2017 11:14 am

The 4% rule will work for 30, 40, or 50 years, just with different success rates. Different people consider different success rates as acceptable.

FIRE may be a good thing for some people, but there is nothing to brag about. Many princes and princesses are born to FIRE and they never brag about that.

YetAnotherUser
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Re: FIRE [financial independence/retire early]

Post by YetAnotherUser » Thu Nov 30, 2017 11:41 am

jlcnuke wrote:
Thu Nov 30, 2017 10:36 am
Da5id wrote:
Thu Nov 30, 2017 8:24 am
jlcnuke wrote:
Thu Nov 30, 2017 6:33 am
Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.
I'm not so sure that you are doing it right on SS. There are bend points in the earning curve used to compute PIA for Social Security, and it is not linear as you are implying above. If you had 25 years of high wages, I think you will get more that you suggest.

A bigger risk is that SS rules will change for someone who is quite distant from retirement. The assumption that any program will persist unchanged into perpetuity seems shaky. Discussing the details of that veers off topic and into politics, but making concrete decisions in the present that strongly depend on the fact that Social Security/Medicare/ACA/government program X will have no changes far in the future seems like a bad move IMHO.
The SSA.gov calculator for determining benefits is what calculated that actually... and the 35 year old retiree in the example didn't have 25 years of high earnings, he had just over a decade of decent earnings, another close to decade of [poor - admin LadyGeek] earnings, and more than a decade of no earnings going into the SSA calculations.

I'm not saying that the MMMers or ERE crowd's assumption that 4% SWR will work for 50+ year retirements is right, safe, or a good move, I'm just explaining the rationale and calculations I see them use to justify that thought.
Even in your example though that's $9k/year which is a considerable amount (20%+) of the ~40k folks like that tend to try to live on, in general. Smaller, yes, but percentage it's pretty significant.

delamer
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Re: FIRE [financial independence/retire early]

Post by delamer » Thu Nov 30, 2017 11:56 am

indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.
I have two former co-workers who retired at a "normal retirement age" of early- to mid-60's and had died by the time they were in their early 70's. Both were in good healh until they were diagnosed with cancer. Another retired in his early 60's as soon as he was diagnosed with cancer, and died less than a year later.

My point is that no one knows how much time they have left, and not everyone gets to have and enjoy a long retirement if they wait until a traditional age. There has to be a balance, and the older I get the more I understand those who structure their lives to retire as soon as they can.

indexonlyplease
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Re: FIRE [financial independence/retire early]

Post by indexonlyplease » Thu Nov 30, 2017 3:12 pm

aristotelian wrote:
Thu Nov 30, 2017 9:16 am
indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.
It's not for everyone but there are good reasons to consider it. I want to enjoy my prime years. Sitting at a desk and in meetings all days is slowly killing my body as well as my soul. I would very much like to be done by age 50.

Health care is an issue. In a worst case scenario, one could work at Starbucks or travel/move to a country that does not have employer based health care system (i.e. just about any other country in the world). I agree it is better to be on the safe side when it comes to retirement planning. However, let's face it, someone who has $2M-$3M in the bank is never going to be in poverty.
$2-3 Mil in the bank at 50 that sounds like a good plan I could live with. I was lucky because I retired with a pension at 52 last year. Have health insurance subsidizes by my union. I also am FI because of my investments alone. But without the pension and the heath insurance I don't believe I would of even considered retirement at 52.

indexonlyplease
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Re: FIRE [financial independence/retire early]

Post by indexonlyplease » Thu Nov 30, 2017 3:17 pm

mak1277 wrote:
Thu Nov 30, 2017 9:26 am
indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.
I don't get the sense that early retirees are significantly cutting expenses back after they retire. It seems more like people who are happy living on 25-30k per year already and realize that there's no point in working more if they're happy with their current lifestyle.

And I think it's hilariously easy to say "why not enjoy the work you do?" Some people just don't like to work and want to be in control of their time at an earlier age. Personally, I couldn't dream up a better job than the one I have (low stress, high autonomy, great pay)...but I plan to leave it as soon as I can.
I don't know anyone happy living off of 25-30K a year. Unless they live at home with their parents. I am just stating be careful. I see to many retired people bagging at the grocery store. And not because they are bored in life.

Health care will be the FI killer. Make sure you are ready. And if you don't enjoy your job get another one. At 25-30K a year there are many choices.

indexonlyplease
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Re: FIRE [financial independence/retire early]

Post by indexonlyplease » Thu Nov 30, 2017 3:22 pm

delamer wrote:
Thu Nov 30, 2017 11:56 am
indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.
I have two former co-workers who retired at a "normal retirement age" of early- to mid-60's and had died by the time they were in their early 70's. Both were in good healh until they were diagnosed with cancer. Another retired in his early 60's as soon as he was diagnosed with cancer, and died less than a year later.

My point is that no one knows how much time they have left, and not everyone gets to have and enjoy a long retirement if they wait until a traditional age. There has to be a balance, and the older I get the more I understand those who structure their lives to retire as soon as they can.
I will agree. Just make sure you don't retire early out live your money and then have to go back to work at a older age. That would suck. Also, when I talk about early retirment I am talking 30s and 40s. Very few are able to do this. So I think it is unfair to the blogs that talk about how easy it is. It is not unless you have a blog bringing in another income. Most of us don't.

