Realities of Early Retirement Model (FIRE)?

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capitalhockey
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Realities of Early Retirement Model (FIRE)?

Post by capitalhockey » Mon Jul 30, 2018 10:46 am

I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income. My instincts tell me there are some underlying things that are not addressed with this model. Does anyone has direct experience with early retirement model to provide some insight?

1. Health Care -- most people get their health insurance from work until medicare kick in at 65. Buying private insurance is a big cost. ObamaCare is on shaky grounds with current politics. If one forgo insurance, a major health issue will derail a nest egg quickly.

2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).

3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.

4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.

5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?

6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?

I think it's great that people are striving for this goal by living below their means and saving up a bunch of money. I just hope folks are not mislead by some things that are not mentioned in these early retirement articles where all you see are smiles and people saying how great things are. It gives me the vibe when I watch infomercials -- it's always too good to be true feeling!

JoeRetire
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Re: Realities of Early Retirement Model (FIRE)?

Post by JoeRetire » Mon Jul 30, 2018 11:18 am

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income.
Very, very few folks in their early 30s live off their savings. The exceptions get the headlines, but it's nowhere near a common thing.
1. Health Care -- most people get their health insurance from work until medicare kick in at 65. Buying private insurance is a big cost. ObamaCare is on shaky grounds with current politics. If one forgo insurance, a major health issue will derail a nest egg quickly.
True. Healthcare can be expensive and will likely be even more so in the future for many reasons.
2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).
No doubt, the more people in your family, the more expensive things are - particularly when those other people don't bring in an income.
3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.
It's certainly mathematically feasible if you assume a decent investment return rate. After all, you only need than a 2-4% return.
4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.
It's never easy working. Working on your blog may not be easy either. And monetizing your blog to the extent you need to support your lifestyle isn't something everyone can do. That said, I don't believe I've ever read that everyone could do it.
5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?
Certainly any assets would help increase your passive income stream. But you seem to think that lots of folks are hiding something?
6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?
Cost of living is always a factor in the ability to retire. Location is just one part of this equation.
I think it's great that people are striving for this goal by living below their means and saving up a bunch of money. I just hope folks are not mislead by some things that are not mentioned in these early retirement articles where all you see are smiles and people saying how great things are. It gives me the vibe when I watch infomercials -- it's always too good to be true feeling!
Lots of folks write about "follow my method to wealth/early retirement/etc.

And the more you see and read, the more people will think "Hey, I could flip houses too!", "Hey I can build a stable of rentals using no money down too!", "Hey, I can create a blog and retire at 35, too!"

Dreaming is fun. Doing is harder.

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Re: Realities of Early Retirement Model (FIRE)?

Post by IRT » Mon Jul 30, 2018 11:19 am

I think this is spot on. I'd add to the list 'lifestyle restrictions'. A lot of extreme FIRE is based on current yearly spending. In the post-college years it's very easy to live on little (20-30K in some cases) and to imagine that one can simply maintain this spending rate indefinitely. In practice, lifestyle creep happens and isn't really a bad thing-- after all, that's what we work for-- but the extreme FIRE folks are very limited in the growth of their future lifestyle. How can someone in their early 30s possibly know what they'll want/need in their 50s?

PS: I see healthcare as a real issue that current models (necessarily based on past data) have a difficult time predicting.

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willthrill81
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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 11:57 am

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income. My instincts tell me there are some underlying things that are not addressed with this model. Does anyone has direct experience with early retirement model to provide some insight?
I strongly urge you to go to www.rootofgood.com to see how Justin and his family did it. They have three small children, and they've lived well on about $30k a year since they retired several years ago. With a paid off home, very low health insurance premiums (bought through ACA), and living in a local cost-of-living area, it's not too difficult. They take European vacations every couple of years and cruise regularly. This page contains a very good summary of what they did. No magic involved. They now have over $2 million in their portfolio, aside from their home. Even without blog income, which he is very open about, they could withdraw double what they are now and be just fine in terms of long-term withdrawal rates.

Regarding withdrawal rates, a 3% or lower withdrawal rate is historically close to bulletproof, no matter how long the withdrawal period is. For most starting years, 4% would last 50 years if there was a good allocation to stocks. If you are flexible with your withdrawals, it's very doable.

Very few in the FIRE community have inheritance or trust funds.

Your reactions are quite typical. Most believe that retiring in your 30s just isn't possible. But it can be if you're willing to do what it takes to get there.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

JoeRetire
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Re: Realities of Early Retirement Model (FIRE)?

Post by JoeRetire » Mon Jul 30, 2018 12:16 pm

willthrill81 wrote:
Mon Jul 30, 2018 11:57 am
Very few in the FIRE community have inheritance or trust funds.
I don't think I understand that sentence.

By "FIRE community" do you mean "folks who have retired early"?
Or do you mean "online forums I frequent"?

If the former, how could you know what percentage of them have inheritance or trust funds?
Are you saying that folks with inheritances and/or trust funds don't tend to retire early?

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Re: Realities of Early Retirement Model (FIRE)?

Post by thx1138 » Mon Jul 30, 2018 12:37 pm

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.)
You don't need day care if you are retired.

There is no real good reason to spend money on "activities" for your kids. Too many paid "activities" in general have a negative impact on kids as they teach them that they have to have adults around organizing things in order for them to have fun. Walking in the woods is free. Playing games on the playground with other kids is free. You can budget a very small expense for occasional paid activities.

Private pre-college education is extremely expensive, so being in a decent public school district would be good. Because you are not working there are fewer constraints on where you live making it easier to select for a location with a good school.

College tuition is a good question. Many of the FIRE folks seem to have paid for college themselves and assume their kids should do the same. Having the kids understand and bear the expenses certainly would keep the cost down I'd expect. On the flip side having your kid emerge from college entirely debt free and perhaps with a Roth IRA already started from their summer work would be a huge jump start.
3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.
You can withdraw from IRAs just fine at any age as long as you arrange things properly. Look up the "Roth Pipeline" to see how to fund early retirement from IRAs with no penalties.

A withdrawal rate just under 3.5% is just about bullet proof for life. So 1.2M can safely generate about $40K/yr more or less for ever (inflation adjusted of course).
4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.
The blogging thing obviously won't last. But there are other ways to generate income as well. It seems lots of early retirees end up bringing in extra money from side projects they enjoy.
5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?
Most folks I've read don't have any hidden assets. The people I know personally that have don't either, but that is a very small sample.
6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?
This is absolutely key for sure. COL and employment do seem to really go hand in hand though. Typically the highest paying jobs are where the highest COL is. By being retired you have the opportunity to move someplace with a much lower COL. You see a lot of the FIRE folks work a high paying job in a HCOL area while greatly constraining their housing expenses while working and living in the HCOL area. Once they retire they can move to a LCOL area and make their savings last much longer.

