How to realistically FIRE?

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smitcat
Posts: 4190
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 1:50 pm

KlangFool wrote:
Thu Mar 14, 2019 1:09 pm
smitcat wrote:
Thu Mar 14, 2019 12:54 pm
KlangFool wrote:
Thu Mar 14, 2019 12:32 pm
smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm


smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
smitcat,

<<- the person in the HCOL area and higher expenses has many choices.>>

I disagreed. Once a person overspends on a house and the person is stuck on a big expensive mortgage, the choice is gone. By the way, in my area, the house has not recovered to the 2004/2005 level. So, counting on the house appreciation is not possible either.

KlangFool

You have now limited the discussion of FIRE to only home owners.
- you have arbitrarily assigned all overspending to mortgage costs ….if you take that very narrow view you would be correct.
- most folks at any income level have not saved enough for retirement, that data is clear.
- on this thread we are speaking about the minor subset of those that have saved.

The world is much larger than your immediate area and peers.
smitcat,

Show me some real example and observation of folks spending 120K per year that is not homeowners. Where do they spend their money? As per my observations across my friends and families, it is always about the house.

KlangFool
I can see you are not too flexible in your thoughts about how to spend money so lets do it your way and use you numbers in the post.
- Person "A" buys a home too expensive at say 40% of income and has $60K total expenses , home costs = $24K per year / all other costs = $36K
- Person "B" buys a home too expensive at say 40% of income and has $120K total expenses , home costs = $$48K per year / all other costs = $72K
Which person has the ability to easily cut costs by any means including but not limited to selling the home?

pward
Posts: 393
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Re: How to realistically FIRE?

Post by pward » Thu Mar 14, 2019 1:51 pm

Clever_Username wrote:
Thu Mar 14, 2019 1:36 pm
pward wrote:
Thu Mar 14, 2019 12:35 pm
You cannot use the SWR for FIRE as it's set to run out of money in 30 years, you need to use the PWR (perpetual withdrawal rate, i.e. the amount you can safely withdrawal and never run out of money). Also, different portfolios have different SWR/PWR's. There is no set percentage that is safe or perpetual for every portfolio. Too many people wrongly assume that the commonly touted SWR works for all portfolios... it doesn't. Also, counter-intuitively the more conservative a portfolio generally the higher the SWR and PWR.

See here for more info: https://portfoliocharts.com/2016/12/09/ ... etirement/
SWR isn't set to run out of money in 30 years except in extremely unlikely circumstances. Most of the time, the inflation-adjusted principal is higher at the end.
It's set to run out exactly in 30 years in the worst historical time period going back to 1970. These are not "unlikely circumstances" they are real circumstances that have happened and can happen again. It's still only "safe" to 30 years based on past data, so mileage may vary in the future. Things can always get worse than they have in the data that SWR has been backtested too. So I don't really see how your point refutes anything I stated. PWR is the metric for FIRE as one should not gamble on early retirement. PWR is the amount that has proven to maintain the same real value of money indefinitely. It still has the same fault in that it assumes that the worst we've seen since 1970 is the worst we will see, but there's no getting around that limitation. PWR is a far superior metric to use for anyone retiring early. SWR simply is not guaranteed to be "safe" for early retirement.
Last edited by pward on Thu Mar 14, 2019 1:56 pm, edited 2 times in total.

smitcat
Posts: 4190
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 1:54 pm

KlangFool wrote:
Thu Mar 14, 2019 1:09 pm
smitcat wrote:
Thu Mar 14, 2019 12:54 pm
KlangFool wrote:
Thu Mar 14, 2019 12:32 pm
smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm


smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
smitcat,

<<- the person in the HCOL area and higher expenses has many choices.>>

I disagreed. Once a person overspends on a house and the person is stuck on a big expensive mortgage, the choice is gone. By the way, in my area, the house has not recovered to the 2004/2005 level. So, counting on the house appreciation is not possible either.

KlangFool

You have now limited the discussion of FIRE to only home owners.
- you have arbitrarily assigned all overspending to mortgage costs ….if you take that very narrow view you would be correct.
- most folks at any income level have not saved enough for retirement, that data is clear.
- on this thread we are speaking about the minor subset of those that have saved.

The world is much larger than your immediate area and peers.
smitcat,

Show me some real example and observation of folks spending 120K per year that is not homeowners. Where do they spend their money? As per my observations across my friends and families, it is always about the house.

KlangFool
Separate item -
"Show me some real example and observation of folks spending 120K per year that is not homeowners"
You likely have never lived in a HCOL area or a VHCOL area nor have you likely paid for 1-2 kids in childcare.
Whether you own or rent in these areas the costs will quickly add up.
BUT..... you could move from an area such as this to a lower cost of living area and have flexibility when FIRE occurs.

smitcat
Posts: 4190
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 1:57 pm

Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm
smitcat wrote:
Thu Mar 14, 2019 12:26 pm
KlangFool wrote:
Thu Mar 14, 2019 12:23 pm
smitcat wrote:
Thu Mar 14, 2019 12:16 pm

Interestingly I find that most often the person with the $120K of expenses and $3 million to be much safer than the $60K and 1.5 Million.
The $60K expenses are most often not easily reduced whereas the $120K expenses typically have many more methods for reduction should the situation warrant it.
smitcat,

I disagreed. As per my income peers, most of the 120K annual expense is associated with their mortgages. Hence, it cannot be reduced easily.

KlangFool
Renting or mortgage paid off which is typically what we are speaking about:
- the person in the HCOL area and higher expenses has many choices.
- the person in the LCOL area and lower expenses has fewer choices.
Agreed. This is a thread about "realistic" retirement on Bogleheads. Most bogleheads are not gong into retirement with a big mortgage drag on their spending. In fact, they are so cautious that they seem to be worrying about whether 47X expenses is enough!

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
Yes we agree - we could live on $60K per year when the mortgage is paid off but we have no intentions to do so.
So while it would be possible the actual/fun/better/ more like now plan is near twice that expense level.

KlangFool
Posts: 13996
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 2:00 pm

smitcat wrote:
Thu Mar 14, 2019 1:50 pm

I can see you are not too flexible in your thoughts about how to spend money so lets do it your way and use you numbers in the post.
- Person "A" buys a home too expensive at say 40% of income and has $60K total expenses , home costs = $24K per year / all other costs = $36K
- Person "B" buys a home too expensive at say 40% of income and has $120K total expenses , home costs = $$48K per year / all other costs = $72K
Which person has the ability to easily cut costs by any means including but not limited to selling the home?
smitcat,

<<- Person "B" buys a home too expensive at say 40% of income and has $120K total expenses , home costs = $$48K per year / all other costs = $72K>>

In my observation, for 120K of annual expense, the PITI = 60K per year. All other house related cost of 10K per year. The non-house expense = 50K. Aka, the house-related expense far exceeds the non-housing cost.