I retired last year at 52. So I believe in early retirement. But I have a pension and union subsidized health insurance. Also, FI with my investments alone. But would not feel comfortable in early retirement unless I had the pension and insurance.

mak1277
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Re: FIRE [financial independence/retire early]

Post by mak1277 » Thu Nov 30, 2017 3:28 pm

indexonlyplease wrote:
Thu Nov 30, 2017 3:17 pm
And if you don't enjoy your job get another one. At 25-30K a year there are many choices.
What if someone just doesn't want any job? Why is that so difficult to comprehend?

indexonlyplease
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Re: FIRE [financial independence/retire early]

Post by indexonlyplease » Thu Nov 30, 2017 4:15 pm

mak1277 wrote:
Thu Nov 30, 2017 3:28 pm
indexonlyplease wrote:
Thu Nov 30, 2017 3:17 pm
And if you don't enjoy your job get another one. At 25-30K a year there are many choices.
What if someone just doesn't want any job? Why is that so difficult to comprehend?
that will depend on what age you retire and where. I don't know anyone satistied with 30k in South Florida where I live. I guess you could go over seas. And then I will ask how can someone afford health care when they retire young and and on 30K. Also, is that a salary with a family?? Good Luck.

mak1277
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Re: FIRE [financial independence/retire early]

Post by mak1277 » Thu Nov 30, 2017 4:27 pm

indexonlyplease wrote:
Thu Nov 30, 2017 4:15 pm
mak1277 wrote:
Thu Nov 30, 2017 3:28 pm
indexonlyplease wrote:
Thu Nov 30, 2017 3:17 pm
And if you don't enjoy your job get another one. At 25-30K a year there are many choices.
What if someone just doesn't want any job? Why is that so difficult to comprehend?
that will depend on what age you retire and where. I don't know anyone satistied with 30k in South Florida where I live. I guess you could go over seas. And then I will ask how can someone afford health care when they retire young and and on 30K. Also, is that a salary with a family?? Good Luck.
My mistake...when you said that about not enjoying a job, I thought you were talking about me, specifically, since I said in my prior thread I was eager to leave my job (despite it being a very good one). I'm not planning to retire on $30k though.

BW1985
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Re: FIRE [financial independence/retire early]

Post by BW1985 » Thu Nov 30, 2017 4:53 pm

mark39 wrote:
Tue Nov 28, 2017 8:06 pm
flyingaway wrote:
Tue Nov 28, 2017 7:52 pm
Healthcare and health insurance in the U.S. are not predictable for those who have no place to get reliable health insurance. Hopefully this will change in the future.
In fact, those people who talk about medical tourism miss the critical point. Most FIRE people should be able to pay for routine medical procedures. It is those things like cancers or chronical diseases that will bankrupt many people. You might not want to get cancer treatments or chronical disease treatments in those countries.
I recognize my views on this are tainted because of where I work as I deal with life ending events. It's shocking to me how many people just assume things won't happen to them whether it be an accident, chronic disease, divorce, etc. I'm all for looking at probabilities and taking those into account but there are so many things that could happen over many years.

I forget where I heard it but "if you want to live 100 years, you have to survive everyday of that 100 years. So, you've got to prepare for that."
To me this is a key difference between some of the FIRE community and BH's. BH's are more conservative and MMM's are are more optomistic, with the mindset that nothing is guaranteed. Less planning for worst case scenario and more live life now, worry about later when it comes.

ACA was a huge benefit for FIRE's. If it gets hacked away it will be a big loss.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

BW1985
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Re: FIRE [financial independence/retire early]

Post by BW1985 » Thu Nov 30, 2017 5:38 pm

indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.

Also, many of the retire early websites don't talk about how they supplement there income from the money they make on their websites. That's not retirment that is trading one job for another. So why not just keep working. Also, we can't be fooled by early retirement. I don't think it would be fun having to go back to work after taking off 10 yrs. Work longer and save more.

I think health care cost will be the nightmare for many that retire early. You can't predict future health and not having good health care could really put a strain on your income.
That may be the right choice for you but not for others. Others may be fine living frugal indefinitely and not willing to trade more time working for a higher withdraw.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

mark39
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Re: FIRE [financial independence/retire early]

Post by mark39 » Thu Nov 30, 2017 8:19 pm

indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.
I've noticed a couple of things about the Boglehead forum: 1) Most (not all) are higher income earners, and 2) there is a disproportionate number of people who very much enjoy their jobs.This is just my impression and I have no data to back that up, but most people in this country do not make as much and also do not enjoy their jobs one bit. It is something to take into consideration.

As somebody pointed out, I think it is more prudent to take a conservative approach and work longer because there's no way to predict what will happen in the next year or two. Much less an extended period of "not working." Some people are comfortable taking that approach. I am not, but that doesn't mean it's wrong.

Everyone's situation is different and in my line of work I see A LOT of people who die alone and broke in empty apartments. It happens far more often than our society will ever know or admit. I think it's something that might have the FIRE people reconsidering their approach. Nobody thinks it will happen to them.

Flyfree
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Re: FIRE [financial independence/retire early

Post by Flyfree » Fri Dec 01, 2017 1:52 am

There’s a ton in common between the FI crowd and Bogleheads. Yes, there are differences. Both make for good, thoughtful reading.

I’m 52, married with two high school boys and decided to retire....at least for now. The reason is simple. Great career meant sleeping in hotels more nights than my own bed for the last 25 years. Kids will be grown and gone in a few years. It’s now or never. Ever listen to the old song ‘Cats in the cradle’? I’m the third generation of living that song, My parents time also grows short. It feels good being around and able to help.

Financially my wife and I’ve been saving since our 20’s, finding Mr Bogle and Vanguard index funds early. I climbed the career ladder high enough to feel satisfied and earned more than many. Depending on the year we socked away anywhere from 18% to 60% of total comp. We certainly didn’t live the MMM or early extreme lifestyle. On the other hand we lived more frugal than most of my working peers. Cars were bought used, didn’t buy new furniture until the house was paid for. My wife or I cook most nights and we have little use for designer fashion. ~25x expenses is about where the nest egg sits currently.