It really is down to a lifestyle choice. I think one of the common flaws in some of the extremely early FIRE folks is that they seem to be falling victim to the End of History Illusion (see here:https://en.wikipedia.org/wiki/End-of-history_illusion). Many seem to find after a bit that they achieve FIRE that their plans change up from what they expected, many end up picking up work again. I'm not sure this is really such a problem though, having achieved FIRE gave them lots of options and so the fact their preferences changed is no big deal.

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Re: Realities of Early Retirement Model (FIRE)?

Post by FIBoston » Mon Jul 30, 2018 12:45 pm

4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.
The blogging thing is actually quite controversial in the FIRE world. Basically, people copy the financial rules laid out by the bloggers (e.g. retire at 30 with $1.5mill, 3% swr) because that is what the bloggers say they did. However, what goes unsaid by a lot of the bloggers is the fact that they are also pulling in a healthy amount of revenue through ad services and product placement (Betterment must make a killing off these blogs). There's a small movement in the younger FIRE community to force all bloggers to reveal their blogging income.

Just like Kevin Durant, I have little time for the blog-bois.

supersecretname
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Re: Realities of Early Retirement Model (FIRE)?

Post by supersecretname » Mon Jul 30, 2018 1:08 pm

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income. My instincts tell me there are some underlying things that are not addressed with this model. Does anyone has direct experience with early retirement model to provide some insight?

1. Health Care -- most people get their health insurance from work until medicare kick in at 65. Buying private insurance is a big cost. ObamaCare is on shaky grounds with current politics. If one forgo insurance, a major health issue will derail a nest egg quickly.

2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).

3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.

4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.

5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?

6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?

I think it's great that people are striving for this goal by living below their means and saving up a bunch of money. I just hope folks are not mislead by some things that are not mentioned in these early retirement articles where all you see are smiles and people saying how great things are. It gives me the vibe when I watch infomercials -- it's always too good to be true feeling!
it's all about choices

1 - Health Care: affordable ACA will continue to exist for those with low-incomes. Being FIRE, you can massage your income to get the most of the ACA benefits.
2 - Kids: state school or community college. private university will obviously affect retirement
3 - 4% and some flexibility will be fine.
4 - other income: I think a lot of people who FIRE have a side-gig. It's not all bloggers
5 - seems like you are grasping at straws to figure out how someone can make it work
6 - yes, geographic arbitrage plays a role. If you want to live in Manhattan, you are going to need more money. duh.

You don't think it's possible because of the choices you've made for yourself in your life. They aren't wrong or bad, just yours.

Lifestyle inflation can be managed if you are aware of it. Just because you have a family and a good job doesn't mean you need a luxury car and a mcmansion.

It takes a lot of planning and a certain type of personality to FIRE. Those who say it can't be done either have a failure of imagination, or think that everyone else must live the way they do.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 1:27 pm

JoeRetire wrote:
Mon Jul 30, 2018 12:16 pm
willthrill81 wrote:
Mon Jul 30, 2018 11:57 am
Very few in the FIRE community have inheritance or trust funds.
I don't think I understand that sentence.

By "FIRE community" do you mean "folks who have retired early"?
Or do you mean "online forums I frequent"?

If the former, how could you know what percentage of them have inheritance or trust funds?
Are you saying that folks with inheritances and/or trust funds don't tend to retire early?
Yes, yes, and yes. Being able to FIRE essentially requires one to be a millionaire, and data have shown that very few millionaires inherited a significant portion of their wealth.

The whole "trust fund kid" is a frequent knee-jerk reaction to hearing that someone retired early.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

JoeRetire
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Re: Realities of Early Retirement Model (FIRE)?

Post by JoeRetire » Mon Jul 30, 2018 1:52 pm

willthrill81 wrote:
Mon Jul 30, 2018 1:27 pm
Being able to FIRE essentially requires one to be a millionaire, and data have shown that very few millionaires inherited a significant portion of their wealth.
I think you are stringing together a whole lot of assumptions and coming to interesting conclusions.
The whole "trust fund kid" is a frequent knee-jerk reaction to hearing that someone retired early.
Okay, there's another assumption.

Doesn't matter. I was just trying to understand where you were coming from. Now I understand.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 2:05 pm

JoeRetire wrote:
Mon Jul 30, 2018 1:52 pm
willthrill81 wrote:
Mon Jul 30, 2018 1:27 pm
Being able to FIRE essentially requires one to be a millionaire, and data have shown that very few millionaires inherited a significant portion of their wealth.
I think you are stringing together a whole lot of assumptions and coming to interesting conclusions.
The whole "trust fund kid" is a frequent knee-jerk reaction to hearing that someone retired early.
Okay, there's another assumption.

Doesn't matter. I was just trying to understand where you were coming from. Now I understand.
I've heard the "trust fund" reaction many times before. Yes, it's an assumption that few FIRE folks have one, but it's very likely a valid one.

How many FIRE folks have under $1 million in their portfolio? If they do, they will either need to be exceptionally frugal, encounter a very good sequence of returns, or they will go broke.

How many people do you know who suddenly come into enough money to make financially independent, then they live frugally enough to not spend down their money? The data are clear that such people are exceptionally rare.

Deductive reasoning is not the same as making a string of assumptions.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by Dottie57 » Mon Jul 30, 2018 2:15 pm

supersecretname wrote:
Mon Jul 30, 2018 1:08 pm
capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income. My instincts tell me there are some underlying things that are not addressed with this model. Does anyone has direct experience with early retirement model to provide some insight?

1. Health Care -- most people get their health insurance from work until medicare kick in at 65. Buying private insurance is a big cost. ObamaCare is on shaky grounds with current politics. If one forgo insurance, a major health issue will derail a nest egg quickly.

2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).

3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.

4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.

5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?

6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?

I think it's great that people are striving for this goal by living below their means and saving up a bunch of money. I just hope folks are not mislead by some things that are not mentioned in these early retirement articles where all you see are smiles and people saying how great things are. It gives me the vibe when I watch infomercials -- it's always too good to be true feeling!
it's all about choices

1 - Health Care: affordable ACA will continue to exist for those with low-incomes. Being FIRE, you can massage your income to get the most of the ACA benefits.
2 - Kids: state school or community college. private university will obviously affect retirement
3 - 4% and some flexibility will be fine.
4 - other income: I think a lot of people who FIRE have a side-gig. It's not all bloggers
5 - seems like you are grasping at straws to figure out how someone can make it work
6 - yes, geographic arbitrage plays a role. If you want to live in Manhattan, you are going to need more money. duh.

You don't think it's possible because of the choices you've made for yourself in your life. They aren't wrong or bad, just yours.

Lifestyle inflation can be managed if you are aware of it. Just because you have a family and a good job doesn't mean you need a luxury car and a mcmansion.

It takes a lot of planning and a certain type of personality to FIRE. Those who say it can't be done either have a failure of imagination, or think that everyone else must live the way they do.
I agree. I would have never wanted to retire really early before 40. I liked work until the last 5 years or so. I do think retiring at 55 or so would have been great. And I have enjoyed spending money on friends and home.

