Mr. Money Mustache, SWR, and equity allocation

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KyleAAA
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by KyleAAA » Thu Feb 14, 2019 12:38 pm

Sugarmountain wrote:
Thu Feb 14, 2019 12:35 pm
H-Town wrote:
Wed Feb 13, 2019 8:11 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
I was reading an article by Mr. Money Mustache, with whom I'm very familiar, and was curious what Bogleheads think of some of his assumptions and recommendations.

The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.

An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
5% SWR is a reckless advice. MMM's advice don't work for him. He caters to certain audience to make money.
It's all about risk management. From the simulators, it looks like a 5% starting WR indexed to inflation has a 60% success rate over 30 year periods. I personally wouldn't be comfortable with that, but others might be, particularly people who are willing to live with the risk that they may need to drastically cut back on expenses or find other income sources along the way, i.e. potentially going back to work. But given that I'm 51 there is at least a 40% chance that I'll be dead in the next 30 years, so there's also a risk that I spend too much of my remaining life working.
It's 5% of balance, not 5% inflation adjusted. Meaning if the portfolio goes down, so does your income that year. It is not a particularly aggressive withdrawal rate so long as you can deal with the volatility.

Sugarmountain
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Sugarmountain » Thu Feb 14, 2019 1:15 pm

KyleAAA wrote:
Thu Feb 14, 2019 12:38 pm
Sugarmountain wrote:
Thu Feb 14, 2019 12:35 pm
H-Town wrote:
Wed Feb 13, 2019 8:11 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
I was reading an article by Mr. Money Mustache, with whom I'm very familiar, and was curious what Bogleheads think of some of his assumptions and recommendations.

The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.

An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
5% SWR is a reckless advice. MMM's advice don't work for him. He caters to certain audience to make money.
It's all about risk management. From the simulators, it looks like a 5% starting WR indexed to inflation has a 60% success rate over 30 year periods. I personally wouldn't be comfortable with that, but others might be, particularly people who are willing to live with the risk that they may need to drastically cut back on expenses or find other income sources along the way, i.e. potentially going back to work. But given that I'm 51 there is at least a 40% chance that I'll be dead in the next 30 years, so there's also a risk that I spend too much of my remaining life working.
It's 5% of balance, not 5% inflation adjusted. Meaning if the portfolio goes down, so does your income that year. It is not a particularly aggressive withdrawal rate so long as you can deal with the volatility.
The OP was about MMM's statements that a 5% WR would mostly work. That was 5% starting and inflation adjusted going forward.

I haven't really seen models of 5% of a portfolio annually. Seems like that should always work you just might not have much to spend if things go wrong. But then 10% annually could also work, by definition it would never go to 0.

Rus In Urbe
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Rus In Urbe » Thu Feb 14, 2019 1:36 pm

I think this gets to the point about MMM:
Jack FFR1846 » Tue Dec 18, 2018 1:01 pm
I'm both a fan and a critic of MMM. I think Pete has some good ideas but the overall public view of his preaching goes something like this: If you save enough to withdraw 5%, drink a bunch of micro brews, do lots of work for zero dollars and home school your kids, you'll never go wrong and can live forever.

I think what he really is saying is: Save a chunk of money. Live a lifestyle of frugality by bicycling everywhere, not buying up, not buying crap and do random jobs and gigs to forever continue to bring in money. So there's where "he" can live on 5% of that original chunk (even ignoring the $400k site income).
+1

Think of MMM's blog more as a LIFESTYLE blog than a financial one. It's a gateway for many folks who are just starting to realize that there is another way to think about money (ie. be frugal and save it). All of MMM's "face-punching" and other somewhat violent put-down language, and his self-regard, is appealing to some readers who needs some waking-up regarding their financial lives, and need a hero-figure to follow. So, good for him! He helps a lot of people take control of their lives. Some of his money advice is sound, other bits apply more to him than anyone else. But couldn't we say that about any almost advice on the Internet?

I read MMM for a time, years ago. Over time, some MMM readers become part of his "club." I found him fresh and amusing for a while, but eventually tired of his writing voice. I get more from detailed financial sites (such as this one).
I'd like to live as a poor man with lots of money. ~Pablo Picasso

MnD
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by MnD » Thu Feb 14, 2019 1:52 pm

Sugarmountain wrote:
Thu Feb 14, 2019 1:15 pm
I haven't really seen models of 5% of a portfolio annually. Seems like that should always work you just might not have much to spend if things go wrong. But then 10% annually could also work, by definition it would never go to 0.
Setting and keeping a low % inflation-adjusted SWR _guarantees_ you won't have much to spend whether or not things go wrong, go right or are somewhere in between. 5% of portfolio (which I pair with a 3% inflation-adjusted minimum draw) is about as risky as a 3.3% inflation-adjusted SWR. Both survive 30 years under all historical sequences with about the same portfolio depletion in the worst case sequences.

The difference is when you don't have bad sequences. 5% provides higher income for you to enjoy in your retirement whereas ultra-low inflation-adjusted SWR's provide very large ending portfolio balances (commonly several times larger than what you retired with) for your heirs to enjoy.

emoore
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by emoore » Thu Feb 14, 2019 2:39 pm

MnD wrote:
Thu Feb 14, 2019 1:52 pm
Sugarmountain wrote:
Thu Feb 14, 2019 1:15 pm
I haven't really seen models of 5% of a portfolio annually. Seems like that should always work you just might not have much to spend if things go wrong. But then 10% annually could also work, by definition it would never go to 0.
Setting and keeping a low % inflation-adjusted SWR _guarantees_ you won't have much to spend whether or not things go wrong, go right or are somewhere in between. 5% of portfolio (which I pair with a 3% inflation-adjusted minimum draw) is about as risky as a 3.3% inflation-adjusted SWR. Both survive 30 years under all historical sequences with about the same portfolio depletion in the worst case sequences.

The difference is when you don't have bad sequences. 5% provides higher income for you to enjoy in your retirement whereas ultra-low inflation-adjusted SWR's provide very large ending portfolio balances (commonly several times larger than what you retired with) for your heirs to enjoy.
The 5% fixed withdraw rate is what I'm starting to lean to for retirement. Seems easier than an inflation adjusted SWR but I should have most or all of my basic expenses covered by SS and a small pension.