KlangFool

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 2:10 pm

smitcat wrote:
Thu Mar 14, 2019 1:54 pm

Separate item -
"Show me some real example and observation of folks spending 120K per year that is not homeowners"
You likely have never lived in a HCOL area or a VHCOL area nor have you likely paid for 1-2 kids in childcare.
Whether you own or rent in these areas the costs will quickly add up.
BUT..... you could move from an area such as this to a lower cost of living area and have flexibility when FIRE occurs.
smitcat,

<<You likely have never lived in a HCOL area >>

I live in the Northern Virginia / DC Metro area. The house price in my area is about $200 per square feet. The median annual income in my neighborhood is about 150K. The median house price in my neighborhood is 500K to 600K. I live in the cheap section of my neighborhood. My townhouse is about 400K.

Do you consider this as HCOL area?

<<BUT..... you could move from an area such as this to a lower cost of living area and have flexibility when FIRE occurs.>>

Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K.

KlangFool

smitcat
Posts: 4190
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Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 2:12 pm

KlangFool wrote:
Thu Mar 14, 2019 2:00 pm
smitcat wrote:
Thu Mar 14, 2019 1:50 pm

I can see you are not too flexible in your thoughts about how to spend money so lets do it your way and use you numbers in the post.
- Person "A" buys a home too expensive at say 40% of income and has $60K total expenses , home costs = $24K per year / all other costs = $36K
- Person "B" buys a home too expensive at say 40% of income and has $120K total expenses , home costs = $$48K per year / all other costs = $72K
Which person has the ability to easily cut costs by any means including but not limited to selling the home?
smitcat,

<<- Person "B" buys a home too expensive at say 40% of income and has $120K total expenses , home costs = $$48K per year / all other costs = $72K>>

In my observation, for 120K of annual expense, the PITI = 60K per year. All other house related cost of 10K per year. The non-house expense = 50K. Aka, the house-related expense far exceeds the non-housing cost.

KlangFool

"In my observation, for 120K of annual expense, the PITI = 60K per year"
OK so you want to use a "too expensive' ratio of 50% not 40%.
OK so same situation with a $60K income leaves person "A" with $30K in home costs and $30K for everything else.
And your observation on a $120K income leaves person "B" with your $60K home expenses and $60K for everything else.

Which person has the ability to easily cut costs by any means including but not limited to selling the home?

LiterallyIronic
Posts: 1331
Joined: Sat Dec 05, 2015 10:36 am

Re: How to realistically FIRE?

Post by LiterallyIronic » Thu Mar 14, 2019 2:17 pm

market timer wrote:
Thu Mar 14, 2019 9:11 am
I'd feel pretty comfortable on 25 x $100K/year at age 50 (i.e., healthy discretionary budget that could be cut). I'd be worried if it's 25 x $35K/year (lean FIRE).
Oof. I'm shooting for 25 x $24k/year at age 50. That should definitely get me to 80, at which I'm probably either dead or close to it, based on the odds. But the goal is to bounce the last check, not be the richest man in the cemetery.

smitcat
Posts: 4190
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 2:21 pm

KlangFool wrote:
Thu Mar 14, 2019 2:10 pm
smitcat wrote:
Thu Mar 14, 2019 1:54 pm

Separate item -
"Show me some real example and observation of folks spending 120K per year that is not homeowners"
You likely have never lived in a HCOL area or a VHCOL area nor have you likely paid for 1-2 kids in childcare.
Whether you own or rent in these areas the costs will quickly add up.
BUT..... you could move from an area such as this to a lower cost of living area and have flexibility when FIRE occurs.
smitcat,

<<You likely have never lived in a HCOL area >>

I live in the Northern Virginia / DC Metro area. The house price in my area is about $200 per square feet. The median annual income in my neighborhood is about 150K. The median house price in my neighborhood is 500K to 600K. I live in the cheap section of my neighborhood. My townhouse is about 400K.

Do you consider this as HCOL area?

<<BUT..... you could move from an area such as this to a lower cost of living area and have flexibility when FIRE occurs.>>

Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K.

KlangFool
Your data has nothing to do with a comparison between two areas of the country with varying costs.
Once again you are confusing your specific situations with that of comparing two diverse areas.
We are speaking about the flexibility to FIRE and how income in retirement can affect the safety value.

If we must use your neighborhood which I do not like to do consider this:
So here is your data:
"Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K."

Person "C" has lived in a LCOL area and has $60K in expenses and want to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).
Person "D" has lived in a HCOL area and has $120K in expenses and wants to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).

Which person "C" or "D" will be more flexible in retirement after they move?

smitcat
Posts: 4190
Joined: Mon Nov 07, 2016 10:51 am

Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 2:22 pm

LiterallyIronic wrote:
Thu Mar 14, 2019 2:17 pm
market timer wrote:
Thu Mar 14, 2019 9:11 am
I'd feel pretty comfortable on 25 x $100K/year at age 50 (i.e., healthy discretionary budget that could be cut). I'd be worried if it's 25 x $35K/year (lean FIRE).
Oof. I'm shooting for 25 x $24k/year at age 50. That should definitely get me to 80, at which I'm probably either dead or close to it, based on the odds. But the goal is to bounce the last check, not be the richest man in the cemetery.
It never gets old - every time I read one of your posts I say "bless this man and his plans".
I wish you all the luck and fortune....

KlangFool
Posts: 13996
Joined: Sat Oct 11, 2008 12:35 pm

Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 2:28 pm

smitcat wrote:
Thu Mar 14, 2019 2:21 pm

Your data has nothing to do with a comparison between two areas of the country with varying costs.
Once again you are confusing your specific situations with that of comparing two diverse areas.
We are speaking about the flexibility to FIRE and how income in retirement can affect the safety value.

If we must use your neighborhood which I do not like to do consider this:
So here is your data:
"Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K."

Person "C" has lived in a LCOL area and has $60K in expenses and want to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).
Person "D" has lived in a HCOL area and has $120K in expenses and wants to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).

Which person "C" or "D" will be more flexible in retirement after they move?
smitcat,

It is very simple.

You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?

deanmoriarty
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Re: How to realistically FIRE?

Post by deanmoriarty » Thu Mar 14, 2019 2:42 pm

KlangFool wrote:
Thu Mar 14, 2019 2:28 pm
You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?
Plenty of people I know in the Bay Area live that expensively, I know at least a dozen of them.