Healthcare - Cobra now, ACA later is the plan. $30k is roughly the cost either way. It hurts, and is factored in. College costs are also planned for, to a point.

In four years both Kids will be out of high school and in college or beyond. Best case we’ll stay within the 4% - 4.5% spending range and the plan works as designed. If Murphy shows up or the kids decide on medical school I may need to go back to work for a while. I understand my earning power will be diminished. On the other hand any job with healthcare immediately tips $30k (after taxes) back our way even before accounting for any salary. Part time or consulting work might be enough if we stray a small amount from plan. Finally, SS and Medicare kick in eventually, neither of which are counted in the 25x nest egg. Between the two the net impact is north of $50k a year.

Am I worried? Sure, there’s a bit of feel the fear and do it anyway. There aren’t many guarantees in life. The bear market will come. Healthcare, taxes, illness, college, inflation, the list goes on and on...and...

The last few months have been the most satisfying I can remember. Seeing my son high school soccer games, taking my older son for college visits, helping get my parents to their doctor’s visits are all things I would have missed. Road my motorcycle to the Rockies and back this summer by myself after taking my family on a great vacation. Never would have had enough vacation time. Tonight I cooked dinner for my wife and sons, who invited their friends over for dinner. The meal and conversation was every bit as enjoyable as the many nights I spent with salesmen and customers on the road in fancy steak joints. .

Thirty might be to a bit young to retire. $25k might be too little. I’ll never know as that boat sailed long ago. For me, 65 seemed like all the best stuff would be missed and over. Would it be nice to have 35x expenses as the nest egg? Sure. 50x, even better....and where does it stop?

Only time will tell if the choice each of us make is a good one.....

randomguy
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Re: FIRE [financial independence/retire early]

Post by randomguy » Fri Dec 01, 2017 6:52 am

mnnice wrote:
Thu Nov 30, 2017 10:14 am
Da5id wrote:
Thu Nov 30, 2017 8:24 am
jlcnuke wrote:
Thu Nov 30, 2017 6:33 am
Neither figures take into account SS, but those retiring very early are generally not going to get much from SS anyway. If I retire at 47 instead of 62, my benefits are reduced by 1/3rd because it uses the average wage for 35 years of your highest earnings. Start adding a bunch of zeros in (or just your meager part time income from high school/college years) and it's nowhere close to the average earnings you had at the "peak" of your career. Take an professional who retires at 35 making $65k/year for example. Let's assume he moved up to that from a starting salary of $45k/year with 3% raises each year. However, he only made $10k/year in college, and $5k/year for a couple years in high school. That person's average earnings for SS calculations would only be $22,717/year. Not close to their professional earnings. So their SS check at 62 would be ~$750/month. A help, but not massive by any means, and only going up to ~$1,400/month if they wait until 70 to collect.
I'm not so sure that you are doing it right on SS. There are bend points in the earning curve used to compute PIA for Social Security, and it is not linear as you are implying above. If you had 25 years of high wages, I think you will get more that you suggest.

A bigger risk is that SS rules will change for someone who is quite distant from retirement. The assumption that any program will persist unchanged into perpetuity seems shaky. Discussing the details of that veers off topic and into politics, but making concrete decisions in the present that strongly depend on the fact that Social Security/Medicare/ACA/government program X will have no changes far in the future seems like a bad move IMHO.
More wages past the second bend point doesn’t increase your benefits much. Many of us will get more if we work more but we have long since passed the first bend point and are not likely to max out the second regardless of if we make zero, 20k, or 70k per year for the next 20 years. For me The first bend point is was met by about 30, but I am unlikely to ever max the second. Proudly Barista FIREd.
8-)
I don't think you can save enough to retire if you are making 65k/year and only working for ~10 years. Put numbers in like MMM where you have 120k/year for 10 years and your benefit is 973 at 62. Work for 15 years and your benefit is 1300 @62.

But lets look at a 750/month check. That is 9k/year. Or almost 50% of expenses for a person spending 20k. Have a spouse and your are looking at another 4500-9k. Delay that to 65 and you start closing in on covering expenses. That is the power of only needing 20-30k to live. If this same couple wanted to live o 100k (say they saved like 200k/year), SS doesn't help anywhere near as much.

HoosierJim
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Re: FIRE [financial independence/retire early]

Post by HoosierJim » Fri Dec 01, 2017 7:13 am

mark39 wrote:
Tue Nov 28, 2017 5:26 pm
... I hear them talk about having annual expenses of $25k, for example. There is no way that I can see based on what they write/talk about that they include health care in the annual spending.
Here's a health plan in Pittsburgh - Married couple both 55 with income of approx $23k - Monthly premium is $4.62 - yes - I put the decimal point in the right place.



Image

mak1277
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Re: FIRE [financial independence/retire early

Post by mak1277 » Fri Dec 01, 2017 8:31 am

Flyfree wrote:
Fri Dec 01, 2017 1:52 am
There’s a ton in common between the FI crowd and Bogleheads. Yes, there are differences. Both make for good, thoughtful reading.

I’m 52, married with two high school boys and decided to retire....at least for now. The reason is simple. Great career meant sleeping in hotels more nights than my own bed for the last 25 years. Kids will be grown and gone in a few years. It’s now or never. Ever listen to the old song ‘Cats in the cradle’? I’m the third generation of living that song, My parents time also grows short. It feels good being around and able to help.

Financially my wife and I’ve been saving since our 20’s, finding Mr Bogle and Vanguard index funds early. I climbed the career ladder high enough to feel satisfied and earned more than many. Depending on the year we socked away anywhere from 18% to 60% of total comp. We certainly didn’t live the MMM or early extreme lifestyle. On the other hand we lived more frugal than most of my working peers. Cars were bought used, didn’t buy new furniture until the house was paid for. My wife or I cook most nights and we have little use for designer fashion. ~25x expenses is about where the nest egg sits currently.