H-Town
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by H-Town » Thu Feb 14, 2019 3:29 pm

Sugarmountain wrote:
Thu Feb 14, 2019 12:35 pm
Plus- I don't consider saving 20x the current expense is financial independent. I keep my expense low at early age because I want to save big. Once I achieve financial independent (maybe 50x to 80x annual expense), I want to be able to live lavishly. I want to travel anywhere in the world when I want. I want a fast car and several luxury cars. I want a beach house, a lake house, a cabin, several vacation houses. I want to a charity in my name. :twisted:

Why do you want to live frugally to be "financial independent" and then live frugally for the rest of your life?
Possibly because some folks find living frugally to be fairly painless and they'd rather trade luxuries for time than trade time for luxuries. The risk you face is you spend so much time earning and saving you don't get much time to enjoy your lake house, beach house, cabin, and several other vacation houses. Different strokes for different folks.
I hear you. I have to find my balance and it might be different from other folks.

KyleAAA
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by KyleAAA » Thu Feb 14, 2019 3:32 pm

Sugarmountain wrote:
Thu Feb 14, 2019 1:15 pm
KyleAAA wrote:
Thu Feb 14, 2019 12:38 pm
Sugarmountain wrote:
Thu Feb 14, 2019 12:35 pm
H-Town wrote:
Wed Feb 13, 2019 8:11 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
I was reading an article by Mr. Money Mustache, with whom I'm very familiar, and was curious what Bogleheads think of some of his assumptions and recommendations.

The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.

An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
5% SWR is a reckless advice. MMM's advice don't work for him. He caters to certain audience to make money.
It's all about risk management. From the simulators, it looks like a 5% starting WR indexed to inflation has a 60% success rate over 30 year periods. I personally wouldn't be comfortable with that, but others might be, particularly people who are willing to live with the risk that they may need to drastically cut back on expenses or find other income sources along the way, i.e. potentially going back to work. But given that I'm 51 there is at least a 40% chance that I'll be dead in the next 30 years, so there's also a risk that I spend too much of my remaining life working.
It's 5% of balance, not 5% inflation adjusted. Meaning if the portfolio goes down, so does your income that year. It is not a particularly aggressive withdrawal rate so long as you can deal with the volatility.
The OP was about MMM's statements that a 5% WR would mostly work. That was 5% starting and inflation adjusted going forward.

I haven't really seen models of 5% of a portfolio annually. Seems like that should always work you just might not have much to spend if things go wrong. But then 10% annually could also work, by definition it would never go to 0.
I do not believe MMM ever advocated a 5% inflation adjusted withdrawal rate. I could be wrong.

Sugarmountain
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Sugarmountain » Thu Feb 14, 2019 5:22 pm

KyleAAA wrote:
Thu Feb 14, 2019 3:32 pm
I do not believe MMM ever advocated a 5% inflation adjusted withdrawal rate. I could be wrong.
I think it was this blog post https://www.mrmoneymustache.com/2018/11 ... -of-money/ that triggered this current thread. In it MMM says:
Let’s say you want to be able to spend $40,000 per year, for life, and have that spending allowance continue to grow with inflation. And you never want to make another dollar from work in your lifetime.

In this situation, the following three sentences represent the entire universe of probability for you:
  • If you retire with $800,000 in investments, you will probably make it through your whole life without running out of money (a 5% withdrawal rate)
    If you start with a $1 million nest egg (a 4% withdrawal rate), you will very likely never run out of money
    If you start with a $1.33 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.
And while he doesn't specify in this post that when he says "5%", I'm pretty sure he means a 5% starting withdrawal rate that is then inflation adjusted over time since that's how everything else of his that I've read describes the WR.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by KyleAAA » Thu Feb 14, 2019 5:30 pm

Sugarmountain wrote:
Thu Feb 14, 2019 5:22 pm
KyleAAA wrote:
Thu Feb 14, 2019 3:32 pm
I do not believe MMM ever advocated a 5% inflation adjusted withdrawal rate. I could be wrong.
I think it was this blog post https://www.mrmoneymustache.com/2018/11 ... -of-money/ that triggered this current thread. In it MMM says:
Let’s say you want to be able to spend $40,000 per year, for life, and have that spending allowance continue to grow with inflation. And you never want to make another dollar from work in your lifetime.

In this situation, the following three sentences represent the entire universe of probability for you:
  • If you retire with $800,000 in investments, you will probably make it through your whole life without running out of money (a 5% withdrawal rate)
    If you start with a $1 million nest egg (a 4% withdrawal rate), you will very likely never run out of money
    If you start with a $1.33 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.
And while he doesn't specify in this post that when he says "5%", I'm pretty sure he means a 5% starting withdrawal rate that is then inflation adjusted over time since that's how everything else of his that I've read describes the WR.
I see. That wording would seem to fall a bit short of "recommending 5% WR." He is not incorrect in saying the chances of a 5% WR not running out of money over 50 years is > 50%.

ThatGuy
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by ThatGuy » Thu Feb 14, 2019 5:59 pm

KyleAAA wrote:
Thu Feb 14, 2019 5:30 pm
Sugarmountain wrote:
Thu Feb 14, 2019 5:22 pm
KyleAAA wrote:
Thu Feb 14, 2019 3:32 pm
I do not believe MMM ever advocated a 5% inflation adjusted withdrawal rate. I could be wrong.
I think it was this blog post https://www.mrmoneymustache.com/2018/11 ... -of-money/ that triggered this current thread. In it MMM says:
Let’s say you want to be able to spend $40,000 per year, for life, and have that spending allowance continue to grow with inflation. And you never want to make another dollar from work in your lifetime.