This particular friend that I'm thinking about spends about $9,000 per month along with his wife on non-housing related expenses, and that's really close to $120k, especially considering it's post tax. He told me his spending (we're ski buddies so we talk a lot when we go together), and that was something along the lines of:

- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year at $10-$15k per trip, several weekends out of town in nice hotels at $2k+ per trip)
- Expensive car payments (Audi + BMW, at $2,000/mo)
- Expensive dining out, multiple times a week (think about sushi dinner for 2 at about 100$ a pop, which is the norm in the Bay)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo, which includes a lot of whey protein and workout supplements)

These are normal middle class folks, dual income, both engineers in the Bay, so no executives or anything like that. Probably pulling combined ~$500-600k, which is typical for Bay Area.
Last edited by deanmoriarty on Thu Mar 14, 2019 2:50 pm, edited 1 time in total.

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 2:45 pm

deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm
KlangFool wrote:
Thu Mar 14, 2019 2:28 pm
You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?
Plenty of people I know in the Bay Area live that expensively, I know at least a dozen of them.

This particular friend that I'm thinking about spends about $9,000 per month along with his wife on non-housing related expenses, and that's really close to $120k, especially considering it's post tax. He told me his spending (we're ski buddies so we talk a lot when we go together), and that was something along the lines of:

- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year, several weekends out of town in nice hotels)
- Expensive car payments (Audi + BMW)
- Expensive dining out, multiple times a week (think about Sushi dinner for 2 at about 100$ a pop)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo)

These are normal middle class folks, dual income, both engineers in the Bay, so no executives or anything like that. Probably pulling combined ~$500-600k, which is typical for Bay Area.
deanmoriarty,

Do they rent or own a house? What would be your estimate of their housing expense?

KlangFool

deanmoriarty
Posts: 290
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Re: How to realistically FIRE?

Post by deanmoriarty » Thu Mar 14, 2019 2:47 pm

KlangFool wrote:
Thu Mar 14, 2019 2:45 pm
deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm

Plenty of people I know in the Bay Area live that expensively, I know at least a dozen of them.

This particular friend that I'm thinking about spends about $9,000 per month along with his wife on non-housing related expenses, and that's really close to $120k, especially considering it's post tax. He told me his spending (we're ski buddies so we talk a lot when we go together), and that was something along the lines of:

- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year, several weekends out of town in nice hotels)
- Expensive car payments (Audi + BMW)
- Expensive dining out, multiple times a week (think about Sushi dinner for 2 at about 100$ a pop)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo)

These are normal middle class folks, dual income, both engineers in the Bay, so no executives or anything like that. Probably pulling combined ~$500-600k, which is typical for Bay Area.
deanmoriarty,

Do they rent or own a house? What would be your estimate of their housing expense?

KlangFool
Yes, they rent a reasonable 2bd apartment in San Francisco, I don't know the exact number but it's fair to say around $3500-$4000 a month since it's not a particularly luxury home. And this is on top of the $9,000 already described.

Plenty of people I know are in a similar situation.

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willthrill81
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Re: How to realistically FIRE?

Post by willthrill81 » Thu Mar 14, 2019 2:49 pm

pward wrote:
Thu Mar 14, 2019 1:51 pm
Clever_Username wrote:
Thu Mar 14, 2019 1:36 pm
pward wrote:
Thu Mar 14, 2019 12:35 pm
You cannot use the SWR for FIRE as it's set to run out of money in 30 years, you need to use the PWR (perpetual withdrawal rate, i.e. the amount you can safely withdrawal and never run out of money). Also, different portfolios have different SWR/PWR's. There is no set percentage that is safe or perpetual for every portfolio. Too many people wrongly assume that the commonly touted SWR works for all portfolios... it doesn't. Also, counter-intuitively the more conservative a portfolio generally the higher the SWR and PWR.

See here for more info: https://portfoliocharts.com/2016/12/09/ ... etirement/
SWR isn't set to run out of money in 30 years except in extremely unlikely circumstances. Most of the time, the inflation-adjusted principal is higher at the end.
It's set to run out exactly in 30 years in the worst historical time period going back to 1970. These are not "unlikely circumstances" they are real circumstances that have happened and can happen again. It's still only "safe" to 30 years based on past data, so mileage may vary in the future. Things can always get worse than they have in the data that SWR has been backtested too. So I don't really see how your point refutes anything I stated. PWR is the metric for FIRE as one should not gamble on early retirement. PWR is the amount that has proven to maintain the same real value of money indefinitely. It still has the same fault in that it assumes that the worst we've seen since 1970 is the worst we will see, but there's no getting around that limitation. PWR is a far superior metric to use for anyone retiring early. SWR simply is not guaranteed to be "safe" for early retirement.
Actually, the '4% rule of thumb' was based on data going back to the 1920s, and subsequent backtesting using U.S. data going back further than that also supported 4% fixed real withdrawals being safe over 30 year periods. Keep in mind that there have only been about three historic 30 year periods where your portfolio would have been mostly or entirely depleted at the end of the 30 years. Whether that is 'safe enough' is a matter of personal opinion.

I agree that the perpetual withdrawal rate concept is more appropriate for early retirees, although there is some debate over what that rate has actually been (e.g. using U.S. and/or international data).

That being said, 4% is a perfectly fine starting point for an early retiree who has the ability to slash their spending (i.e. by 50%) if truly needed.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 2:51 pm

deanmoriarty wrote:
Thu Mar 14, 2019 2:47 pm
KlangFool wrote:
Thu Mar 14, 2019 2:45 pm
deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm

Plenty of people I know in the Bay Area live that expensively, I know at least a dozen of them.

This particular friend that I'm thinking about spends about $9,000 per month along with his wife on non-housing related expenses, and that's really close to $120k, especially considering it's post tax. He told me his spending (we're ski buddies so we talk a lot when we go together), and that was something along the lines of:

- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year, several weekends out of town in nice hotels)
- Expensive car payments (Audi + BMW)
- Expensive dining out, multiple times a week (think about Sushi dinner for 2 at about 100$ a pop)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo)

These are normal middle class folks, dual income, both engineers in the Bay, so no executives or anything like that. Probably pulling combined ~$500-600k, which is typical for Bay Area.
deanmoriarty,

Do they rent or own a house? What would be your estimate of their housing expense?

KlangFool
Yes, they rent a reasonable 2bd apartment in San Francisco, I don't know the exact number but it's fair to say around $3500-$4000 a month since it's not a particularly luxury home. And this is on top of the $9,000 already described.

Plenty of people I know are in a similar situation.
deanmoriarty,

Thanks.

KlangFool

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alpenglow
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Re: How to realistically FIRE?

Post by alpenglow » Thu Mar 14, 2019 2:57 pm

marcopolo wrote:
Thu Mar 14, 2019 1:40 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Just curious is that 35x the residual amount of expenses beyond your pension, or 35x of total expenses and Pension on top of that?
I'll have 35x expenses without the pension. Like I said, I'm overdoing it.

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Wiggums
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Re: How to realistically FIRE?