Healthcare - Cobra now, ACA later is the plan. $30k is roughly the cost either way. It hurts, and is factored in. College costs are also planned for, to a point.

In four years both Kids will be out of high school and in college or beyond. Best case we’ll stay within the 4% - 4.5% spending range and the plan works as designed. If Murphy shows up or the kids decide on medical school I may need to go back to work for a while. I understand my earning power will be diminished. On the other hand any job with healthcare immediately tips $30k (after taxes) back our way even before accounting for any salary. Part time or consulting work might be enough if we stray a small amount from plan. Finally, SS and Medicare kick in eventually, neither of which are counted in the 25x nest egg. Between the two the net impact is north of $50k a year.

Am I worried? Sure, there’s a bit of feel the fear and do it anyway. There aren’t many guarantees in life. The bear market will come. Healthcare, taxes, illness, college, inflation, the list goes on and on...and...

The last few months have been the most satisfying I can remember. Seeing my son high school soccer games, taking my older son for college visits, helping get my parents to their doctor’s visits are all things I would have missed. Road my motorcycle to the Rockies and back this summer by myself after taking my family on a great vacation. Never would have had enough vacation time. Tonight I cooked dinner for my wife and sons, who invited their friends over for dinner. The meal and conversation was every bit as enjoyable as the many nights I spent with salesmen and customers on the road in fancy steak joints. .

Thirty might be to a bit young to retire. $25k might be too little. I’ll never know as that boat sailed long ago. For me, 65 seemed like all the best stuff would be missed and over. Would it be nice to have 35x expenses as the nest egg? Sure. 50x, even better....and where does it stop?

Only time will tell if the choice each of us make is a good one.....
This put a smile on my face this morning!

My dad was self-employed, and over the course of my life through high school, he never missed a single game I played in any sport (and he coached most of them). I can't imagine being in a position where I couldn't do the same for my kids.

User avatar
teen persuasion
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Re: FIRE [financial independence/retire early]

Post by teen persuasion » Fri Dec 01, 2017 8:45 am

indexonlyplease wrote:
Thu Nov 30, 2017 3:17 pm
mak1277 wrote:
Thu Nov 30, 2017 9:26 am
indexonlyplease wrote:
Thu Nov 30, 2017 9:03 am
I think many are to worried about retiring early. Why not enjoy the work you do and enjoy life along the way. Web sites like Mr. MM talk about how they retired early and live on 25-30k a year. Who would want to live so frugal at a retiremnt age in your 30-40s. Why not work longer and live the same lifestyle in retirement that you lived while working.
I don't get the sense that early retirees are significantly cutting expenses back after they retire. It seems more like people who are happy living on 25-30k per year already and realize that there's no point in working more if they're happy with their current lifestyle.

And I think it's hilariously easy to say "why not enjoy the work you do?" Some people just don't like to work and want to be in control of their time at an earlier age. Personally, I couldn't dream up a better job than the one I have (low stress, high autonomy, great pay)...but I plan to leave it as soon as I can.
I don't know anyone happy living off of 25-30K a year. Unless they live at home with their parents. I am just stating be careful. I see to many retired people bagging at the grocery store. And not because they are bored in life.

Health care will be the FI killer. Make sure you are ready. And if you don't enjoy your job get another one. At 25-30K a year there are many choices.
Don't know about anyone else, but we have been very happy living with expenses < $25k. Mortgage paid off 15 years early, raising 5 kids (2 thru college, 2 in college, 1 in MS), I was SAHM for nearly 20 years and only working part-time now, DH may *just* break above $40k income this year for the first time.

Not sure what we've missed vs. a higher spend rate life, other than expensive travel and lots of taxes. Our kids have been involved in all sorts of activities: sports, gifted programs, drama/musicals, rocket and robotics clubs, and especially music ensembles (orchestra, band, chorus, jazz band, pit, state and county festivals).

We won't be retiring in our 30s, if only because we were past that before MMM began spreading his message, but we are getting within striking distance now at 50. For us FIRE means choices - we get to decide if we want to keep working, cut back hours, or switch to a fun seasonal job, or reinvent ourselves, one quit, both quit, ...

randomguy
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Re: FIRE [financial independence/retire early]

Post by randomguy » Fri Dec 01, 2017 9:37 am

HoosierJim wrote:
Fri Dec 01, 2017 7:13 am
mark39 wrote:
Tue Nov 28, 2017 5:26 pm
... I hear them talk about having annual expenses of $25k, for example. There is no way that I can see based on what they write/talk about that they include health care in the annual spending.
Here's a health plan in Pittsburgh - Married couple both 55 with income of approx $23k - Monthly premium is $4.62 - yes - I put the decimal point in the right place.



Image
Most peoples fear is that ACA goes away (or they add an asset test) and you have to pay the full freight (1k+/month) than the current costs. The other point is that is just insurance. Add up all the other costs (copays, dentist, glasses,....) and you could easily be looking at 3k+ even with insurance. That is a number you can pay but it does eat up a good chunk of a 25k budget. People will also always struggle to understand on how other people live on so much less than they do. To some extent when you have a low income, you find ways of making things work.

In the end it is just one more risk. If you are 55, it really doesn't matter much as you are close enough to SS that you should make it. If you are 35, it gets a lot more interesting. Of course the 35 year old is in the likely spot of having a much bigger portfolio when they actually hit 55.

CnC
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Re: FIRE [financial independence/retire early]

Post by CnC » Fri Dec 01, 2017 9:57 am

Personally I think the 4% rule is much safer for someone retiring at 45 than someone retiring at 65.



What! You might think, that the extra 20 years withdrawal would make 4% more risky. But in my opinion it makes it much LESS risky.