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Re: Realities of Early Retirement Model (FIRE)?

Post by JoeRetire » Mon Jul 30, 2018 2:23 pm

willthrill81 wrote:
Mon Jul 30, 2018 2:05 pm
Deductive reasoning is not the same as making a string of assumptions.
I agree. They are not at all the same.

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Re: Realities of Early Retirement Model (FIRE)?

Post by jharkin » Mon Jul 30, 2018 2:34 pm

willthrill81 wrote:
Mon Jul 30, 2018 11:57 am
very low health insurance premiums (bought through ACA),
I have a friend who retired in his late 40s... does the same. He must have millions in IRAs, but he manipulates his income to show an AGI barely in the double digits to get dirt cheap healthcare.

The thing that bugs me... this healthcare is not really cheap. Its subsidised - by the rest of us still working and paying high tax rates. What happens when the program becomes untenable (either on the numbers, or politically) and an asset-based means test is implemented? The FIRE folks could be in for a world of hurt.

I know they say "I'll just go back to work".. but in my field (tech) I could not go back after a few years or a decade off, my skills would be outdated. I'd have to settle for something much lower paid. And more and more low paid jobs these days are "gig economy" jobs with no benefits...

-----

Dont get me wrong... I hope ACA does not get thrown out, as I would like to retire sometime before 60 and ACA will be a key bridge to Medicare...but I have a bad feeling about it.
Last edited by jharkin on Mon Jul 30, 2018 2:41 pm, edited 1 time in total.

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Re: Realities of Early Retirement Model (FIRE)?

Post by supersecretname » Mon Jul 30, 2018 2:41 pm

jharkin wrote:
Mon Jul 30, 2018 2:34 pm
The thing that bugs me... this healthcare is not really cheap. Its subsidised - by the rest of us still working and paying high tax rates.
Not only do corporations do the same thing, they have a fiduciary responsibility to shareholders to engage in all manners of tax maneuvers. But yet, somehow it's wrong for an average person to do it (on a fraction of the scale that corporations do it). No laws are being broken. The government sets out the rules of the game, and you can't fault a person for playing within the rules as provided.

Let that noodle your brain for a bit.

edit: for clarity.
Last edited by supersecretname on Mon Jul 30, 2018 2:46 pm, edited 1 time in total.

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Re: Realities of Early Retirement Model (FIRE)?

Post by jharkin » Mon Jul 30, 2018 2:44 pm

supersecretname wrote:
Mon Jul 30, 2018 2:41 pm
jharkin wrote:
Mon Jul 30, 2018 2:34 pm
The thing that bugs me... this healthcare is not really cheap. Its subsidised - by the rest of us still working and paying high tax rates.
Not only do corporations do the same thing, they have a fiduciary responsibility to shareholders to engage in such maneuvers. But yet, somehow it's wrong for an average person to do it (on a fraction of the scale that corporations do it). No laws are being broken. The government sets out the rules of the game, and you can't fault a person for playing within the rules as provided.

Let that noodle your brain for a bit.
Point taken ... but I think its far less likely for corporations to stop subsidizing insurance, as its used as a key recruiting tool to attract talent.

ACA on the other hand is under a lot of scrutiny with very powerful elements out to overturn it.......

supersecretname
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Re: Realities of Early Retirement Model (FIRE)?

Post by supersecretname » Mon Jul 30, 2018 2:46 pm

my point was about the tax games that corps play, not employer-sponsored insurance.

Lynette
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Re: Realities of Early Retirement Model (FIRE)?

Post by Lynette » Mon Jul 30, 2018 2:50 pm

jharkin wrote:
Mon Jul 30, 2018 2:34 pm
willthrill81 wrote:
Mon Jul 30, 2018 11:57 am
very low health insurance premiums (bought through ACA),
I have a friend who retired in his late 40s... does the same. He must have millions in IRAs, but he manipulates his income to show an AGI barely in the double digits to get dirt cheap healthcare.

The thing that bugs me... this healthcare is not really cheap. Its subsidised - by the rest of us still working and paying high tax rates. What happens when the program becomes untenable (either on the numbers, or politically) and an asset-based means test is implemented? The FIRE folks could be in for a world of hurt.

Dont get me wrong... I hope ACA does not get thrown out, as I would like to retire sometime before 60 and ACA will be a key bridge to Medicare...but I have a bad feeling about it.
I can understand reasons why people retire early if they are physically burnt out from manual labor, have other responsibilities such as elder parents or have simply had enough of the corporate world and retire after 50/55. It is not only ACA subsidies that are paid for by those working but also Medicare. One can get Medicare as long as one qualifies for SS - i.e. 40 quarters of work. Again I have no issues with paying extra into Medicare for those who really need it. However, I find it strange that there is no qualification for other than 40 quarter of work for possible 30 years of Medicare. The rest of us pay for this as well.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 3:00 pm

Many on this forum are blessed with careers that they really like. I enjoy my career as well but not enough to do it apart from what I'm paid. When I reach FI, I strongly suspect that I'll pull the trigger on retirement, certainly no later than 55.

A great many people out there do not enjoy what they do for money one little bit. I have many family members who would quit today if they could make their finances work.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

renue74
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Re: Realities of Early Retirement Model (FIRE)?

Post by renue74 » Mon Jul 30, 2018 3:02 pm

It's a play on words. "Early retirement."

If you stop working when you're 35 and live off savings....that's what you did. You didn't retire.

I would guess that most of these folks at some point between 35 and real retirement would work...maybe in a less stressful situation.

I applaud them. Live life. These people are survivors, plotters, savers. You don't get to saving $1M in your early 30s without a plan. Plan the work, work the plan.

My neighbor 2 doors down from me put a "For Sale" sign in his yard...about 4 weeks ago. He and his wife were going to move to Naples, FL. "Moving to paradise" and retiring...he said. He's maybe in his late 50s, early 60s.

My wife texted me last Friday and said the man had gone to the doctor a few days ago and was diagnosed with a brain tumor. They gave him 6 months to live. 2 days later, him and his wife went to the river park and were reading. He died while at the park.

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HomerJ
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Re: Realities of Early Retirement Model (FIRE)?

Post by HomerJ » Mon Jul 30, 2018 3:07 pm

My only problem with the extreme FIRE people is that living extremely frugal that works at 30 or 35 may turn out to not work at 55 or 65.

And by then it may be too late.

They dont give themselves a large margin of error. As a former engineer, this disturbs me :)
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bhsince87
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Re: Realities of Early Retirement Model (FIRE)?

Post by bhsince87 » Mon Jul 30, 2018 3:11 pm

IMO, healthcare is the biggest blind spot facing these folks. If you live in a country where healthcare is provided or heavily subsidise, it's less of an issue. And the USA has been in that category for the past 7-8 years. Going forward, who knows?

I don't think most of them realize how much rates climb with age, even with ACA. For my wife and I, age 53 and 51, current unsubsidized cost is $28k per year, with an additional $4k out of pocket max. Running the numbers for a couple aged 32 and 35, current rate is half that, $14k, plus the $4k out of pocket max.