Post by Wiggums » Thu Mar 14, 2019 3:01 pm

Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
When people talk about expenses on BH.org, do you include federal and state taxes? My assumption is yes, but I thought I’d ask.

pdavi21
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Re: How to realistically FIRE?

Post by pdavi21 » Thu Mar 14, 2019 3:03 pm

The answer is 3.33% for infinite years and 4% for 30 years.

The 3.33% should be of your allocable assets. Home, non-lump sum pensions, and Social Security should not be included at all for a very early retirement, but can be used to reduce future expenses for a somewhat early retirement.

The 3.33% and 4% both refer to portfolios of US stocks and US bonds (I think 60/40, 75/25, 50/50, etc are common, but I have no idea).

At the end of the day, both are extremely conservative estimates. A 3.33% withdrawal rate will last 54 years if AA returns 5% (2.5% real) with 2.5% inflation (ignoring volatility). A 4% withdrawal rate would only need to beat inflation by 1% to last 30 years. You can always work, anyway.

Anyone planning to spend over 50-60k per year is in the top 50% of spenders. For a household of 2 or 4, the federal poverty limits were $16,460 and $25,100 in 2018. If you plan to spend more than that in retirement, you are in the top 72% of spenders. Spending above 60k per year (outside of a major illness or long term care) would be an epic failure for an early retired household considering that they have more flexibility than ANY working household does.
Last edited by pdavi21 on Thu Mar 14, 2019 3:10 pm, edited 2 times in total.
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Irisheyes
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Re: How to realistically FIRE?

Post by Irisheyes » Thu Mar 14, 2019 3:03 pm

Wiggums wrote:
Thu Mar 14, 2019 3:01 pm
Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
When people talk about expenses on BH.org, do you include federal and state taxes? My assumption is yes, but I thought I’d ask.
I didn't include fed or state taxes. We're in NorCal and our after tax expenses run about 9-10k a month (with about 12k a year included in that figure for prop tax.)

Our biggest discretionary expenses are travel and food (we rarely eat out but do buy mostly fresh organic produce which costs a lot despite living in CA). Our one child attends public school. Everything just costs a lot here and burning through 9-10k a month (even w/o a mortgage payment) does not mean we have an extravagant life style.
Last edited by Irisheyes on Thu Mar 14, 2019 3:09 pm, edited 1 time in total.

22twain
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Re: How to realistically FIRE?

Post by 22twain » Thu Mar 14, 2019 3:04 pm

deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm
- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year at $10-$15k per trip, several weekends out of town in nice hotels at $2k+ per trip)
- Expensive car payments (Audi + BMW, at $2,000/mo)
- Expensive dining out, multiple times a week (think about sushi dinner for 2 at about 100$ a pop, which is the norm in the Bay)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo, which includes a lot of whey protein and workout supplements)

These are normal middle class folks
If that's normal middle class, what does upper middle class look like? :shock:
My investing princiPLEs do not include absolutely preserving princiPAL.

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 3:06 pm

Wiggums wrote:
Thu Mar 14, 2019 3:01 pm
Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
When people talk about expenses on BH.org, do you include federal and state taxes? My assumption is yes, but I thought I’d ask.
No in my case.

KlangFool

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Wiggums
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Re: How to realistically FIRE?

Post by Wiggums » Thu Mar 14, 2019 3:12 pm

KlangFool wrote:
Thu Mar 14, 2019 3:06 pm
Wiggums wrote:
Thu Mar 14, 2019 3:01 pm
Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
When people talk about expenses on BH.org, do you include federal and state taxes? My assumption is yes, but I thought I’d ask.
No in my case.

KlangFool
Ok thanks

deanmoriarty
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Re: How to realistically FIRE?

Post by deanmoriarty » Thu Mar 14, 2019 3:12 pm

22twain wrote:
Thu Mar 14, 2019 3:04 pm
deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm
- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year at $10-$15k per trip, several weekends out of town in nice hotels at $2k+ per trip)
- Expensive car payments (Audi + BMW, at $2,000/mo)
- Expensive dining out, multiple times a week (think about sushi dinner for 2 at about 100$ a pop, which is the norm in the Bay)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo, which includes a lot of whey protein and workout supplements)

These are normal middle class folks
If that's normal middle class, what does upper middle class look like? :shock:
This is the Bay Area. Any reasonably talented (but not abnormally talented) engineer can pull $300k in cash-equivalent compensation (if not more, much more), so the household income of ~600k easily allows these expenses and even some savings. There are hundreds of thousands of people like that in the Bay Area, so by definition that's Bay Area middle class (my friend I was mentioning above would probably struggle buying a house in San Francisco where they live, since that currently would go for probably $2-3M considering the nice location, so that's definitely middle class). Upper middle class in the Bay Area are generally tech executives, pulling 7 figures a year.

This is one of the biggest reasons why people are attracted to the Bay Area, as opposed to going to the Midwest where they could buy a house much more easily and settle down: they like the spread between salary and cost of living while they are young, which translates in a lot of discretionary expenses and fun.

There's always time to move to a LCOL area.
Last edited by deanmoriarty on Thu Mar 14, 2019 3:16 pm, edited 3 times in total.

pward
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Re: How to realistically FIRE?

Post by pward » Thu Mar 14, 2019 3:13 pm

pdavi21 wrote:
Thu Mar 14, 2019 3:03 pm
The answer is 3.33% for infinite years and 4% for 30 years.

The 3.33% should be of your allocable assets. Home, non-lump sum pensions, and Social Security should not be included at all for a very early retirement, but can be used to reduce future expenses for a somewhat early retirement.

The 3.33% and 4% both refer to portfolios of US stocks and US bonds (I think 60/40, 75/25, 50/50, etc are common, but I have no idea).

At the end of the day, both are extremely conservative estimates. A 3.33% withdrawal rate will last 54 years if AA returns 5% (2.5% real) with 2.5% inflation (ignoring volatility). A 4% withdrawal rate would only need to beat inflation by 1% to last 30 years. You can always work, anyway.
I believe it was for 60/40 specifically. On the site I originally posted they backtest and calculate SWR and the PWR (maintain real value indefinitely) for multiple common AA's. For example, for the 60/40 3 fund portfolio they have a 4.6% SWR and 3.5% PWR. Just click on this link and scroll down to the withdrawal rate calculator: https://portfoliocharts.com/portfolio/t ... portfolio/

There are plenty of other portfolios that are higher, and counter-intuitively generally more conservative portfolios have higher withdrawal rates.
Last edited by pward on Thu Mar 14, 2019 3:15 pm, edited 1 time in total.

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Wiggums
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Re: How to realistically FIRE?