In this situation, the following three sentences represent the entire universe of probability for you:
  • If you retire with $800,000 in investments, you will probably make it through your whole life without running out of money (a 5% withdrawal rate)
    If you start with a $1 million nest egg (a 4% withdrawal rate), you will very likely never run out of money
    If you start with a $1.33 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.
And while he doesn't specify in this post that when he says "5%", I'm pretty sure he means a 5% starting withdrawal rate that is then inflation adjusted over time since that's how everything else of his that I've read describes the WR.
I see. That wording would seem to fall a bit short of "recommending 5% WR." He is not incorrect in saying the chances of a 5% WR not running out of money over 50 years is > 50%.
How about this one?
MMM wrote:Really, there are two factors at work here: Suze Orman uses ultra-conservative withdrawal assumptions for retirees, assuming they will forego the better returns of stocks and hold only government bonds, which pay almost nothing these days. This leads to roughly a 2% withdrawal rate assumption, versus the 4% I am fond of here. That’s fair enough – to each their own assumptions and I’ll happily stick to my stocks, rental houses and Lending Club, where I could easily maintain 6% or higher withdrawals while the principal keeps up with inflation.
Work is the curse of the drinking class - Oscar Wilde

Jags4186
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Jags4186 » Thu Feb 14, 2019 6:04 pm

I may have responded a long time ago on this thread but I’ve always said....it’s a lot easier to live frugally when it’s a lifestyle choice rather than because you have to.

MMM has the luxury of living on $25,000/yr because he probably has 100x of that in his portfolio and he also generates $100,000s/yr in income from his blog. If there was an emergency or some need for a significant amount of money, it would be no problem for him to need it.

For the rest of us, if you lived on $25,000/yr on a $625,000 portfolio and all of a sudden you needed a lump sum of money, it is very likely you’d be forced back into work (which may not be easy to do depending how long you’ve been out) or run the risk of running out of money.

Everything MMM says must be taken with that grain of salt in mind. I feel much of his stuff is over extreme for amusement. He isn’t “dangerous”. But I believe the people who post on his forum who say “MMM said 25x on $25k and I’m there see ya work!” Is dangerous.

retire2022
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by retire2022 » Mon Apr 15, 2019 5:37 pm

all Mr Mustache sold his website for 9 million:

https://www.mrmoneymustache.com/2019/04 ... 9-million/

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fortfun
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by fortfun » Mon Apr 15, 2019 5:41 pm

retire2022 wrote:
Mon Apr 15, 2019 5:37 pm
all Mr Mustache sold his website for 9 million:

https://www.mrmoneymustache.com/2019/04 ... 9-million/
April Fools!

IMhooked
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by IMhooked » Mon Apr 15, 2019 5:41 pm

Note the date he posted it. :D

retire2022
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by retire2022 » Mon Apr 15, 2019 5:45 pm

duh, :oops:

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Mon Apr 15, 2019 6:09 pm

H-Town wrote:
Wed Feb 13, 2019 8:11 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
I was reading an article by Mr. Money Mustache, with whom I'm very familiar, and was curious what Bogleheads think of some of his assumptions and recommendations.

The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.

An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
5% SWR is a reckless advice. MMM's advice don't work for him. He caters to certain audience to make money.

Plus- I don't consider saving 20x the current expense is financial independent. I keep my expense low at early age because I want to save big. Once I achieve financial independent (maybe 50x to 80x annual expense), I want to be able to live lavishly. I want to travel anywhere in the world when I want. I want a fast car and several luxury cars. I want a beach house, a lake house, a cabin, several vacation houses. I want to a charity in my name. :twisted:

If you have 80X you expenses when you live frugally then you have much less when you live lavishly. There is no going back.
Also, you have it backwards. You do traveling when you are young. Travelling has much less value as time passes. Actually life has less value. 1 year in your 50s is worth 10-50% of one year in your 20s. It could be 0 or negative...
An old guy in a fast car... again, not much value. I pass in my daily commute droves of porches and ferraris driven by 60-70 year olds.

You can expand this to anything: everything you like and you don't do as a young person you might not even like anymore when older. Or not be able to do it anymore. You life is the most precious asset you have and is rapidly depreciating (or at least it has a high risk embedded).

Multiple houses are also very low value for life spent. Who needs multiple houses? Why is this a thing to desire? One house is enough of a hassle to maintain. The ultimate luxury would be o rent wherever you wish, not own a house. Is like having a house with staff.

Why do you want to live frugally to be "financial independent" and then live frugally for the rest of your life?
Because some people have ENOUGH. And some people don't need a lot of money to enjoy life, but they need time.
I am not a fan of MMMs approach, I want to be able to do lots of things during my retirement (especially if early) but a lot of these things don't cost much money. Some do, but still not at the level of multiple houses etc.
Last edited by Starfish on Mon Apr 15, 2019 8:22 pm, edited 2 times in total.

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Earl Lemongrab
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Earl Lemongrab » Mon Apr 15, 2019 8:04 pm

I never lived frugally to save. I saved because I lived frugally. I don't plan any change in lifestyle now that I'm retired.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

JTColton
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by JTColton » Tue Apr 16, 2019 3:11 am

Starfish wrote:
Mon Apr 15, 2019 6:09 pm
You life is the most precious asset you have and is rapidly depreciating (or at least it has a high risk embedded).
Starfish your post was excellent but this line really distills it down. Where is the inflection point for trading the vitality of youth for financial resources to enjoy in old age?
randomguy wrote:
Mon Apr 15, 2019 6:24 pm
And yet most people who are 50+ who want a job, have one. The cost to be FI by 50 might be higher than you want to pay. You will never get back the years with your kids when they are young where you can spend money on things that bring both of you happiness.
I pulled this quote from the "Layoff - Early 60's" thread, didn't want to highjack it with BH vs MMM and its very relevant here to contrast the differences in mindset. For me it is the polar opposite, the cost of working until 65 or even 50 is higher than I want to pay. You will never get back the years with your kids when they were young and you were spending 40-60+ hours a week at work/commute/traveling.

lostdog
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by lostdog » Tue Apr 16, 2019 7:58 am

Traveling isn't the ultimate thing to achieve in life for some people. Hobbies, staycations, spending time with friends and family, financial Independence etc. ..

These.days people travel but spend more time taking pictures and posting on social media rather than experiencing the actual moment. Keeping up with the Joneses and then going back to work to maintain this stuff is not very fun.