Yes, if you can qualify for a subsidy, that will drop (to $2k plus $4k out of pocket max for us). But is that a lifestyle folks really want to embrace? Maybe.

Also keep in mind, that having kids brings the subsidy level down substantially. What will happen when the kids leave home?

And it is expected ACA will change starting in 2019. We don't know how exactly, but it's reasonable to expect that some sort of means testing, or reduction of subsidies is a logical step.

Another issue is just the optimism of youth. From age 10 until age 40, i saw a doctor maybe 4-5 times total! A few ear or sinus infections, and a broken finger once.

At age 40 I was diagnosed with chronic GERD. That means daily meds and an endoscopy every three years. plus a colonoscopy every 5 years. At age 43, i was diagnosed with asthma. At 50, high blood pressure.

With regular medication, these are all under control, and they have minimal impact on my daily life. But they do require expensive medications and regular office visits.

And they are "pre-existing" conditions that could have prevented me for even getting coverage for them 10 or 15 years ago.

So I'm actually happy tat i can (currently) get health insurance for $32k a year, if I need it.

I doubt many 30-40 years olds contemplating FIRE have similar experience or perspective. I sure didn't at that age.
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Re: Realities of Early Retirement Model (FIRE)?

Post by Meg77 » Mon Jul 30, 2018 3:39 pm

Lots of households live off $30k - $40k a year - including many retired folks living primarily off social security in this country. It's certainly possible, especially when you have no debt and a paid off house in a low or moderate cost of living area (which includes many large city neighborhoods and suburbs, just perhaps not the trendy city centers).

I keep telling my husband we could FIRE if we really wanted to. He doesn't believe me. He just turned 40 and I'm in my mid 30s, and our net worth is around $2.5M. We'd have to downsize our house probably and definitely spend less, but we could make it work. No more buying suits or eating out daily for lunches or traveling during expensive holiday times. Longer trips abroad would slash our travel and living costs (VRBO versus a nice hotel, flights on the cheapest days, eating for dirt cheap in South America, Thailand, etc.) Taxable income would be super low so income taxes would plummet and health care wouldn't be crazy. Worst case we could do a bit of consulting or part time work when needed. I expect a future inheritance, but that would be icing on the cake (and my parents could live another 3 decades so it's not like I'm waiting for that).

In the meantime though we'll keep saving and working, especially until we decide for sure whether we are having kids. We could still afford to FIRE with kids and both be stay at home parents, but I'd probably want to pad their college funds before pulling the rip cord on my higher income.
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Re: Realities of Early Retirement Model (FIRE)?

Post by livesoft » Mon Jul 30, 2018 3:51 pm

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).
Clearly, there are families with very very low incomes who have children and they are doing OK.

There should be no day care costs because one is retired and otherwise not working.

There are plenty of zero cost activities for kids who do not have working parents, too. Or parents can get a cost reduction if they help out with activities. For instance, I coached youth sports up to the AAU level.

College tuition should not really be a problem either. If the family needs financial aid, then they can get it. If they go to an inexpensive university, then the costs are manageable. My youngest has a nice 4-year degree and the cost was not that much.

Quite a lot of people overextend themselves for children. You know what I mean: Every 16-year-old gets a car to drive. Private K-12 school. Traveling sports, music, band, drama, enlightenment teams and summer camps. Exotic vacations. Private university.

I must admit I don't know about dental work due to hockey things though
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Re: Realities of Early Retirement Model (FIRE)?

Post by FireProof » Mon Jul 30, 2018 4:02 pm

capitalhockey wrote:
Mon Jul 30, 2018 10:46 am
I have read a few articles about the FIRE (Financial Independent & EArly Retirement) which folks in their early 30s, etc quit their job and live off of their savings and passive income. My instincts tell me there are some underlying things that are not addressed with this model. Does anyone has direct experience with early retirement model to provide some insight?

1. Health Care -- most people get their health insurance from work until medicare kick in at 65. Buying private insurance is a big cost. ObamaCare is on shaky grounds with current politics. If one forgo insurance, a major health issue will derail a nest egg quickly.

2. Kids -- the examples I read about are married folks with no kids or single folks with no kids. One or more kids are big costs to carry on (day care, activities costs, college tuition, etc.).

3. Withdrawal Rate -- I read about a guy with 1.2M saved up and withdrawing 2-4% at 28 years old. I am guessing this is a post tax account since there is a penalty for taking out money from IRA or 401k before 58. Assuming he lives to 80, that 1.2M has to last 50 years -- I am not sure if that is mathematically feasible.

4. Passive Income -- most folks in the article are making money from their blogs promoting the early retirement lifestyle with ad clicks....assuming other people copy this blog model, this passive income area will be crowded and saturated...it's not easy making money off passive income. Savings rates have been at 2%. Dividends are not much higher. Not everyone can create a popular blog that brings in $2,000 a month in ads.

5. Other Hidden Assets -- are there other hidden assets not discussed like inheritance or trust funds, which would surely increase passive income streams?

6. Cost of Living location -- one of the key strategy is controlling spending or limiting to a very amount....for people living in big cities, housing will take a big bite off....I am guessing moving to a much lower cost of living area is needed for the numbers to work out?

I think it's great that people are striving for this goal by living below their means and saving up a bunch of money. I just hope folks are not mislead by some things that are not mentioned in these early retirement articles where all you see are smiles and people saying how great things are. It gives me the vibe when I watch infomercials -- it's always too good to be true feeling!
Health care is a big problem potentially (ObamaCare may have changed that, but maybe temporarily - I've never looked into it, though). Personally I solved it by leaving the US. That may not be a desirable option for many.

Most of the expenses of kids are caused by working, e.g child care. And actually college really gives a huge advantage to early retirees, since if family income is low, basically all decent schools will give full grants (top privates are free for income under 120k/year, UCs for something like 80k/year), unless your net worth that is not in retirement accounts or your home is very high. But even if the kid turns out to be a dunce, overpaying for college is entirely a choice.

3% withdrawal rate is pretty safe indefinitely, actually. The first 30 years are the critical ones, anyway, so for longer periods, you don't have to drop withdrawal much. And taxes tend not to be an issue when you have no salary.

I'd love to have passive income, but sadly no one wants to give it to me! And definitely not interested in blogging, or anything involving scrounging for ad revenue.

No hidden assets either, alas. I caught my dad reading a book called "How to Die Broke," but hopefully he won't take it too literally.

Cost of living is obviously very important, But living in a high cost region is largely driven by working as well, except for some places like Hawaii. Since you don't specify what the numbers are, hard to say whether they work out, but certainly FIRE in Manhattan will take bigger savings than in Kansas or Spain.

But of course, you're right, anyone trying to sell some method should be taken with a big grain of salt.

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Re: Realities of Early Retirement Model (FIRE)?