Post by Wiggums » Thu Mar 14, 2019 3:14 pm

Irisheyes wrote:
Thu Mar 14, 2019 3:03 pm
Wiggums wrote:
Thu Mar 14, 2019 3:01 pm
Irisheyes wrote:
Thu Mar 14, 2019 1:10 pm

The idea that the 120k expense crowd has a big mortgage which reduces their spending flexibility in retirement is a red herring, despite what Klangfool's peers may or may not be doing.

120K is about our expense-level and our mortgage is paid off. Otherwise we wouldn't even think about retirement.
When people talk about expenses on BH.org, do you include federal and state taxes? My assumption is yes, but I thought I’d ask.
I didn't include fed or state taxes. We're in NorCal and our after tax expenses run about 9-10k a month (with about 12k a year included in that figure for prop tax.)

Our biggest discretionary expenses are travel and food (we rarely eat out but do buy mostly fresh organic produce which costs a lot despite living in CA). Our one child attends public school. Everything just costs a lot here and burning through 9-10k a month (even w/o a mortgage payment) does not mean we have an extravagant life style.
Thanks. That was very helpful

Dottie57
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Re: How to realistically FIRE?

Post by Dottie57 » Thu Mar 14, 2019 3:30 pm

:sharebeer
22twain wrote:
Thu Mar 14, 2019 3:04 pm
deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm
- No kids
- Expensive hobbies (500$/mo x2 premium health club, flying lessons once a month or so at 300$/hour, a couple ski passes, ...)
- Expensive travelling (couple international trips a year at $10-$15k per trip, several weekends out of town in nice hotels at $2k+ per trip)
- Expensive car payments (Audi + BMW, at $2,000/mo)
- Expensive dining out, multiple times a week (think about sushi dinner for 2 at about 100$ a pop, which is the norm in the Bay)
- Very expensive grocery shopping, mostly at Whole foods (he said about $2000/mo, which includes a lot of whey protein and workout supplements)

These are normal middle class folks
If that's normal middle class, what does upper middle class look like? :shock:
:sharebeer

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 3:44 pm

pward wrote:
Thu Mar 14, 2019 1:51 pm
Clever_Username wrote:
Thu Mar 14, 2019 1:36 pm
pward wrote:
Thu Mar 14, 2019 12:35 pm
You cannot use the SWR for FIRE as it's set to run out of money in 30 years, you need to use the PWR (perpetual withdrawal rate, i.e. the amount you can safely withdrawal and never run out of money). Also, different portfolios have different SWR/PWR's. There is no set percentage that is safe or perpetual for every portfolio. Too many people wrongly assume that the commonly touted SWR works for all portfolios... it doesn't. Also, counter-intuitively the more conservative a portfolio generally the higher the SWR and PWR.

See here for more info: https://portfoliocharts.com/2016/12/09/ ... etirement/
SWR isn't set to run out of money in 30 years except in extremely unlikely circumstances. Most of the time, the inflation-adjusted principal is higher at the end.
It's set to run out exactly in 30 years in the worst historical time period going back to 1970.
Going back much farther than that. At least as far as the Great Depression (where 4% worked).
These are not "unlikely circumstances" they are real circumstances that have happened and can happen again. It's still only "safe" to 30 years based on past data, so mileage may vary in the future. Things can always get worse than they have in the data that SWR has been backtested too.
4% really only failed if you retired in the mid 1960s, where one got 16 years of basically zero stock market returns, had rising interest rates (so bonds did poorly too), AND you got double-digit inflation for multiple years at the end of those bad 16 years.

And even then, 4% lasted like 26 years.. If you had cut back your spending at all during the bad times, 4% would have ALWAYS worked for 30 years in the past.

But sure, it's possible the next 30 years will be worse than all the worst periods in the past.
PWR is the metric for FIRE as one should not gamble on early retirement.
I'll agree with that. If one is retiring early enough that you'll likely need your money to last 35-50 years. I wouldn't use 4% then either.

However, in this case, the OP didn't include SS. We need more details (like is he spending $300k a year or something), but it's very likely that 4% will work for someone retiring at 50 who can wait to take SS at 70.
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smitcat
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Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 4:30 pm

KlangFool wrote:
Thu Mar 14, 2019 2:28 pm
smitcat wrote:
Thu Mar 14, 2019 2:21 pm

Your data has nothing to do with a comparison between two areas of the country with varying costs.
Once again you are confusing your specific situations with that of comparing two diverse areas.
We are speaking about the flexibility to FIRE and how income in retirement can affect the safety value.

If we must use your neighborhood which I do not like to do consider this:
So here is your data:
"Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K."

Person "C" has lived in a LCOL area and has $60K in expenses and want to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).
Person "D" has lived in a HCOL area and has $120K in expenses and wants to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).

Which person "C" or "D" will be more flexible in retirement after they move?
smitcat,

It is very simple.

You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?

"You just need to show me a real example of a household that you know with an annual expense of 120K"
I gave you the comparison of how a low income budget at FIRE will have a lower safety margin than a higher income budget even if they are both heavily in home debt - is that not what we were trying to understand? even with your numbers the ability to lower your expenses and have a margin for error lies with the higher income and higher expenses.

"Where would someone spend the money until it is 120K per year?"
In a higher cost of living area the taxes alone will push the home of rental way up. How about in a MCOL area:
MCOL area -retirement budget:
$20,000- Home
$20,000 - healthcare
$10,000 - taxes
$20,,000 - cars and boat
$15,000 - food , supplies, hard goods
$10,000 - sporting, hobbies etc
$30,000 - travel and entertainment
$125K - total

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 5:00 pm

smitcat wrote:
Thu Mar 14, 2019 4:30 pm
KlangFool wrote:
Thu Mar 14, 2019 2:28 pm
smitcat wrote:
Thu Mar 14, 2019 2:21 pm

Your data has nothing to do with a comparison between two areas of the country with varying costs.
Once again you are confusing your specific situations with that of comparing two diverse areas.
We are speaking about the flexibility to FIRE and how income in retirement can affect the safety value.

If we must use your neighborhood which I do not like to do consider this:
So here is your data:
"Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K."

Person "C" has lived in a LCOL area and has $60K in expenses and want to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).
Person "D" has lived in a HCOL area and has $120K in expenses and wants to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).

Which person "C" or "D" will be more flexible in retirement after they move?
smitcat,

It is very simple.

You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?

"You just need to show me a real example of a household that you know with an annual expense of 120K"
I gave you the comparison of how a low income budget at FIRE will have a lower safety margin than a higher income budget even if they are both heavily in home debt - is that not what we were trying to understand? even with your numbers the ability to lower your expenses and have a margin for error lies with the higher income and higher expenses.