The simple fact is that the 4% rule works +90% of the time and ±50% of the time you double your money after 30 years.

The kicker is that nearly all of the failures under the 4% rule happen when the first 5 years of retirement really torpedo. Then according to the rule your 4% initial withdrawal turns into an 8% withdrawal.

Well if you retire at 45 and the market crashes before you are 50, congratulations you still have 15 years to work before normal retirement age. If you have a typical market first 5 years of retirement, congratulations you are set and now are withdrawing less than 4% and have a 100% success rate of retirement.

Da5id
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Re: FIRE [financial independence/retire early]

Post by Da5id » Fri Dec 01, 2017 10:24 am

CnC wrote:
Fri Dec 01, 2017 9:57 am
Well if you retire at 45 and the market crashes before you are 50, congratulations you still have 15 years to work before normal retirement age. If you have a typical market first 5 years of retirement, congratulations you are set and now are withdrawing less than 4% and have a 100% success rate of retirement.
Doesn't follow. For example, if the market is crashing (ala 2008) you may also have trouble finding employment at the same time. Seems really stressful. Another flaw in your logic is that having social security/medicare closer (for the older retiree) is a huge win. But each to their own thinking, and risk perception/sensitivity.

CnC
Posts: 523
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Re: FIRE [financial independence/retire early]

Post by CnC » Fri Dec 01, 2017 10:38 am

Da5id wrote:
Fri Dec 01, 2017 10:24 am
CnC wrote:
Fri Dec 01, 2017 9:57 am
Well if you retire at 45 and the market crashes before you are 50, congratulations you still have 15 years to work before normal retirement age. If you have a typical market first 5 years of retirement, congratulations you are set and now are withdrawing less than 4% and have a 100% success rate of retirement.
Doesn't follow. For example, if the market is crashing (ala 2008) you may also have trouble finding employment at the same time. Seems really stressful. Another flaw in your logic is that having social security/medicare closer (for the older retiree) is a huge win. But each to their own thinking, and risk perception/sensitivity.
I actually graduated in 08 and had more than one job before my last day of school my wife graduated on 09 and didnt spend more than a few weeks before she started at a sp500 company. I simply refuse to believe that someone skilled enough to reach FI by 45 could not find a job in the years between 2008 and 2010. Its not like you cant pay your day to day bills. You just cant sit on the couch eating cheetos for years as your portfolios decrease. A 45 year old professional is more likely to find a nee job than a 65 year old is to keep theirs in a bad economy.

Ill take the 'stress' of knowing there is a 15% chance i may have to rerurn to work between 45 and 50 over the stress of 100% knowing I have to work until 62+


Also retiring in 07/08 passed the fire test. That down turn was not enough to fail the 4% rule. If you retired in 07 and kept blindly withdrawing 4% by now you would be free and clear.

randomguy
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Re: FIRE [financial independence/retire early]

Post by randomguy » Fri Dec 01, 2017 10:47 am

Da5id wrote:
Fri Dec 01, 2017 10:24 am
CnC wrote:
Fri Dec 01, 2017 9:57 am
Well if you retire at 45 and the market crashes before you are 50, congratulations you still have 15 years to work before normal retirement age. If you have a typical market first 5 years of retirement, congratulations you are set and now are withdrawing less than 4% and have a 100% success rate of retirement.
Doesn't follow. For example, if the market is crashing (ala 2008) you may also have trouble finding employment at the same time. Seems really stressful. Another flaw in your logic is that having social security/medicare closer (for the older retiree) is a huge win. But each to their own thinking, and risk perception/sensitivity.
It is a mixture. It is easier to handle set backs when you have time. A 45 year old is healthy enough to work a McJob or two and make the 20k they need to pay the bills. And 80 year old isn't going to be able to work in most cases. In between your mileage may vary. But by retiring at 45 instead of 50, you might be signing up to work 20 years of that McJob to make the same amount of money that you could have gotten with 5 years in your high paying job. SS and the like all depends on how you account for it. If you are 65 and SS covers your expenses, you can be using the 20% rule:)

I am guessing for most people the best approach is to split the difference. If you can retire at 40 with 25x or work to 50 and retire with 50x, retirng at 45 with 33x or so seems like a good compromise. Once you hit 25x, it only takes a couple more years to really ramp up the savings.


But a lot also depends on your various safety factors (SS, pensions, ability to cut spending, and ability to work) in determining how much risk to take on. Not retiring and working til 70+ is obviously the safest financial move. But there is a lot more to live than money.

randomguy
Posts: 5643
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Re: FIRE [financial independence/retire early]

Post by randomguy » Fri Dec 01, 2017 11:07 am

CnC wrote:
Fri Dec 01, 2017 10:38 am
Da5id wrote:
Fri Dec 01, 2017 10:24 am
CnC wrote:
Fri Dec 01, 2017 9:57 am
Well if you retire at 45 and the market crashes before you are 50, congratulations you still have 15 years to work before normal retirement age. If you have a typical market first 5 years of retirement, congratulations you are set and now are withdrawing less than 4% and have a 100% success rate of retirement.
Doesn't follow. For example, if the market is crashing (ala 2008) you may also have trouble finding employment at the same time. Seems really stressful. Another flaw in your logic is that having social security/medicare closer (for the older retiree) is a huge win. But each to their own thinking, and risk perception/sensitivity.
I actually graduated in 08 and had more than one job before my last day of school my wife graduated on 09 and didnt spend more than a few weeks before she started at a sp500 company. I simply refuse to believe that someone skilled enough to reach FI by 45 could not find a job in the years between 2008 and 2010. Its not like you cant pay your day to day bills. You just cant sit on the couch eating cheetos for years as your portfolios decrease. A 45 year old professional is more likely to find a nee job than a 65 year old is to keep theirs in a bad economy.