If you think a successful retirement is constant travel and bragging about it on social media is the ultimate, well you'll need a lesson in reality.

smitcat
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by smitcat » Tue Apr 16, 2019 8:05 am

JTColton wrote:
Tue Apr 16, 2019 3:11 am
Starfish wrote:
Mon Apr 15, 2019 6:09 pm
You life is the most precious asset you have and is rapidly depreciating (or at least it has a high risk embedded).
Starfish your post was excellent but this line really distills it down. Where is the inflection point for trading the vitality of youth for financial resources to enjoy in old age?
randomguy wrote:
Mon Apr 15, 2019 6:24 pm
And yet most people who are 50+ who want a job, have one. The cost to be FI by 50 might be higher than you want to pay. You will never get back the years with your kids when they are young where you can spend money on things that bring both of you happiness.
I pulled this quote from the "Layoff - Early 60's" thread, didn't want to highjack it with BH vs MMM and its very relevant here to contrast the differences in mindset. For me it is the polar opposite, the cost of working until 65 or even 50 is higher than I want to pay. You will never get back the years with your kids when they were young and you were spending 40-60+ hours a week at work/commute/traveling.

"Starfish your post was excellent but this line really distills it down. Where is the inflection point for trading the vitality of youth for financial resources to enjoy in old age?"
I propose that balance is always very important - never spend all funds for the present and never plan to spend all funds in the future.
Challenge yourself to acquire more income but share the growing income each year between living in the present and saving for the future. Each persons numbers will vary but balance is really the key to them all.

"If you have 80X you expenses when you live frugally then you have much less when you live lavishly. There is no going back."
Of course you can always cut back and live less expensively when you choose.... you can always go back for a short or long period of time.

"You will never get back the years with your kids when they were young and you were spending 40-60+ hours a week at work/commute/traveling."
There are many alternatives to the seemingly binary choice of working 60hrs or early retirement. if you don't like your job then its a job problem and not an early retire problem - many folks can source an income that allows plenty of time with family and still have an active work life until they feel they are ready to FIRE.
YMMV

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by RadAudit » Tue Apr 16, 2019 8:21 am

lostdog wrote:
Tue Apr 16, 2019 7:58 am
If you think a successful retirement is constant travel and bragging about it on social media is the ultimate, well you'll need a lesson in reality.
+1

Only recently started traveling / cruising in retirement. (I'm 72) I'm beginning to see that it's a lot of hassle to get there and once you are there you begin to question why you're there. The last trip, as I was boarding the launch to shore, I was struck by the idea that some folks never left pool side on the ship during the entire voyage.

I'm rapidly approaching the idea that you can watch a Nat Geo video at home with a bourbon in your hand and get much the same experience - may be better. They get better camera angles.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Tue Apr 16, 2019 9:12 am

H-Town wrote:
Wed Feb 13, 2019 8:11 pm
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
I was reading an article by Mr. Money Mustache, with whom I'm very familiar, and was curious what Bogleheads think of some of his assumptions and recommendations.

The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.

An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
5% SWR is a reckless advice. MMM's advice don't work for him. He caters to certain audience to make money.

Plus- I don't consider saving 20x the current expense is financial independent. I keep my expense low at early age because I want to save big. Once I achieve financial independent (maybe 50x to 80x annual expense), I want to be able to live lavishly. I want to travel anywhere in the world when I want. I want a fast car and several luxury cars. I want a beach house, a lake house, a cabin, several vacation houses. I want to a charity in my name. :twisted:

Why do you want to live frugally to be "financial independent" and then live frugally for the rest of your life?
It is all about value and utility H-Town. For example, you want a luxury car and you are looking at a BMW. For an extra $20k the car will be slightly faster and have better brakes/suspension. You never take the car out to the track but just use it to commute to work and a few dinners and entertainment events. At the dealer you easily see the difference but after a few months owning the car, you get used to what you have and the $20k purchase starts to lose its value. Eventually it makes little to no difference. To keep up this desire of having that level car every 4 years compounded for 40 years is worth over $600k. How many hours will you need to work to keep up that luxury? And is it worth it?

You see, luxury goods have a very small utility. They may purchase you happiness but it is very short lived and the more you spend on it, the less you get per dollar. Once you realize that materialism has very little utility you start questioning how much you really need to make you happy and what actually buys happiness. You start to wonder if going to work every day to maintain all your positions is really worth it. You start to look at what Buys you real joy vs a short lived thrill that dissipates shorty after the money is spent.

Why have 2 luxury cars when you butt can only sit in 1 at a time? Why have 3 houses when now you must pay property tax and utilities on 3 homes and now responsible for 3 roofs, 3 boilers and 3 havoc systems. Why spend so much time at work just so you can keep those things. Isn’t it much easier to keep one house and just rent a place when you need it. Let someone else worry about all those things so you can spend time enjoying the people and doing the things you live.

You may not realize it now, but your time on this planet is very limited and very precious. Make the most of it.

I want to point out that I am not saying retire ASAP or live like a pauper. What I am saying is to evaluate what makes you truly happy taking into account how much of your life you may be giving up to get it. Happyness is not owning 3 houses and 4 cars it is something else and each person’s joy is different.

dbapaddy
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by dbapaddy » Tue Apr 16, 2019 9:21 am

I credit MMM with getting me more focused on my finances a while back.

But I visit his site less and less...unless I am on a plane. The posts/coments seem more and more preachy/judgmental. The followers seem like they believe he can do no wrong and I think his math is sometimes off. Also, I'm not sure he is that frugal...obviously much more than I am but I suspect maybe not as much as it seems....

If he can get back to writing for people that currently still have to work, I would probably visit his site more often again.

delamer
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by delamer » Tue Apr 16, 2019 10:42 am

lostdog wrote:
Tue Apr 16, 2019 7:58 am
Traveling isn't the ultimate thing to achieve in life for some people. Hobbies, staycations, spending time with friends and family, financial Independence etc. ..

These.days people travel but spend more time taking pictures and posting on social media rather than experiencing the actual moment. Keeping up with the Joneses and then going back to work to maintain this stuff is not very fun.

If you think a successful retirement is constant travel and bragging about it on social media is the ultimate, well you'll need a lesson in reality.
If traveling and posting photos brings someone enjoyment what “lesson in reality” do they need?