"Where would someone spend the money until it is 120K per year?"
In a higher cost of living area the taxes alone will push the home of rental way up. How about in a MCOL area:
MCOL area -retirement budget:
$20,000- Home
$20,000 - healthcare
$10,000 - taxes
$20,,000 - cars and boat
$15,000 - food , supplies, hard goods
$10,000 - sporting, hobbies etc
$30,000 - travel and entertainment
$125K - total
Very interesting!

KlangFool

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samsoes
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Re: How to realistically FIRE?

Post by samsoes » Thu Mar 14, 2019 5:29 pm

StandingRock wrote:
Thu Mar 14, 2019 9:30 am
samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
I am just going to assume that you don't have anything better to do than work.
That assumption, I assure you, couldn't be farther from the truth. Honest.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

Thesaints
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Re: How to realistically FIRE?

Post by Thesaints » Thu Mar 14, 2019 5:30 pm

samsoes wrote:
Thu Mar 14, 2019 5:29 pm
That assumption, I assure you, couldn't be farther from the truth. Honest.
I'm with you, but in your situation wouldn't it make a lot of sense to decrease your savings/annual expense ratio ?

StandingRock
Posts: 331
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Re: How to realistically FIRE?

Post by StandingRock » Thu Mar 14, 2019 5:43 pm

samsoes wrote:
Thu Mar 14, 2019 5:29 pm
StandingRock wrote:
Thu Mar 14, 2019 9:30 am
samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
I am just going to assume that you don't have anything better to do than work.
That assumption, I assure you, couldn't be farther from the truth. Honest.
Then get on with it.

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 6:49 pm

deanmoriarty wrote:
Thu Mar 14, 2019 2:42 pm
These are normal middle class folks, dual income, both engineers in the Bay, so no executives or anything like that. Probably pulling combined ~$500-600k, which is typical for Bay Area.
They are not middle-class.

It's fine they make what they make and they spend what they spend...

But they are not middle-class.
The J stands for Jay

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 6:54 pm

alpenglow wrote:
Thu Mar 14, 2019 2:57 pm
marcopolo wrote:
Thu Mar 14, 2019 1:40 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Just curious is that 35x the residual amount of expenses beyond your pension, or 35x of total expenses and Pension on top of that?
I'll have 35x expenses without the pension. Like I said, I'm overdoing it.
Ridiculous.

But lucky. If you're only 43-45, and already have that much, not much of a sacrifice to keep working. So I don't blame you.

The problem is, most people don't have a 80% pension PLUS 35x expenses at 50. But they read these threads and think "Maybe I should keep working".

It would be dumb for someone to keep working past 60 with kind of situation. But not dumb for someone to keep working at 45 with that situation.

Probably not necessary, but not dumb.
The J stands for Jay

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 6:59 pm

deanmoriarty wrote:
Thu Mar 14, 2019 3:12 pm
the household income of ~600k easily allows these expenses and even some savings. There are hundreds of thousands of people like that in the Bay Area so by definition that's Bay Area middle class
No, by definition, they are in the top 1%.

By definition.

Own it. It's fine. There's nothing wrong with it. But own it.

They cannot call themselves "middle-class".
The J stands for Jay

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 7:01 pm

samsoes wrote:
Thu Mar 14, 2019 5:29 pm
StandingRock wrote:
Thu Mar 14, 2019 9:30 am
samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
I am just going to assume that you don't have anything better to do than work.
That assumption, I assure you, couldn't be farther from the truth. Honest.
Then why are you working? Serious question.

It's basic logic. You don't need to work. But you choose to work instead of doing things you'd rather do.

Why?
The J stands for Jay

Slacker
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Re: How to realistically FIRE?

Post by Slacker » Thu Mar 14, 2019 7:05 pm

50yrs old, 25x expenses saved?

I look at it like this:

25x expenses at a desired spending level, which is closer to 40x to 50x expenses at bare bones (Lean FIRE) level should make you pretty solid to retire so long as you are willing to accept a cut to spending if a series of bad years hits...you won't run out of money so long as you can tighten the purse strings down to the bare bones retirement level but in the overwhelming majority of cases you will be spending at your desired "luxury" level of retirement spending.

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Wanderingwheelz
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Re: How to realistically FIRE?

Post by Wanderingwheelz » Thu Mar 14, 2019 7:13 pm

Admiral wrote:
Thu Mar 14, 2019 9:58 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Why are you discounting/ignoring SS? That leads to inaccurate assumptions of income streams, and then you get inaccurate results of what's needed to cover expenses (GIGO).

If you have a SS benefit (or dual benefits) and want to go ahead and discount them to some reasonable percentage--with no accurate way of knowing what the discount should or might be--then go ahead and do that.

But, for example in my case, if I ignored SS/pensions in my calculations I would need $3m. When I don't, I need $700k. Big difference, no? Are you also assuming Medicare will go bust?
I don’t count SS just out of an extreme amount of caution. At 47, I personally feel there’s too many years for congress to make major changes to the social program to work it into the calculations I use that includes the funds that nobody can take away from me.

There were a couple of comments inquiring about my 25x being an actual dollar figure. My expenses are actually quite low at $65,000 since I have no mortgage and no more college to pay for. My 25x number actually stands at $90,000 right now including my home value, with 3 to 5 more years of work left to do.

sailaway
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Re: How to realistically FIRE?

Post by sailaway » Thu Mar 14, 2019 7:34 pm

Wanderingwheelz wrote:
Thu Mar 14, 2019 7:13 pm
Admiral wrote:
Thu Mar 14, 2019 9:58 am
Wanderingwheelz wrote:
Thu Mar 14, 2019 9:06 am
Simple question.

Is 25x expenses/spending really a “safe” way to look at one’s ability or preparedness to retire? I realize it get safer to use such “rules of thumb” as you get older, but even for a 50 year old, is it still “within the margin of safety” to use the 25x figure? Two SSs will be there, but not using it in any calculations. Inheritances not calculated, either.

Portfolio is 60/40 using the 3 Fund Portfolio.
Why are you discounting/ignoring SS? That leads to inaccurate assumptions of income streams, and then you get inaccurate results of what's needed to cover expenses (GIGO).

If you have a SS benefit (or dual benefits) and want to go ahead and discount them to some reasonable percentage--with no accurate way of knowing what the discount should or might be--then go ahead and do that.

But, for example in my case, if I ignored SS/pensions in my calculations I would need $3m. When I don't, I need $700k. Big difference, no? Are you also assuming Medicare will go bust?
I don’t count SS just out of an extreme amount of caution. At 47, I personally feel there’s too many years for congress to make major changes to the social program to work it into the calculations I use that includes the funds that nobody can take away from me.

There were a couple of comments inquiring about my 25x being an actual dollar figure. My expenses are actually quite low at $65,000 since I have no mortgage and no more college to pay for. My 25x number actually stands at $90,000 right now including my home value, with 3 to 5 more years of work left to do.