Post by ConcernedKid » Mon Jul 30, 2018 4:37 pm

I'm naive enough to think I can retire at age 40.5. I will live off of investments and income from rental properties. For health care I plan to use ACA subsidies (if they still exist) or a global plan that covers healthcare outside of the U.S.. I will do my best to stay healthy by sticking to a plant-based diet and exercising on a regular basis. So far, I do not have any chronic conditions or take any medication. I understand that this is not guaranteed to last.

Many in the FIRE community use real estate to produce greater returns than the market. Real estate helps on three counts. First, the depreciation on the real estate allows you to offset rental income. Second, the income generated is not subject to FICA taxes. Last, but not least, the property can be a source of cash in a pinch through HELOCs and/or cash-out refinances.

I plan to keep my income as low as possible and convert money from my traditional IRA/401k to my Roth IRA by filling up space to the top of the 12% tax bracket. The goal is to live solely off of rental income and to let my invested portfolio grow untouched. I don't have a trust fund, will not be inheriting anything, don't have a blog and am willing to change the country I live in as a type of inflation hedge. We'll see how it goes.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 5:48 pm

HomerJ wrote:
Mon Jul 30, 2018 3:07 pm
They dont give themselves a large margin of error.
That's true of some but not all. Justin at www.rootofgood.com spends $30k annually and has a $2 million portfolio and no debt. Even if he had to pay $20k annually for health insurance, he could easily do that for as long as he wants.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 5:52 pm

bhsince87 wrote:
Mon Jul 30, 2018 3:11 pm
IMO, healthcare is the biggest blind spot facing these folks.
Perhaps, but I'm reminded of one sure fire fix to the problem.

"Don't be downhearted, I can fix it for you sonny. It won't take too long, it'll just take money."
-Alan Jackson

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

We're planning enough of a 'cushion' when I retire at around age 55 that we could pay $30k annually in today's dollars for health insurance and it not be a stretch for us.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by getthatmarshmallow » Mon Jul 30, 2018 6:00 pm

I find the FIRE community fascinating, and I'll be interested to see how it ages. Health insurance is one variable that's hard to predict, but so are lifestyle adjustments -- and I don't mean lifestyle inflation. But it's relatively easy to bike everywhere and DIY kitchen remodels in one's 30s; perhaps less attractive in one's 50s or 60s.

Most I find pretty impressive, although I think it's wise to keep in mind that living on $30K while generating lots of passive income isn't the same as living on $30K when draining one's portfolio, and I wonder what happens when the next market crash happens. It's not a path for everyone, but the idea that one could take a well-paying job and aim to opt out in one's 30s is great -- sort of a DIY trust fund.

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Re: Realities of Early Retirement Model (FIRE)?

Post by bhsince87 » Mon Jul 30, 2018 6:44 pm

willthrill81 wrote:
Mon Jul 30, 2018 5:52 pm
bhsince87 wrote:
Mon Jul 30, 2018 3:11 pm
IMO, healthcare is the biggest blind spot facing these folks.
Perhaps, but I'm reminded of one sure fire fix to the problem.

"Don't be downhearted, I can fix it for you sonny. It won't take too long, it'll just take money."
-Alan Jackson

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

We're planning enough of a 'cushion' when I retire at around age 55 that we could pay $30k annually in today's dollars for health insurance and it not be a stretch for us.
I'm planning to retire at age 55 (or the year I turn 55) about 16 months to a couple years from now depending on circumstances at the time. I reall want to see what happens with ACA in 2019.

At age 53, today, ACA+ out of pocket would be $32k which is above your budget. Last year that would have been $28k. Year before that $22k. Year before that, $18k. I don't like that trend!

Of course, I can remember when pre-exiting conditions like we have now would have made it impossible to get insurance at any price, so maybe I'm a bit jaded. Hopefully, we won't return to those days.

So we're budgeting $48k for living expenses (about $8k of that is "fun"), $40k for health care, and $20k for vacations, etc. We can pull that off at a 3.5% withdraw rate now, so hopefully the numbers will be similar if not better when we pull the trigger.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Mon Jul 30, 2018 7:05 pm

bhsince87 wrote:
Mon Jul 30, 2018 6:44 pm
willthrill81 wrote:
Mon Jul 30, 2018 5:52 pm
bhsince87 wrote:
Mon Jul 30, 2018 3:11 pm
IMO, healthcare is the biggest blind spot facing these folks.
Perhaps, but I'm reminded of one sure fire fix to the problem.

"Don't be downhearted, I can fix it for you sonny. It won't take too long, it'll just take money."
-Alan Jackson

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

We're planning enough of a 'cushion' when I retire at around age 55 that we could pay $30k annually in today's dollars for health insurance and it not be a stretch for us.
I'm planning to retire at age 55 (or the year I turn 55) about 16 months to a couple years from now depending on circumstances at the time. I reall want to see what happens with ACA in 2019.

At age 53, today, ACA+ out of pocket would be $32k which is above your budget. Last year that would have been $28k. Year before that $22k. Year before that, $18k. I don't like that trend!

Of course, I can remember when pre-exiting conditions like we have now would have made it impossible to get insurance at any price, so maybe I'm a bit jaded. Hopefully, we won't return to those days.

So we're budgeting $48k for living expenses (about $8k of that is "fun"), $40k for health care, and $20k for vacations, etc. We can pull that off at a 3.5% withdraw rate now, so hopefully the numbers will be similar if not better when we pull the trigger.
Yes, the trend is alarming, but there is an upper limit to health insurance premiums. We just don't yet know what the upper limit is. For now at least, I think you are well prepared.

If I was 55, we could get a high deductible plan in our state for about $7k right now, far below the $32k you cite.

If we need to delay retirement in our to build up our portfolio to the point that we could pay whatever we have to for healthcare. Also, we are far more open to health sharing plans than many here are, and the cost of those is often a fraction of health insurance.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by market timer » Mon Jul 30, 2018 8:43 pm

getthatmarshmallow wrote:
Mon Jul 30, 2018 6:00 pm
I think it's wise to keep in mind that living on $30K while generating lots of passive income isn't the same as living on $30K when draining one's portfolio, and I wonder what happens when the next market crash happens.
Yes, will be interesting to watch. The US currently has an unprecedented level of wealth-to-income, surpassing the housing and dot-com bubbles. Everyone feels rich until they get their small dividend and interest checks.

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Re: Realities of Early Retirement Model (FIRE)?

Post by market timer » Mon Jul 30, 2018 8:47 pm

bhsince87 wrote:
Mon Jul 30, 2018 3:11 pm
For my wife and I, age 53 and 51, current unsubsidized cost is $28k per year, with an additional $4k out of pocket max.
Regardless of who pays, such high health care expenses are not sustainable.

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Re: Realities of Early Retirement Model (FIRE)?