Some people on this forum have expensive interests that hold zero appeal for me. Some have cheap interests that have no appeal to me. These people don’t care what I think about their interests, and vice versa.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 11:00 am

Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
Is the difference due to Bogleheads using far more conservative allocations?
I’d rather say it is due to Mr. MoneyMustache being wrong and not by little.

JTColton
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by JTColton » Tue Apr 16, 2019 11:11 am

smitcat wrote:
Tue Apr 16, 2019 8:05 am
I propose that balance is always very important - never spend all funds for the present and never plan to spend all funds in the future.
Challenge yourself to acquire more income but share the growing income each year between living in the present and saving for the future. Each persons numbers will vary but balance is really the key to them all.

There are many alternatives to the seemingly binary choice of working 60hrs or early retirement. if you don't like your job then its a job problem and not an early retire problem - many folks can source an income that allows plenty of time with family and still have an active work life until they feel they are ready to FIRE.
YMMV
Balance is indeed important and going too far one way or the other is a recipe for misery and/or disaster. Personally I would take less income at present in exchange for more free time. Time to get 8 hours of sleep every night. Time to cook healthy meals from scratch everyday. Time to work out for 1+ hrs everyday. Time to read or enjoy nature everyday. Time to raise and mentor my children everyday. An air travel vacation a few times a year. These things do not take loads of money. It seems to me that along with the superb investing advice here, there is so much aversion to risk that one is advised to stay in a suboptimal situation rather than taking a risk to move to a much better one. I've had to make my own risk:reward calculus as I retire from the military early, leaving more money and other benefits on the table.

Re: binary choices: Many threads on here recently where posters are extremely stressed from work and have a horrible work/life balance. They ask about RE or semi-retirement or downshifting and the overwhelming majority of responses seem to indicate (at least around here) that you should continue to work because the risk of financial ruin is too great or that their children will somehow suffer for it. Some of the responses are just ridiculous like calling a posters manhood into question who has a 1.5MM portfolio to keep working a job he hates and may be affecting his health because he might not be able to afford to pay for his child's prom or braces.

That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so. De-couple your identity from what you do at work or even from work at all. Find happiness in what makes you happy, not what Madison Ave marketers want to sell you. People, places, memories etc.
RadAudit wrote:
Tue Apr 16, 2019 8:21 am
+1

Only recently started traveling / cruising in retirement. (I'm 72) I'm beginning to see that it's a lot of hassle to get there and once you are there you begin to question why you're there. The last trip, as I was boarding the launch to shore, I was struck by the idea that some folks never left pool side on the ship during the entire voyage.

I'm rapidly approaching the idea that you can watch a Nat Geo video at home with a bourbon in your hand and get much the same experience - may be better. They get better camera angles.
Did you travel much when you were younger? Do you think that you would enjoy it more if you were 20-30 years younger?

Perfect case in point. What is the purpose of a portfolio of several millions if you just want to sit home and drink?

smitcat
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by smitcat » Tue Apr 16, 2019 11:20 am

JTColton wrote:
Tue Apr 16, 2019 11:11 am
smitcat wrote:
Tue Apr 16, 2019 8:05 am
I propose that balance is always very important - never spend all funds for the present and never plan to spend all funds in the future.
Challenge yourself to acquire more income but share the growing income each year between living in the present and saving for the future. Each persons numbers will vary but balance is really the key to them all.

There are many alternatives to the seemingly binary choice of working 60hrs or early retirement. if you don't like your job then its a job problem and not an early retire problem - many folks can source an income that allows plenty of time with family and still have an active work life until they feel they are ready to FIRE.
YMMV
Balance is indeed important and going too far one way or the other is a recipe for misery and/or disaster. Personally I would take less income at present in exchange for more free time. Time to get 8 hours of sleep every night. Time to cook healthy meals from scratch everyday. Time to work out for 1+ hrs everyday. Time to read or enjoy nature everyday. Time to raise and mentor my children everyday. An air travel vacation a few times a year. These things do not take loads of money. It seems to me that along with the superb investing advice here, there is so much aversion to risk that one is advised to stay in a suboptimal situation rather than taking a risk to move to a much better one. I've had to make my own risk:reward calculus as I retire from the military early, leaving more money and other benefits on the table.

Re: binary choices: Many threads on here recently where posters are extremely stressed from work and have a horrible work/life balance. They ask about RE or semi-retirement or downshifting and the overwhelming majority of responses seem to indicate (at least around here) that you should continue to work because the risk of financial ruin is too great or that their children will somehow suffer for it. Some of the responses are just ridiculous like calling a posters manhood into question who has a 1.5MM portfolio to keep working a job he hates and may be affecting his health because he might not be able to afford to pay for his child's prom or braces.

That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so. De-couple your identity from what you do at work or even from work at all. Find happiness in what makes you happy, not what Madison Ave marketers want to sell you. People, places, memories etc.
RadAudit wrote:
Tue Apr 16, 2019 8:21 am
+1

Only recently started traveling / cruising in retirement. (I'm 72) I'm beginning to see that it's a lot of hassle to get there and once you are there you begin to question why you're there. The last trip, as I was boarding the launch to shore, I was struck by the idea that some folks never left pool side on the ship during the entire voyage.

I'm rapidly approaching the idea that you can watch a Nat Geo video at home with a bourbon in your hand and get much the same experience - may be better. They get better camera angles.
Did you travel much when you were younger? Do you think that you would enjoy it more if you were 20-30 years younger?

Perfect case in point. What is the purpose of a portfolio of several millions if you just want to sit home and drink?
"That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so."

We were never drawn by doing anything 'minimally' and minimally never seemed to be optimizing anything.
So I guess that is why we were never drawn to the MMM site.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 3:16 pm

Thesaints wrote:
Tue Apr 16, 2019 11:00 am
Triple digit golfer wrote:
Tue Dec 18, 2018 11:48 am
Is the difference due to Bogleheads using far more conservative allocations?
I’d rather say it is due to Mr. MoneyMustache being wrong and not by little.
What is the chance of MMM being wrong vs. your average BH?
What is the probability to be at 70 dead or incapacitated vs. what is the probability to run out of money and be aware of it?