For early retirees, subtle changes that most people see as fair could make a big difference to SS. What if they counted the most recent 35 years instead of the highest? What if you had to have your minimum quarters in the last 35 years?

smitcat
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Re: How to realistically FIRE?

Post by smitcat » Thu Mar 14, 2019 8:41 pm

HomerJ wrote:
Thu Mar 14, 2019 6:54 pm
alpenglow wrote:
Thu Mar 14, 2019 2:57 pm
marcopolo wrote:
Thu Mar 14, 2019 1:40 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Just curious is that 35x the residual amount of expenses beyond your pension, or 35x of total expenses and Pension on top of that?
I'll have 35x expenses without the pension. Like I said, I'm overdoing it.
Ridiculous.

But lucky. If you're only 43-45, and already have that much, not much of a sacrifice to keep working. So I don't blame you.

The problem is, most people don't have a 80% pension PLUS 35x expenses at 50. But they read these threads and think "Maybe I should keep working".

It would be dumb for someone to keep working past 60 with kind of situation. But not dumb for someone to keep working at 45 with that situation.

Probably not necessary, but not dumb.
"But lucky. If you're only 43-45, and already have that much, not much of a sacrifice to keep working. So I don't blame you."
I agree with all your posts except for this line.
- if you don't like your work and/or your existing life it does not matter what age you are
- if you do like your work and/or your existing life it does not matter what age you are

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 8:51 pm

Wanderingwheelz wrote:
Thu Mar 14, 2019 7:13 pm
I don’t count SS just out of an extreme amount of caution. At 47, I personally feel there’s too many years for congress to make major changes to the social program to work it into the calculations I use that includes the funds that nobody can take away from me.
Note that someone running for President is talking about a "wealth tax" so if you don't want to count SS, you can't really count on your own portfolio being "funds no one can take away from me" either.

SS will be around. It probably will be fully funded, but even if it isn't it won't be zero.
There were a couple of comments inquiring about my 25x being an actual dollar figure. My expenses are actually quite low at $65,000 since I have no mortgage and no more college to pay for. My 25x number actually stands at $90,000 right now including my home value, with 3 to 5 more years of work left to do.
I'm not sure what you mean here...

$65,000 is your expenses... 25x expenses is $1.625 million.

I don't know what you mean by your "25x number actually stands at $90,000". Does that mean you actually have $2.25 million?

I'm not sure what you mean by "including your home value". There's no reason to include your home value.

Can you explain?

Figure out how much you spend each year. Multiply by 25. It's good that your house is paid off. That's ideal. That's a good way to do it. So figure your expenses with no mortgage, and multiply by 25. If you have that much not even looking at Social Security, and you're in your 50s, you can definitely retire.
Last edited by HomerJ on Thu Mar 14, 2019 8:56 pm, edited 3 times in total.
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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 8:53 pm

smitcat wrote:
Thu Mar 14, 2019 8:41 pm
HomerJ wrote:
Thu Mar 14, 2019 6:54 pm
alpenglow wrote:
Thu Mar 14, 2019 2:57 pm
marcopolo wrote:
Thu Mar 14, 2019 1:40 pm
alpenglow wrote:
Thu Mar 14, 2019 12:34 pm
FWIW, I'm aiming to FIRE in 5-7 years around age 50. The goal is 35x expenses saved, paid off house, and a pension that covers 80% of expenses starting at age 55. This includes money for modest travel and new vehicles every 5 years (I usually keep cars for 10). I'm probably overdoing it, but my kids will still be in secondary school so I need a cushion.
Just curious is that 35x the residual amount of expenses beyond your pension, or 35x of total expenses and Pension on top of that?
I'll have 35x expenses without the pension. Like I said, I'm overdoing it.
Ridiculous.

But lucky. If you're only 43-45, and already have that much, not much of a sacrifice to keep working. So I don't blame you.

The problem is, most people don't have a 80% pension PLUS 35x expenses at 50. But they read these threads and think "Maybe I should keep working".

It would be dumb for someone to keep working past 60 with kind of situation. But not dumb for someone to keep working at 45 with that situation.

Probably not necessary, but not dumb.
"But lucky. If you're only 43-45, and already have that much, not much of a sacrifice to keep working. So I don't blame you."
I agree with all your posts except for this line.
- if you don't like your work and/or your existing life it does not matter what age you are
- if you do like your work and/or your existing life it does not matter what age you are
Not a binary choice.

What if you somewhat like your work, and you're young, and you figure, I can work a few more years until I'm 50... No big deal to be super sure.
The J stands for Jay

labguy
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Re: How to realistically FIRE?

Post by labguy » Thu Mar 14, 2019 9:02 pm

StandingRock wrote:
Thu Mar 14, 2019 9:30 am
samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
I am just going to assume that you don't have anything better to do than work.
Exactly, 47x that is a slam dunk by any measure. Feel sorry for folks that cannot see the big picture, now if you want to work that’s an entirely different conversation.

marcopolo
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Re: How to realistically FIRE?

Post by marcopolo » Thu Mar 14, 2019 9:29 pm

KlangFool wrote:
Thu Mar 14, 2019 5:00 pm
smitcat wrote:
Thu Mar 14, 2019 4:30 pm
KlangFool wrote:
Thu Mar 14, 2019 2:28 pm
smitcat wrote:
Thu Mar 14, 2019 2:21 pm

Your data has nothing to do with a comparison between two areas of the country with varying costs.
Once again you are confusing your specific situations with that of comparing two diverse areas.
We are speaking about the flexibility to FIRE and how income in retirement can affect the safety value.

If we must use your neighborhood which I do not like to do consider this:
So here is your data:
"Folks that could be FIRE in my neighborhood do not have an annual expense of 120K. The annual median income is 150K."

Person "C" has lived in a LCOL area and has $60K in expenses and want to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).
Person "D" has lived in a HCOL area and has $120K in expenses and wants to move to KF's neighborhood at retirement. He has the ability to sell his home and buy another one without needing a mortgage (or you may not like that so he's a renter / your call).

Which person "C" or "D" will be more flexible in retirement after they move?
smitcat,

It is very simple.

You just need to show me a real example of a household that you know with an annual expense of 120K. And, how much of that annual expense is related to the mortgage and the house. You can pick LCOL, HCOL, or whatever area.

I am just telling you that from all my observations, it is always about the house at that annual expense level.

KlangFool

P.S.: I am not trying to prove that you are wrong. I am just curious how would those expense numbers look like if it is not associated with home ownership. Where would someone spend the money until it is 120K per year?

"You just need to show me a real example of a household that you know with an annual expense of 120K"
I gave you the comparison of how a low income budget at FIRE will have a lower safety margin than a higher income budget even if they are both heavily in home debt - is that not what we were trying to understand? even with your numbers the ability to lower your expenses and have a margin for error lies with the higher income and higher expenses.