Post by Dottie57 » Mon Jul 30, 2018 8:54 pm

market timer wrote:
Mon Jul 30, 2018 8:43 pm
getthatmarshmallow wrote:
Mon Jul 30, 2018 6:00 pm
I think it's wise to keep in mind that living on $30K while generating lots of passive income isn't the same as living on $30K when draining one's portfolio, and I wonder what happens when the next market crash happens.
Yes, will be interesting to watch. The US currently has an unprecedented level of wealth-to-income, surpassing the housing and dot-com bubbles. Everyone feels rich until they get their small dividend and interest checks.

Image
At 61 now, I hope the economy and market will recover. Have a large cash position, 50% in FI. If I have problems, how will those who didn’t save and invest much retire?

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Re: Realities of Early Retirement Model (FIRE)?

Post by randomguy » Mon Jul 30, 2018 9:06 pm

getthatmarshmallow wrote:
Mon Jul 30, 2018 6:00 pm
I find the FIRE community fascinating, and I'll be interested to see how it ages. Health insurance is one variable that's hard to predict, but so are lifestyle adjustments -- and I don't mean lifestyle inflation. But it's relatively easy to bike everywhere and DIY kitchen remodels in one's 30s; perhaps less attractive in one's 50s or 60s.

Most I find pretty impressive, although I think it's wise to keep in mind that living on $30K while generating lots of passive income isn't the same as living on $30K when draining one's portfolio, and I wonder what happens when the next market crash happens. It's not a path for everyone, but the idea that one could take a well-paying job and aim to opt out in one's 30s is great -- sort of a DIY trust fund.
So far there haven't been many portfolio draining years. It has been gravy and sunshine. When sustained down market (2000-2) happens we can see how people react.

Things like owning a car and kitchen remodels aren't enough to really change numbers except for people at the real bottom end. Buy a 3k car and drive it 3k/year (i.e thats a lot of biking your replacing) is a couple thousand/year expense. Same thing with doing a remodel every 15 years. And obviously if you opt out in your 30s, by the time you hit your 60s, your should have portfolio capable of supporting much higher expenditures as long as we aren't in the bottom 25% or so of returns.

I think one thing you always have to remember is that on the internet, what a couple hundred people do can seem like a much bigger movement than it really is. I find things like tiny houses, van life, 3 month backpacking trips, and choosing to live on 25k/year interesting. I am unlikely to do any of them:)

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Re: Realities of Early Retirement Model (FIRE)?

Post by Sasquatch » Mon Jul 30, 2018 9:28 pm

willthrill81 wrote:
Mon Jul 30, 2018 1:27 pm
Yes, yes, and yes. Being able to FIRE essentially requires one to be a millionaire, and data have shown that very few millionaires inherited a significant portion of their wealth.
It’s also likely there are many, many self made millionaires who you would never guess are wealthy. For every 1 “online story” there are numerous folks living modestly under the radar.

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Re: Realities of Early Retirement Model (FIRE)?

Post by mnnice » Mon Jul 30, 2018 10:06 pm

bhsince87 wrote:
Mon Jul 30, 2018 3:11 pm
IMO, healthcare is the biggest blind spot facing these folks. If you live in a country where healthcare is provided or heavily subsidise, it's less of an issue. And the USA has been in that category for the past 7-8 years. Going forward, who knows?

I don't think most of them realize how much rates climb with age, even with ACA. For my wife and I, age 53 and 51, current unsubsidized cost is $28k per year, with an additional $4k out of pocket max. Running the numbers for a couple aged 32 and 35, current rate is half that, $14k, plus the $4k out of pocket max.

Yes, if you can qualify for a subsidy, that will drop (to $2k plus $4k out of pocket max for us). But is that a lifestyle folks really want to embrace? Maybe.

Also keep in mind, that having kids brings the subsidy level down substantially. What will happen when the kids leave home?

And it is expected ACA will change starting in 2019. We don't know how exactly, but it's reasonable to expect that some sort of means testing, or reduction of subsidies is a logical step.

Another issue is just the optimism of youth. From age 10 until age 40, i saw a doctor maybe 4-5 times total! A few ear or sinus infections, and a broken finger once.

At age 40 I was diagnosed with chronic GERD. That means daily meds and an endoscopy every three years. plus a colonoscopy every 5 years. At age 43, i was diagnosed with asthma. At 50, high blood pressure.

With regular medication, these are all under control, and they have minimal impact on my daily life. But they do require expensive medications and regular office visits.

And they are "pre-existing" conditions that could have prevented me for even getting coverage for them 10 or 15 years ago.

So I'm actually happy tat i can (currently) get health insurance for $32k a year, if I need it.

I doubt many 30-40 years olds contemplating FIRE have similar experience or perspective. I sure didn't at that age.
Your experience may trend to average, but it is not universal. I am quite sure I used more healthcare between 30-40 than I will between 40-50 (although that decade is not completely in the books yet 8-) ). Some of us gave birth to others humans in our thirties.

I don’t hold any hubris that there is not a strong element of luck in this. Although I don’t try to court trouble and try to eat well, floss, exercise, and wear my seatbelt. :happy.

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Re: Realities of Early Retirement Model (FIRE)?

Post by getthatmarshmallow » Mon Jul 30, 2018 10:08 pm

randomguy wrote:
Mon Jul 30, 2018 9:06 pm
getthatmarshmallow wrote:
Mon Jul 30, 2018 6:00 pm
I find the FIRE community fascinating, and I'll be interested to see how it ages. Health insurance is one variable that's hard to predict, but so are lifestyle adjustments -- and I don't mean lifestyle inflation. But it's relatively easy to bike everywhere and DIY kitchen remodels in one's 30s; perhaps less attractive in one's 50s or 60s.

Most I find pretty impressive, although I think it's wise to keep in mind that living on $30K while generating lots of passive income isn't the same as living on $30K when draining one's portfolio, and I wonder what happens when the next market crash happens. It's not a path for everyone, but the idea that one could take a well-paying job and aim to opt out in one's 30s is great -- sort of a DIY trust fund.
So far there haven't been many portfolio draining years. It has been gravy and sunshine. When sustained down market (2000-2) happens we can see how people react.

Things like owning a car and kitchen remodels aren't enough to really change numbers except for people at the real bottom end. Buy a 3k car and drive it 3k/year (i.e thats a lot of biking your replacing) is a couple thousand/year expense. Same thing with doing a remodel every 15 years. And obviously if you opt out in your 30s, by the time you hit your 60s, your should have portfolio capable of supporting much higher expenditures as long as we aren't in the bottom 25% or so of returns.

I think one thing you always have to remember is that on the internet, what a couple hundred people do can seem like a much bigger movement than it really is. I find things like tiny houses, van life, 3 month backpacking trips, and choosing to live on 25k/year interesting. I am unlikely to do any of them:)
The kitchen remodel is just an example -- but the point is that a lot of the FIRE-types are getting there in part through extreme frugality that's made possible by the ability to undertake a decent amount of physical activity/sweat equity. (I'm sensitive to this because spouse and I are big DIYers, which is a giant $ savings but perhaps not sustainable when we're older.) The movement's young, and populated by relatively young adults. I also wonder how LCOL areas mesh with availability of public transportation (perhaps more of a priority later in life?) Mostly I just find it interesting and sometimes inspiring.