Ill take the 'stress' of knowing there is a 15% chance i may have to rerurn to work between 45 and 50 over the stress of 100% knowing I have to work until 62+


Also retiring in 07/08 passed the fire test. That down turn was not enough to fail the 4% rule. If you retired in 07 and kept blindly withdrawing 4% by now you would be free and clear.
You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years. Ask KlangFool to tell you his stories of his coworkers being unable to find jobs:) Now some is field dependant (i.e. doctors/lawyers/accountants might have certification issues, software developers might find their expertise is no longer values) and luck (i.e. the demand for mortgage and stock brokers in 08 was pretty low. If your previous career was being a repo man on the otherhand....). People tend to blame their misfortunes on bad luck and other misfortunes on stupidly. The truth tends to be in the middle.

07/08 wasn't a stressful test of the 4% rule. It was a short market crash (~8 months for the really bad part) followed by a rapid rebound. The 2000 retirees are the ones to watch. A 3 year downcycle and then another crash right getting back in nominal terms. Right now they are tracking to be successful but it is pretty close. They are about break even in real dollars with 13 years left. A couple more years without a big market crash and they should make it. A 30%+ crash next year and things get real interesting.

Your choice isn't between risking going back to work from 45-50 or working til 62. Your choice is between working another 3-5 years and not facing the risk of going back to work or facing the risk of going back to work any maybe having to work another 10-15 years if you end up in a lower paying job. Hence the OMY problem. You need to determine your risk tolerance and how unpleasant work is. Personally I found when I didn't need a paycheck, a lot of the annoyances go away. YMMV

scrabbler1
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Re: FIRE [financial independence/retire early]

Post by scrabbler1 » Fri Dec 01, 2017 11:14 am

mark39 wrote:
Tue Nov 28, 2017 1:14 pm
I've been reading and listening to choosefi.com and have followed Mr. Money Mustache for some time now and I've always wondered what some Bogleheads think of these topics? Specifically, the ability to declare yourself "financially independent" once you have 25x your annual expenses invested in a 50/50 or 60/40 stock/bond portfolio. I understand the 4% rule works in your favor over 95% of the time, but to my knowledge, this doesn't factor in health care. Unless there is something these groups have addressed and I have somehow missed.

Granted, they typically don't "retire" in the sense of never working again, but they have gotten out of the rat race as people typically think of it. Basically, I'm just wanting to get others' opinions on these ideas and really interested in how people are financing health care.

Mark
Mark, I retired 9 years ago at age 45 and it has been great being out of the daily rat race. I am a frequent poster at www.early-retirement.org which has a big following, but not as big as this place. I retired while the market was crashing and that was a big benefit to my retirement planning because the bond fund I planned to buy into (using the proceeds of the valuable company stock I cashed out) was so dang cheap, enabling me to buy about 25% more shares and boost its monthly dividend by the same.

As I was putting together my ER plan, I split it into 2 parts. The first part included only my taxable accounts and it has to get me from age 45 to age ~60, when the first of my "reinforcements" begin arriving. Those are (1) unfettered access to my IRA, (2) my frozen company pension, and (3) Social Security. Because the time line for the more critical part of my ER is only 15 years, I don't care a whole lot about multiples of expenses or SWRs. I care that the monthly and quarterly dividends can more than cover my expenses, allowing for a decent cushion to cover any smaller, unforeseen expenses.

As for health insurance, this has been the big wild card in the last 9 years. I was already on COBRA when I retired in late 2008, so when it expired a few months later I switched to an affordable individual plan (no ACA yet). The premiums rose by nearly 50% in 2 years (death spiral?) so I got out and was underinsured for 2 1/2 years until the ACA and its exchanges came on line in 2014. When I got sick and was in the hospital in 2015, I had decent coverage which limited my OOP to about $6,400 which was fine. Premiums have been rising but for 2018 I'll be paying about what I paid in 2010, halfway into the big rate increases.

Meanwhile, the bond fund's dividends per share have dropped since late 2008 but I have many more shares to mostly cancel out the DPS reduction. Market gains have enabled me to rebalance and buy more bond fund shares, keeping my AA in the taxable account pretty stable at ~40/~60. The IRA's value has more than doubled since late 2008, only improving an already fine picture beyond age ~60 when the reinforcements begin arriving.

BW1985
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Re: FIRE [financial independence/retire early]

Post by BW1985 » Fri Dec 01, 2017 12:50 pm

lostdog wrote:
Wed Nov 29, 2017 6:02 pm
randomguy wrote:
Wed Nov 29, 2017 12:37 am
lostdog wrote:
Tue Nov 28, 2017 8:21 pm


You bet! Those simpletons will have to go back to work after 5 years of enjoying their young families, all the while you will have been working this whole time! Suckers.....

I always enjoy the local animosity of those frugal fire types. Seems Bogleheads would have more in common than not with them (LBYM, index investing, etc,etc), but it never seems to work out that way.
Or those simpletons can't get jobs because unemployment is 10% and they have 5 year employment gaps, they spend down assets while being underemployed and end up working to 65 instead of retiring at 55.:) Or they could have worked 5 more years and retired at 40. :) Or ACA gets a asset adjustment and they all get hit with 10k/year health care bills cause they have 1 million in assets:)

There is an intersection between bogleheads and FIRE but it isn't huge. A lot of FIRE people are real estate guys who think rentals are the way to go. And a lot of bogleheads think there is a difference between being frugal and living below your means. Pretty much any of the extreme views get criticism. I think having a 4k house for a family of 3 is pushing it. But I don't think the right action is for a family of 3 to move into a 400 ft small house either. And option in the middle (say 1500 sq ft) seems like better choice.It would be fun to read about how the nonfamous FIRE guys do over the next 10-20 years.