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 3:57 pm

JTColton wrote:
Tue Apr 16, 2019 3:11 am
Starfish wrote:
Mon Apr 15, 2019 6:09 pm
You life is the most precious asset you have and is rapidly depreciating (or at least it has a high risk embedded).
Starfish your post was excellent but this line really distills it down. Where is the inflection point for trading the vitality of youth for financial resources to enjoy in old age?
Thank you.
As for inflection point, for many people income goes up with age, sometimes abruptly. So it does not make that much sense to struggle to save some money at 27 - for retirement I mean - when actually that amount of money would be negligible 10 years later (even doubled with market growth). Nobody ever said on their deathbed "I wished I saved 3000$ more at 25 instead of touring south america".

But obviously it's a tough trade off. It is easy only if the income is large enough and basic expenses low enough. The difference can be then split accordingly between now and future.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Tue Apr 16, 2019 5:29 pm

smitcat wrote:
Tue Apr 16, 2019 11:20 am

"That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so."

We were never drawn by doing anything 'minimally' and minimally never seemed to be optimizing anything.
So I guess that is why we were never drawn to the MMM site.
There are quite a few high income earners on MMM that don't think living on $24k a year is enough for them. They do plenty of fun things while saving a very large portion of their take home pay. There are plenty of people there looking for $2+ million portfolios prior to FIRE. Therefor I think "minimally" is the wrong adjective. I prefer the words "more optimally."

The idea of not wasting money on things that purchase little to no happiness while maximizing the things you do enjoy.

For example, I like to take my car to a road course a few times a year. We like to travel, ski, and willing to spend $100+ on a dinner for two every so often. We go to the movies and catch live music. We do not live minimally, but we try not to waste money on things that purchase little or temporary happiness which has allowed us to semi retire a few months ago while in our 40s. We are enjoying life so much more than when we worked full time. In about 2 years we should have more than enough to retire but will decide at that point if we enjoy part time work enough to stay vs looking for other things to do in life.

MMM has taught us to live life more optimally and we have been happier and healthier since we started on this path.

smitcat
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by smitcat » Tue Apr 16, 2019 5:35 pm

EnjoyIt wrote:
Tue Apr 16, 2019 5:29 pm
smitcat wrote:
Tue Apr 16, 2019 11:20 am

"That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so."

We were never drawn by doing anything 'minimally' and minimally never seemed to be optimizing anything.
So I guess that is why we were never drawn to the MMM site.
There are quite a few high income earners on MMM that don't think living on $24k a year is enough for them. They do plenty of fun things while saving a very large portion of their take home pay. There are plenty of people there looking for $2+ million portfolios prior to FIRE. Therefor I think "minimally" is the wrong adjective. I prefer the words "more optimally."

The idea of not wasting money on things that purchase little to no happiness while maximizing the things you do enjoy.

For example, I like to take my car to a road course a few times a year. We like to travel, ski, and willing to spend $100+ on a dinner for two every so often. We go to the movies and catch live music. We do not live minimally, but we try not to waste money on things that purchase little or temporary happiness which has allowed us to semi retire a few months ago while in our 40s. We are enjoying life so much more than when we worked full time. In about 2 years we should have more than enough to retire but will decide at that point if we enjoy part time work enough to stay vs looking for other things to do in life.

MMM has taught us to live life more optimally and we have been happier and healthier since we started on this path.
If you say so that's all that matters.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by mrspock » Tue Apr 16, 2019 6:15 pm

Personally... I suspect MMM is probably not wrong: even 68% with pessimistic assumptions is probably close to 100% with realistic ones. The trinity study assumptions and indeed most of the pessimistic assumptions fellow Bogleheads make are probably not very realistic for most folks (I.e. most probably get SS, have flexible spending and spend less as they age).

Because of this, I suspect most Bogleheads will depart this earth leaving a rather gigantic inheritance to their heirs or favorite charities.

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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Wiggums » Tue Apr 16, 2019 6:53 pm

mrspock wrote:
Tue Apr 16, 2019 6:15 pm
Personally... I suspect MMM is probably not wrong: even 68% with pessimistic assumptions is probably close to 100% with realistic ones. The trinity study assumptions and indeed most of the pessimistic assumptions fellow Bogleheads make are probably not very realistic for most folks (I.e. most probably get SS, have flexible spending and spend less as they age).

Because of this, I suspect most Bogleheads will depart this earth leaving a rather gigantic inheritance to their heirs or favorite charities.
Better too much than to run out. Also, much easier to be frugal by choice. I’d like to think that we purchase whatever we need. Over the years, we found more happiness in family than toys. I personally do not judge other people who live for today or who decide they can’t save for retirement. I think people who cone to BHs are looking For reliable answers to their questions rather than entertainment.

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Wiggums
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Wiggums » Tue Apr 16, 2019 6:53 pm

mrspock wrote:
Tue Apr 16, 2019 6:15 pm
Personally... I suspect MMM is probably not wrong: even 68% with pessimistic assumptions is probably close to 100% with realistic ones. The trinity study assumptions and indeed most of the pessimistic assumptions fellow Bogleheads make are probably not very realistic for most folks (I.e. most probably get SS, have flexible spending and spend less as they age).

Because of this, I suspect most Bogleheads will depart this earth leaving a rather gigantic inheritance to their heirs or favorite charities.
Better too much than to run out. Also, much easier to be frugal by choice. I’d like to think that we purchase whatever we need. Over the years, we found more happiness in family than toys. I personally do not judge other people who live for today or who decide they can’t save for retirement. I think people who cone to BHs are looking For reliable answers to their questions rather than entertainment.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 6:57 pm

Starfish wrote:
Tue Apr 16, 2019 3:16 pm
What is the probability to be at 70 dead or incapacitated vs. what is the probability to run out of money and be aware of it?
I bet than many BH-ers already are in their 70's. Not all of them incapacitated.

EnjoyIt
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by EnjoyIt » Tue Apr 16, 2019 7:14 pm

smitcat wrote:
Tue Apr 16, 2019 5:35 pm
EnjoyIt wrote:
Tue Apr 16, 2019 5:29 pm
smitcat wrote:
Tue Apr 16, 2019 11:20 am

"That's the draw of the MMM side of it. Optimize your life and live minimally so that if you do need to take a risk to improve your lot in life you can afford to do so."