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Re: Realities of Early Retirement Model (FIRE)?

Post by ClevrChico » Mon Jul 30, 2018 10:46 pm

I think most of the road-blocks you listed are easily solved. The hardest, health-care, can be obtained by simply going back to work and getting a part-time job if one really needed to.

I'd be concerned about becoming lazy and squandering my free time and possibly losing my edge.

The other scary part would be losing the ability to relate to my friends and family. Even traditionally retired people seem to have issues with relating to the lifestyle of a working family, and it does impact relationships. I can detect a condescending tone in some of the FIRE blogs, and I wonder if this is the online version of the phenomenon.

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Re: Realities of Early Retirement Model (FIRE)?

Post by AerialWombat » Mon Jul 30, 2018 10:48 pm

supersecretname wrote:
Mon Jul 30, 2018 1:08 pm
it's all about choices

1 - Health Care: affordable ACA will continue to exist for those with low-incomes. Being FIRE, you can massage your income to get the most of the ACA benefits.
2 - Kids: state school or community college. private university will obviously affect retirement
3 - 4% and some flexibility will be fine.
4 - other income: I think a lot of people who FIRE have a side-gig. It's not all bloggers
5 - seems like you are grasping at straws to figure out how someone can make it work
6 - yes, geographic arbitrage plays a role. If you want to live in Manhattan, you are going to need more money. duh.

You don't think it's possible because of the choices you've made for yourself in your life. They aren't wrong or bad, just yours.

Lifestyle inflation can be managed if you are aware of it. Just because you have a family and a good job doesn't mean you need a luxury car and a mcmansion.

It takes a lot of planning and a certain type of personality to FIRE. Those who say it can't be done either have a failure of imagination, or think that everyone else must live the way they do.
Spot on. It's precisely about choices. I'll add:

1 - Health insurance: Everybody seems to forget that health insurance *is* optional. It's not a mandatory expense. I lost my health insurance after ACA passed (provider killed the plan I was on) and simply went without for many years. This year, to avoid paying the penalty for not having insurance (which I simply paid the past few years), I signed up for a healthcare sharing ministry. $45/mo. That might be an affordable option for others. Having no insurance at all is always an option. Not the one most Americans would choose, but some of us are comfortable with it, even more so at a younger age as is being discussed here for 30's FIRE.

2 - Quite a few Millennials have chosen to forego children. Even with them, most middle class parents I see spoil their kids. It does NOT cost $250k to raise a kid, as oft reported. That expenditure level is a *choice*. Public education or home school them for K-12, then college education can be obtained at extremely low cost through non-traditional means (and not every kid needs to go to college -- another current cultural fallacy). It's literally possible to complete an accredited degree from a real college in under 6 months for under $5,000, if somebody really just wants a degree and is ok with very limited choices of major (psychology, business, biology, chemistry).

3 - To live my base lifestyle, I could withdraw at 3.5% per year on just over half a million in assets and be fine. Single, no kids. Not a glamorous retirement, but functional FIRE. With my rental properties, I actually need even less net worth to pull it off. I could technically do it now, just three years in from starting to invest/save.

4 - I'm a strong believer in multiple streams of semi-active income (most "passive" income streams really aren't). I know that trying to redefine the word "retirement" causes nothing but arguments on this forum, but I believe that retirement is what you make it. This is also a choice. I will do some small thing to make some small side income until the day I die from whatever illness that health insurance could have cured. :D

5 - Hidden assets not required. It's all just math.

6 - Much like other people can't comprehend my belief about health insurance, I can't comprehend everybody else's desire to live in high cost cities. I don't understand the attraction to the "desirable" cities. But, this is also a choice. I know plenty of people living in $600k-$900k houses that are, quite frankly, in worse repair and in worse neighborhoods than the $180k house I bought in Dec. 2016, let alone the $265k house I'm living in right now.

For people that are capable of doing so, I encourage taking the plunge. Even if you can't actually "retire", I advocate taking extensive time off in order to live life. Live off savings for a few years, then go back to work. Or do what Tim Ferriss suggests, which he calls "mini-retirements". We're all on one trajectory or another that ultimately goes to the same place: Death.

After bankruptcy/homelessness at age 30, then recovery-ish by 33-34, I will *never* regret the 3 years I then spent traveling the world while working remotely, part-time, "4-Hour Workweek" style. No regrets. None. Yes, some might say I wasted the highest income producing years of my mid-30's, thus delaying real retirement. But I don't care. 100% worth it, especially if I get hit by a bus tomorrow.

Just my 13 cents (inflation, ya' know?).

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Re: Realities of Early Retirement Model (FIRE)?

Post by CarpeDiem22 » Tue Jul 31, 2018 12:10 am

As long as the relentless rules of humble arithmetic are on your side, nothing can stop you from retiring early (if that is what you want). Kids don't necessarily need day care (you're retired, remember?), they can work part-time during teens to build some corpus (and character) to partially fund college education; passive income could be from anything you love and do in your free time, not necessarily blogging; high cost location is no more an issue once you are not tied to a fixed job, you can move.

If you are talking about FI blogs in particular, I think most of them exist for passive income mainly, and it is in their interest to give you a rosy picture that you again and again return to.

The reality is that many people have done it and are managing ok. In fact, since human mind works in linear fashion and doesn't comprehend compounding intuitively, I feel people can retire earlier than they think.

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Re: Realities of Early Retirement Model (FIRE)?

Post by jharkin » Tue Jul 31, 2018 6:45 am

willthrill81 wrote:
Mon Jul 30, 2018 5:52 pm

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

Its not so much the premium part that worries me.... I can work an extra year or two if premiums are 50k rather than 20k. What worries me is what if the ACA protection for pre-existing conditions gets overturned?

I think about this a LOT lately, as my extended family had 4 cancer diagnoses in the last year alone, one was a family member in their 30s in otherwise great health. Another has a very rare tumor only treatable with a specialized targeted therapy that costs something like $12K... a MONTH (which has to be taken for life). People who think they can self insure for health, I suspect have never had a close relation go through a cancer diagnosis...

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Re: Realities of Early Retirement Model (FIRE)?

Post by plantingourpennies » Tue Jul 31, 2018 8:12 am

Most of the math that the FIRE community uses comes from the regular retirement community-4% rule, trinity study, it's all the same stuff. Even the boglehead investing style (low-cost mutual funds) is very popular choice for the FIRE crowd.

Unfortunately we also inherited/stole the word "retirement."

And it drives people...up...the...wall. It's a new idea, and it's jarring- "How dare this punk kid RETIRE at 30! I slaved away for 40 years in a cube farm for MegaCorp and liked it darnit!" And the next thing you know people are posting all the reasons why it must be impossible to do this at a young age (despite what the math says).