"Where would someone spend the money until it is 120K per year?"
In a higher cost of living area the taxes alone will push the home of rental way up. How about in a MCOL area:
MCOL area -retirement budget:
$20,000- Home
$20,000 - healthcare
$10,000 - taxes
$20,,000 - cars and boat
$15,000 - food , supplies, hard goods
$10,000 - sporting, hobbies etc
$30,000 - travel and entertainment
$125K - total
Very interesting!

KlangFool
This whole exchange makes no sense to me.

KlangFool, Do you really have such a narrow view of the world that you can't imagine other people living different lifestyle than you and your immediate friends/neighbors?

You always talk about your other family members that are multi-millionaries, and give $250k to their kids. Do you think they have a hard time spending $120k or more a year beyond housing costs?

Surely, you have read the numerous threads about how expensive health insurance/healthcare can be for people of a certain age.

Surely, you have read the numerous threads about the amount of money people spend on vacations/travel.

It bogles my mind that you can't understand how people could spend $120k/yr even with a paid of house.
Similarly, i often find it odd when people can't imagine how others could live on $30k/yr, or less.

You may want to consider broadening your perspective, it would help you better understand where others are coming from.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Wricha
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Re: How to realistically FIRE?

Post by Wricha » Thu Mar 14, 2019 9:38 pm

samsoes wrote:
Thu Mar 14, 2019 9:12 am
Sounds like you are either at 25x or are close.

I have about 47x of annual expenses saved (in accounts of varying tax treatments) and I'm still afraid to pull the retirement ripcord.

Also not counting SS nor potential inheritance. 55, single.

I'll be paying close attention to this thread.
There is a guy named TimeLord on Bogleheads. You should PM him. He would really enjoy a conversation with you. He is always looking for ways not to retire. 47x expenses would keep in the game another 5 years.

KlangFool
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Re: How to realistically FIRE?

Post by KlangFool » Thu Mar 14, 2019 9:44 pm

marcopolo wrote:
Thu Mar 14, 2019 9:29 pm

You always talk about your other family members that are multi-millionaries, and give $250k to their kids. Do you think they have a hard time spending $120k or more a year beyond housing costs?

marcopolo,

I do not need to think. I know that they do.

KlangFool

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Wanderingwheelz
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Re: How to realistically FIRE?

Post by Wanderingwheelz » Thu Mar 14, 2019 10:34 pm

HomerJ wrote:
Thu Mar 14, 2019 8:51 pm
Wanderingwheelz wrote:
Thu Mar 14, 2019 7:13 pm
I don’t count SS just out of an extreme amount of caution. At 47, I personally feel there’s too many years for congress to make major changes to the social program to work it into the calculations I use that includes the funds that nobody can take away from me.
Note that someone running for President is talking about a "wealth tax" so if you don't want to count SS, you can't really count on your own portfolio being "funds no one can take away from me" either.

SS will be around. It probably will be fully funded, but even if it isn't it won't be zero.
There were a couple of comments inquiring about my 25x being an actual dollar figure. My expenses are actually quite low at $65,000 since I have no mortgage and no more college to pay for. My 25x number actually stands at $90,000 right now including my home value, with 3 to 5 more years of work left to do.
I'm not sure what you mean here...

$65,000 is your expenses... 25x expenses is $1.625 million.

I don't know what you mean by your "25x number actually stands at $90,000". Does that mean you actually have $2.25 million?

I'm not sure what you mean by "including your home value". There's no reason to include your home value.

Can you explain?

Figure out how much you spend each year. Multiply by 25. It's good that your house is paid off. That's ideal. That's a good way to do it. So figure your expenses with no mortgage, and multiply by 25. If you have that much not even looking at Social Security, and you're in your 50s, you can definitely retire.
That was a bit confusing- sorry. My home is worth $500,000 quickly- maybe $550,000 if I was willing to wait.

My Vanguard assets are $2,230,000 and I have an HSA with $70,000. I have no debt. I meant NOT including my home I’m at $90,000 at 25x which would take some hard effort for my wife and I to spend in retirement.

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smarcus3
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Re: How to realistically FIRE?

Post by smarcus3 » Thu Mar 14, 2019 10:45 pm

As you may live longer than 30 years, you need to spend less than 4% of your portfolio or ensure that your expenses are flexible if your timing is bad. If your able to live off 3.5% I believe your portfolio should last ~60 years so plenty long enough.

If you're not sure even working just enough to cover living expenses will allow your portfolio to continue to compound and grow. Cutting it too close can't be a fun retirement. I'm planning on spending <3% when I retire years from now unfortunately.
This is my personal opinion. I'm an engineer not a financial advisor.

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HomerJ
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Re: How to realistically FIRE?

Post by HomerJ » Thu Mar 14, 2019 10:48 pm

Wanderingwheelz wrote:
Thu Mar 14, 2019 10:34 pm
HomerJ wrote:
Thu Mar 14, 2019 8:51 pm
Wanderingwheelz wrote:
Thu Mar 14, 2019 7:13 pm
I don’t count SS just out of an extreme amount of caution. At 47, I personally feel there’s too many years for congress to make major changes to the social program to work it into the calculations I use that includes the funds that nobody can take away from me.
Note that someone running for President is talking about a "wealth tax" so if you don't want to count SS, you can't really count on your own portfolio being "funds no one can take away from me" either.

SS will be around. It probably will be fully funded, but even if it isn't it won't be zero.
There were a couple of comments inquiring about my 25x being an actual dollar figure. My expenses are actually quite low at $65,000 since I have no mortgage and no more college to pay for. My 25x number actually stands at $90,000 right now including my home value, with 3 to 5 more years of work left to do.
I'm not sure what you mean here...

$65,000 is your expenses... 25x expenses is $1.625 million.

I don't know what you mean by your "25x number actually stands at $90,000". Does that mean you actually have $2.25 million?

I'm not sure what you mean by "including your home value". There's no reason to include your home value.

Can you explain?

Figure out how much you spend each year. Multiply by 25. It's good that your house is paid off. That's ideal. That's a good way to do it. So figure your expenses with no mortgage, and multiply by 25. If you have that much not even looking at Social Security, and you're in your 50s, you can definitely retire.
That was a bit confusing- sorry. My home is worth $500,000 quickly- maybe $550,000 if I was willing to wait.

My Vanguard assets are $2,230,000 and I have an HSA with $70,000. I have no debt. I meant NOT including my home I’m at $90,000 at 25x which would take some hard effort for my wife and I to spend in retirement.
Well then you can retire. Easily. Even without Social Security.

And you'll get Social Security.

So call in tomorrow and tell them you're quitting.

I mean, the math isn't really that hard. Congrats.
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