We were never drawn by doing anything 'minimally' and minimally never seemed to be optimizing anything.
So I guess that is why we were never drawn to the MMM site.
There are quite a few high income earners on MMM that don't think living on $24k a year is enough for them. They do plenty of fun things while saving a very large portion of their take home pay. There are plenty of people there looking for $2+ million portfolios prior to FIRE. Therefor I think "minimally" is the wrong adjective. I prefer the words "more optimally."

The idea of not wasting money on things that purchase little to no happiness while maximizing the things you do enjoy.

For example, I like to take my car to a road course a few times a year. We like to travel, ski, and willing to spend $100+ on a dinner for two every so often. We go to the movies and catch live music. We do not live minimally, but we try not to waste money on things that purchase little or temporary happiness which has allowed us to semi retire a few months ago while in our 40s. We are enjoying life so much more than when we worked full time. In about 2 years we should have more than enough to retire but will decide at that point if we enjoy part time work enough to stay vs looking for other things to do in life.

MMM has taught us to live life more optimally and we have been happier and healthier since we started on this path.
If you say so that's all that matters.
I'm not sure what you mean by that, but understanding ourselves and better understand what makes us happy been a big deal.

The free time off from work gives us so much opportunity to do positive things for ourselves, for our friends and family, and at even strangers. It has made our life more fulfilling.

This isn't for everyone, obviously, everyone has to live their own life and do what is best for them. Some people can't fathom not working 40 hours a week. We have too much to do outside of work and don't have the time to waste working for dollars we don't really need.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 7:18 pm

Earl Lemongrab wrote:
Mon Apr 15, 2019 8:04 pm
I never lived frugally to save. I saved because I lived frugally. I don't plan any change in lifestyle now that I'm retired.
"I never lived frugally. I don't plan any change in lifestyle."
It sounds a lot more enticing, n'est-ce pas ?

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 7:20 pm

Thesaints wrote:
Tue Apr 16, 2019 6:57 pm
Starfish wrote:
Tue Apr 16, 2019 3:16 pm
What is the probability to be at 70 dead or incapacitated vs. what is the probability to run out of money and be aware of it?
I bet than many BH-ers already are in their 70's. Not all of them incapacitated.
I assume they are not dead either, but I was talking about statistics.
The downside of running out of money in old age is much smaller than the downside of dying early.
Moreover, the probability of running out of money based on MMMs WR is smaller than the probability of running out of life/health.
MMM is mathematically correct. BH is more based on irrational fear.

Of course the reason for this is that is easy to go to work and gather money and go with the routine and rationalize it as the intelligent thing to do. Hey but the money will provide a great quality LTC for the 45% of people with Alzheimer's in 75-85 decade! Or a nice funeral to the ~25% who never reached 70. And this is just looking briefly at 2 factors, there is a long list of nasty diseases.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 7:29 pm

Starfish wrote:
Tue Apr 16, 2019 7:20 pm
Moreover, the probability of running out of money based on MMMs WR is smaller than the probability of running out of life/health.
MMM is mathematically correct. BH is more based on irrational fear.
That doesn't even begin to be wrong. Dying has no financial consequences for the decedent, so to speak. Everything ends there and then. Whereas, living after having exhausted funds (trying to survive, more properly put) has LOTS of disagreeable consequences.

MMM numbers are wrong to begin with and his planning principles are fundamentally flawed.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 7:38 pm

smitcat wrote:
Tue Apr 16, 2019 8:05 am

"If you have 80X you expenses when you live frugally then you have much less when you live lavishly. There is no going back."
Of course you can always cut back and live less expensively when you choose.... you can always go back for a short or long period of time.
Haha, have you tried?
When I was 25 I lived in NY with ~14k$ stipend. I lived well - in my opinion - and travel to Europe once or twice a year. I could go around the world with several thousand dollars. I used to backpack, sleep in tents or cheap hostels. I use to eat PB&J and eggs for dinner if was necessary. I lived in a 3 bdr apt with 5 more guys.
There is no way for me to return to that lifestyle, and not only psychologically. First of all we need expensive health insurance for multiple family members, I need good schools, I need a good car for a long commute. I need a house to live in, not a shared apartment. I need to travel because this is what I like - among many other expensive things - but I could not sleep in a tent on the side of the road or go with my wife and kid in a party hostel.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 7:47 pm

Thesaints wrote:
Tue Apr 16, 2019 7:29 pm
Starfish wrote:
Tue Apr 16, 2019 7:20 pm
Moreover, the probability of running out of money based on MMMs WR is smaller than the probability of running out of life/health.
MMM is mathematically correct. BH is more based on irrational fear.
That doesn't even begin to be wrong. Dying has no financial consequences for the decedent, so to speak. Everything ends there and then. Whereas, living after having exhausted funds (trying to survive, more properly put) has LOTS of disagreeable consequences.
So you advocate that shorter life is BETTER than longer life because you cannot be sorry for what you lost? You priorities are very strange to me. Your fear is to live too long? Too much life?
Life can be shortened at any point, if that is the issue.
MMM numbers are wrong to begin with and his planning principles are fundamentally flawed.
You keep repeating this but you bring no supporting data. MMM has lots of data to support him. Yes, he has his faults, maybe he is to extreme. But even if you do not adhere to his philosophy completely (I don't), it's a very healthy mental exercise and a good way to live at least in principle if not in numbers. FIRE is just a new possibility, a new path.

Having to convert the money you spend in years gained or lost from retirement give you a very good perspective and makes you balance in a better way "living now" vs. FIRE. The fact that people become deeply aware that money=time and time is short is his main contribution, not living with 35k/year.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 8:04 pm

Starfish wrote:
Tue Apr 16, 2019 7:47 pm
So you advocate that shorter life is BETTER than longer life because you cannot be sorry for what you lost? You priorities are very strange to me. Your fear is to live too long? Too much life?
Life can be shortened at any point, if that is the issue.
Personally, my position is that a longer life with lots of money is best. However, length of life it's outside one's control, so we are left with accumulating enough money to support the desired lifestyle as long as needed. Accumulating less with the idea that chances are one will die sooner will leave you unsatisfied in either case: you die sooner, or you live and have no money.