Just substitute "retirement" for "Probably never having to work for the man again, but remaining flexible just in case while spending most of my time traveling, blogging, hiking, working out, reading books, spending time with my family and friends, and generally thumbing my nose at polite society."

If anybody can coin a term for THAT-you'll have my undying gratitude.

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Re: Realities of Early Retirement Model (FIRE)?

Post by arsenalfan » Tue Jul 31, 2018 8:20 am

I have a FIRE friend. One of the most interesting people I've ever met, bit of a Morpheus to my Neo and opened my eyes to Bogeleheads/Mr Money Mustache.

ACA healthcare - they're both healthy and suspect they might roll dice and go without for a year or two, but I bet they just pay.
No kids
Lots of post tax savings, frugal lifestyle, lots of travel. Since retirement I think their accounts have gone up, despite being in a much more conservative allocation.
No passive income. They are doing startup jobs for fun - this was someone making $400-500k, left it in their late 30s, and picking up an entirely different line of work.
No hidden assets.
Paid off condo in HCOL city.

It's just different choices. I'm in same HCOL city, chose kids, big house/less frugal lifestyle. FIRE feels like scooby doo - I would've gotten away with it, except for those pesky kids.

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Re: Realities of Early Retirement Model (FIRE)?

Post by Jack FFR1846 » Tue Jul 31, 2018 8:33 am

I think FIRE is a misnomer. It's not that most of these 30 somethings really are financially independent, nor have they retired. Maybe a new term needs to be defined. Let's stick with Pete's story (Mr. Money Mustache). He "retired" and his wife worked while he pretended to be a contractor. He made zero money doing what he would rather have been doing than writing code. Then his wife retired. Then his blog took off and with $400k a year rolling in for writing 6 blog posts a year, playing on twitter and attending a few FIRE talks, it became easy to keep losing money swinging a hammer. He decided to build his own new house. Ok, cool.

So for a lot of young "back peddlers"....because that's what they are....going to lower stress, lower paying work, they're taking a big, early nest egg and hoping they don't run into something that costs lots of money such as college costs or an unexpected legal situation or health problems. I'm sure some will discover that you can't swing a hammer when you're laid up in a hospital after falling off a scaffolding that you set up yourself, so can't sue anyone and when you work for yourself, you are making zero dollars and after you're done with your hospital stay, that cheapo insurance plan you're on just applies everything to the deductible and you're out thousands of dollars, it's not such a great plan.

I would expect that moving forward, some of these people who have "retired" will get back to their old jobs because they need to bring in the big cash again to finance life. There are plenty of youtube stars who bring in some decent money, but even there, youtube has changed their payment system and a ton of stars have had their thousands of dollars a week check go to zero. How many blogs are going to remain viable touting quitting your job and doing whatever you want to do?
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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Tue Jul 31, 2018 8:34 am

jharkin wrote:
Tue Jul 31, 2018 6:45 am
willthrill81 wrote:
Mon Jul 30, 2018 5:52 pm

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

Its not so much the premium part that worries me.... I can work an extra year or two if premiums are 50k rather than 20k. What worries me is what if the ACA protection for pre-existing conditions gets overturned?

I think about this a LOT lately, as my extended family had 4 cancer diagnoses in the last year alone, one was a family member in their 30s in otherwise great health. Another has a very rare tumor only treatable with a specialized targeted therapy that costs something like $12K... a MONTH (which has to be taken for life). People who think they can self insure for health, I suspect have never had a close relation go through a cancer diagnosis...
"God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference."
- Reinhold Niebuhr
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by alfaspider » Tue Jul 31, 2018 8:51 am

jharkin wrote:
Tue Jul 31, 2018 6:45 am
willthrill81 wrote:
Mon Jul 30, 2018 5:52 pm

Seriously, it's just a question of ability to pay premiums. People can buy health insurance on the open market without going through the 'ACA', and they do every day. And while it will likely go up in cost, but it can't go up at its historic rate indefinitely; it's mathematically impossible.

Its not so much the premium part that worries me.... I can work an extra year or two if premiums are 50k rather than 20k. What worries me is what if the ACA protection for pre-existing conditions gets overturned?

I think about this a LOT lately, as my extended family had 4 cancer diagnoses in the last year alone, one was a family member in their 30s in otherwise great health. Another has a very rare tumor only treatable with a specialized targeted therapy that costs something like $12K... a MONTH (which has to be taken for life). People who think they can self insure for health, I suspect have never had a close relation go through a cancer diagnosis...
Ultimately, that's my biggest barrier to a FIRE lifestyle. This is especially true with children. Perhaps I could accept the idea that I will potentially have trouble getting care in the future, but I can't accept that my child may not be able to get the best care. It's one thing when there's no other options, but it would be tough to just walk away when you have a good job with good health benefits. My employer also has retiree medical benefits which kick in at a relatively young age, but certainly not if you retire in your late 30s! Another thing that's hard to walk away from.

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Tue Jul 31, 2018 8:52 am

plantingourpennies wrote:
Tue Jul 31, 2018 8:12 am
And it drives people...up...the...wall. It's a new idea, and it's jarring- "How dare this punk kid RETIRE at 30! I slaved away for 40 years in a cube farm for MegaCorp and liked it darnit!" And the next thing you know people are posting all the reasons why it must be impossible to do this at a young age (despite what the math says).
Spot on. Sadly, I have no doubt that subconscious envy drives a lot of the antagonism toward the FIRE community.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Realities of Early Retirement Model (FIRE)?

Post by willthrill81 » Tue Jul 31, 2018 8:54 am

alfaspider wrote:
Tue Jul 31, 2018 8:51 am
Perhaps I could accept the idea that I will potentially have trouble getting care in the future, but I can't accept that my child may not be able to get the best care.
I don't understand what you mean here. Why would a FIRE person not be able to get the same quality of care as everyone else? Virtually everyone I've heard of in the FIRE community either has health insurance or is part of a health share plan.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

T4REngineer
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Re: Realities of Early Retirement Model (FIRE)?

Post by T4REngineer » Tue Jul 31, 2018 8:56 am

supersecretname wrote:
Mon Jul 30, 2018 2:41 pm
jharkin wrote:
Mon Jul 30, 2018 2:34 pm
The thing that bugs me... this healthcare is not really cheap. Its subsidised - by the rest of us still working and paying high tax rates.
Not only do corporations do the same thing, they have a fiduciary responsibility to shareholders to engage in all manners of tax maneuvers. But yet, somehow it's wrong for an average person to do it (on a fraction of the scale that corporations do it). No laws are being broken. The government sets out the rules of the game, and you can't fault a person for playing within the rules as provided.

Let that noodle your brain for a bit.

edit: for clarity.
Not commenting on this specific item (reducing AGI) but the flip side of your statement is just because something is legal does not make it morally correct. I can think of plenty of actions that I could take that would be legal but many would be disgusted at. FWIW I would play the AGI game if I was in that spot so no judgment from me but I do understand the opposing view.

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