I would also love to know how many people actually do it versus it being escapist fantasys. I know loved reading about the RV life but the odds of me doing it approach 0. :)
I enjoy the root of good blog because he goes over every detail of his finances including health care. Most of the others tend to leave out the details. I also enjoy the choose fi podcast. They don't push traveling the world etc...They push having your options open when you're FI and then going from there.
Any recommended episodes on choose FI? There's a lot and I just found the podcast, not sure where to start as I have limited listening time.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

CnC
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Re: FIRE [financial independence/retire early]

Post by CnC » Fri Dec 01, 2017 4:37 pm

randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.

TheNightsToCome
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Re: FIRE [financial independence/retire early]

Post by TheNightsToCome » Fri Dec 01, 2017 5:27 pm

CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
I don't have a dog in this fight, but the S&P 500 total real return (i.e., dividends reinvested) since January 2000 is 3.118% according to https://dqydj.com/sp-500-return-calculator/. (Looks like the Dow returned 4.452%, but bogleheads don't invest in the Dow.)

Also, I think the concern expressed is that market returns might be such that the early retiree doesn't realize he/she needs to return to work until he/she is already five years into retirement with the economy in a tailspin. For example, awful bear market begins after 3 years and losses are extreme two years later.

That's not to say that you couldn't find work after 5 years off. I "retired" at 41, but started a career in a completely different industry 3 years later. However, I didn't need the job and I became more interested in school, so I left after 4 years to obtain an MBA.

Skills do deteriorate over time in my primary profession, but I was still able to refresh my skills and return to a highly compensated position in my original field after 13 years away. In general, potential employers were much less interested than before my time away, but my former colleagues (who knew me and my work) were just as eager to have me back.

Although things have worked out for me, I don't think it's prudent to depend on this sort of thing.

TravelforFun
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Re: FIRE [financial independence/retire early]

Post by TravelforFun » Fri Dec 01, 2017 5:56 pm

Traveler wrote:
Wed Nov 29, 2017 7:02 pm
So the 25X rule applies no matter one's age? I find it hard to believe that someone with $50K in annual expenses can retire with $1.25M at age 35. Now if that person with the same $50K in expenses was 50 or 55, the $1.25M is more likely enough to retire. That same $1.25M needs to last the 35 year old 50+ years, while it only has to last the 50 year old 35 years.
Potentially. If your investment earned 4% above inflation every year, you could withdraw 4% forever. I myself shoot for 33X for a 3% withdrawal.

TravelforFun

TheNightsToCome
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Re: FIRE [financial independence/retire early]

Post by TheNightsToCome » Fri Dec 01, 2017 6:12 pm

TravelforFun wrote:
Fri Dec 01, 2017 5:56 pm
Traveler wrote:
Wed Nov 29, 2017 7:02 pm
So the 25X rule applies no matter one's age? I find it hard to believe that someone with $50K in annual expenses can retire with $1.25M at age 35. Now if that person with the same $50K in expenses was 50 or 55, the $1.25M is more likely enough to retire. That same $1.25M needs to last the 35 year old 50+ years, while it only has to last the 50 year old 35 years.
Potentially. If your investment earned 4% above inflation every year, you could withdraw 4% forever. I myself shoot for 33X for a 3% withdrawal.

TravelforFun
"If your investment earned 4% above inflation every year, you could withdraw 4% forever."

Unless you had an awful sequence of returns.

bhsince87
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Re: FIRE [financial independence/retire early]

Post by bhsince87 » Fri Dec 01, 2017 6:30 pm

Coincidentally, I just spent the day with an old friend of mine. I never thought of it this way before, but he essentially went "FIRE" back in 1995 at the age of 30. So he's got a long track record at this. And he has some significant regrets.

He didn't work hard for it, he inherited it. His father was a very successful lawyer. But he died unexpectedly at a young age after suffering a stroke.

He left each of his children a trust fund that was intended to guarantee each of them a yearly income of $48,000, adjusted for inflation, for life. In today's dollars, that looks to be around $80k. His father was a very astute investor (in fact, he personally got me interested in the topic while I was still in high school), so I assume the plan was well thought out.

My friend had earned an Ivy League BS degree, in something like Literature, and had a few years under his belt at the time working for a government agency in DC.

After thinking about things for a while, he decided to move to Los Angeles and try to become an actor. He also started a rock band while he was there. He had some limited success, but eventually decided to move back to the East Coast, and relax.

This worked fine until around 2007. He was told by the trust administrators that they were no longer able to pay him at the current annual level, so he needed to take a "pay cut". I assume the trust fund was overloaded on bonds, but I don't know the details.

Anyway, he has lived an OK life. No debt, but he and his wife have struggled at times. Shes a social worker. He did some work as a DJ, and a few years ago, was happy to land a job at a state owned liquor store. He is hoping to get enough time in there to earn a pension. He'll get almost nothing in social security, though his wife will get something modest.

I felt guilty talking about my plans to retire early, and possibly buy a beach house. But he said, "go for it man!".

His biggest disappointment is that he has essentially fallen from an upper middle class life style, to a decidedly middle class life. He gets royalties from of his music from his rock band days, of $20-40 a month. He calls that his "brandy and cigar" money.

His twin brother took the opportunity to take a dream job at a museum, where he's been working for the past 20 years. He'll have a bit of a pension and social security.

Interestingly, his older brother had already been through law school and was working as an attorney when their father died. He has been quite successful too. That has my friend asking himself, "what if"?

So he's not starving by any means, but he does worry about the future.
BH87

sailaway
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Re: FIRE [financial independence/retire early]

Post by sailaway » Fri Dec 01, 2017 7:35 pm

CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
You don't have to wait through five years of poor returns. You can retire happily for four years, then freak out during a long, aggressive bear market and then boom, you have five years without experience.

mnnice
Posts: 312
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Re: FIRE [financial independence/retire early]

Post by mnnice » Fri Dec 01, 2017 11:27 pm

CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
People in their 40s actually had the hardest time staying employed during the recession. Folks in their 40 are often more anchored in their location ie spouse’s job, kid’s school etc. I say that as someone willing to semi retire at 45 and take more risks than a lot of others. It doesn’t mean it can’t be done but trying to find a job in a crappy economy when you have been out of the game might be harder than you think especially if you work in a more specialized field.

randomguy
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Re: FIRE [financial independence/retire early]

Post by randomguy » Sat Dec 02, 2017 7:31 am

CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.

Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
The CAGR of the stock market from 1966-1985 was 10.7%. The SWR was only 4% over that period. Even in nominal terms the CAGR was 5%. If you aren't a troll, you might want to google sequence of returns.

randomguy
Posts: 5643
Joined: Wed Sep 17, 2014 9:00 am

Re: FIRE [financial independence/retire early]

Post by randomguy » Sat Dec 02, 2017 7:38 am

sailaway wrote:
Fri Dec 01, 2017 7:35 pm
CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
You don't have to wait through five years of poor returns. You can retire happily for four years, then freak out during a long, aggressive bear market and then boom, you have five years without experience.
To be specific when would you have gone back to work if you retired in 1966. Returns weren't great but they also weren't horrible up until 1973. They you had a bad year but it wasn't really bad. And then you had another really bad one. So you are 9 years in before the fact you are in real trouble is obvious.

People taking 5 years off mid career is actually pretty normal for a lot of woman. Studies have shown those woman have a real hard time getting jobs. In times of low employment getting a job isn't a big deal. Employers lower standards to get someone. In tough times they start going, lets hire the college kid for half as much and spend the same amount of time training them up to speed. Maybe your field is special. Maybe it isn't. Hopefully you never need to find out.

CnC
Posts: 523
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Re: FIRE [financial independence/retire early]

Post by CnC » Sat Dec 02, 2017 8:21 am

randomguy wrote:
Sat Dec 02, 2017 7:38 am
sailaway wrote:
Fri Dec 01, 2017 7:35 pm
CnC wrote:
Fri Dec 01, 2017 4:37 pm
randomguy wrote:
Fri Dec 01, 2017 11:07 am


You are denying reality. A college grad is not remotely the same things as a 45-50 year old person who hasn't worked in their field for 5 years.
Why is it that if people disagree with others on the internet they love to say things like you are denying reality! Rather than they simply disagree.

A college grad is no where near as desired as a highly skilled 45 year old who has not been working for 1-2 years in my field.

Also, who would wait through 5 years of bad returns before they started looking for a job?


Don't worry about people who invested wisely and retired in 2000 prior to the bubble bust. Stock would be worth over 2x what they had in 2000. Dow is up 106% from 2000-2017 that's an average of 6% growth per year not including dividends. Assuming 60/40 split at retirement I don't see any issues.


Each of us have our own view on safety but I won't claim that anyone who doesn't agree with me is missing some grand reality boat.
You don't have to wait through five years of poor returns. You can retire happily for four years, then freak out during a long, aggressive bear market and then boom, you have five years without experience.
To be specific when would you have gone back to work if you retired in 1966. Returns weren't great but they also weren't horrible up until 1973. They you had a bad year but it wasn't really bad. And then you had another really bad one. So you are 9 years in before the fact you are in real trouble is obvious.

People taking 5 years off mid career is actually pretty normal for a lot of woman. Studies have shown those woman have a real hard time getting jobs. In times of low employment getting a job isn't a big deal. Employers lower standards to get someone. In tough times they start going, lets hire the college kid for half as much and spend the same amount of time training them up to speed. Maybe your field is special. Maybe it isn't. Hopefully you never need to find out.
Well I'm not hear to argue, :oops: but the 4% rule worked for the 1966 retiree. Despite record inflation.
https://investingforaliving.us/2013/09/ ... t-on-1966/

I am just pointing out that every research paper I have read shows that 4% is extreamly safe. And it goes from safe no bullet proof if you are willing to go back to work if needed within the first 5 years. If you guys disagree, feel free to that's what's beautiful about America.


As far as my field, it is EXTREMELY common for nearly everyone to retire at 55 and go get a job in the private sector making substantially more a year or two later. It is often a running joke that city and state engineers wait until we retire before we make the big bucks.

Perhaps the same is not true for business cubicle work. But, in my profession someone in their 40-50's with 25+ years of experience is infinitely more desirable than a kid out of college.
Last edited by CnC on Sat Dec 02, 2017 9:00 am, edited 1 time in total.

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Tycoon
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Re: FIRE [financial independence/retire early]

Post by Tycoon » Sat Dec 02, 2017 8:37 am

bhsince87 wrote:
Fri Dec 01, 2017 6:30 pm
...was happy to land a job at a state owned liquor store.
The state owns a liquor store? Which state is this?
...I might be just beginning | I might be near the end. Enya | | C'est la vie

pennywise
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Re: FIRE [financial independence/retire early]

Post by pennywise » Sat Dec 02, 2017 8:47 am

HoosierJim wrote:
Fri Dec 01, 2017 7:13 am

Here's a health plan in Pittsburgh - Married couple both 55 with income of approx $23k - Monthly premium is $4.62 - yes - I put the decimal point in the right place.

Image
However I believe this also proves another point made by several in this conversation. For a couple earning $23K, an out of pocket maximum of $10,000 is close to half their yearly income. A chronic illness, an accident, an age-related health condition....and suddenly they are living on $13,000 per year or need to come up with a sum that for this income level may be impossibly high.

So yes health care cost is indeed the elephant in the room at every income level.

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