You keep repeating this but you bring no supporting data. MMM has lots of data to support him. Yes, he has his faults, maybe he is to extreme. But even if you do not adhere to his philosophy completely (I don't), it's a very healthy mental exercise and a good way to live at least in principle if not in numbers. FIRE is just a new possibility, a new path.

Having to convert the money you spend in years gained or lost from retirement give you a very good perspective and makes you balance in a better way "living now" vs. FIRE. The fact that people become deeply aware that money=time and time is short is his main contribution, not living with 35k/year.
The OP wrote
The general gist is that one could stop working today, forever, regardless of age and regardless of which account types the money is located, with 20x annual expenses, 100% in equities.
An example is an $800,000 portfolio of 100% equities (total U.S. stock market funds), drawing $40,000 in the first year of retirement and increasing annually for inflation.
That means 5% withdrawal rate with a highly volatile portfolio. Chances of exhausting funds before dying are at their maximum.

smitcat
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by smitcat » Tue Apr 16, 2019 8:05 pm

Starfish wrote:
Tue Apr 16, 2019 7:38 pm
smitcat wrote:
Tue Apr 16, 2019 8:05 am

"If you have 80X you expenses when you live frugally then you have much less when you live lavishly. There is no going back."
Of course you can always cut back and live less expensively when you choose.... you can always go back for a short or long period of time.
Haha, have you tried?
When I was 25 I lived in NY with ~14k$ stipend. I lived well - in my opinion - and travel to Europe once or twice a year. I could go around the world with several thousand dollars. I used to backpack, sleep in tents or cheap hostels. I use to eat PB&J and eggs for dinner if was necessary. I lived in a 3 bdr apt with 5 more guys.
There is no way for me to return to that lifestyle, and not only psychologically. First of all we need expensive health insurance for multiple family members, I need good schools, I need a good car for a long commute. I need a house to live in, not a shared apartment. I need to travel because this is what I like - among many other expensive things - but I could not sleep in a tent on the side of the road or go with my wife and kid in a party hostel.
"Haha, have you tried?"
Yes of course , no problem.
Frugality is relative just like 80X expenses is relative - halving that would be a no sweat situation.

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 8:20 pm

Thesaints wrote:
Tue Apr 16, 2019 8:04 pm
That means 5% withdrawal rate with a highly volatile portfolio. Chances of exhausting funds before dying are at their maximum.
From what I remember his 5% SWR is based on:
1. SS being a sizable part of living expenses (low expenses to begin with).
2. Picking up "side hustles" and part time jobs when/if necessary to avoid drawdowns. Even return to full time employment. Possible at 40, much less at 70.

His bond allocation is replaced by flexibility and human capital. There is nothing wrong with his math.

delamer
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by delamer » Tue Apr 16, 2019 8:22 pm

Starfish wrote:
Tue Apr 16, 2019 7:20 pm
Thesaints wrote:
Tue Apr 16, 2019 6:57 pm
Starfish wrote:
Tue Apr 16, 2019 3:16 pm
What is the probability to be at 70 dead or incapacitated vs. what is the probability to run out of money and be aware of it?
I bet than many BH-ers already are in their 70's. Not all of them incapacitated.
I assume they are not dead either, but I was talking about statistics.
The downside of running out of money in old age is much smaller than the downside of dying early.
Moreover, the probability of running out of money based on MMMs WR is smaller than the probability of running out of life/health.
MMM is mathematically correct. BH is more based on irrational fear.

Of course the reason for this is that is easy to go to work and gather money and go with the routine and rationalize it as the intelligent thing to do. Hey but the money will provide a great quality LTC for the 45% of people with Alzheimer's in 75-85 decade! Or a nice funeral to the ~25% who never reached 70. And this is just looking briefly at 2 factors, there is a long list of nasty diseases.
Can you point to a study that shows 45% of people between ages 75 to 85 have Alzheimer’s?


delamer
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by delamer » Tue Apr 16, 2019 8:27 pm

You read it wrong.

It says that 45% of those with Alzheimer’s are in the 75-85 age cohort.

That is completely different than claiming that 45% of people in that cohort have Alzheimer’s.

Thesaints
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Thesaints » Tue Apr 16, 2019 8:28 pm

Starfish wrote:
Tue Apr 16, 2019 8:20 pm
Thesaints wrote:
Tue Apr 16, 2019 8:04 pm
That means 5% withdrawal rate with a highly volatile portfolio. Chances of exhausting funds before dying are at their maximum.
From what I remember his 5% SWR is based on:
1. SS being a sizable part of living expenses (low expenses to begin with).
2. Picking up "side hustles" and part time jobs when/if necessary to avoid drawdowns. Even return to full time employment. Possible at 40, much less at 70.

His bond allocation is replaced by flexibility and human capital. There is nothing wrong with his math.
Ah, the usual FIRE-ers trick: I can retire on 40k/year, provided I get another 40k by continuing to work...

Either MMM needs the 5% withdrawals, or he doesn't. The fact that he makes other money via SSA, or "hustling" is immaterial.
If he does, there are solid chances money won't last. If he doesn't, why is he planning to draw 5% to begin with ?

Starfish
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Starfish » Tue Apr 16, 2019 8:41 pm

delamer wrote:
Tue Apr 16, 2019 8:27 pm
You read it wrong.

It says that 45% of those with Alzheimer’s are in the 75-85 age cohort.

That is completely different than claiming that 45% of people in that cohort have Alzheimer’s.
You are right, sorry for misleading.
But 1/3 of the people die with Alzheimers.
My point was not necessarily the percentage but the fact that these percentages are a lot higher than the failure for SWR. Then people freak out from the completely wrong reasons.
Thesaints wrote:
Tue Apr 16, 2019 8:28 pm
Starfish wrote:
Tue Apr 16, 2019 8:20 pm
Thesaints wrote:
Tue Apr 16, 2019 8:04 pm
That means 5% withdrawal rate with a highly volatile portfolio. Chances of exhausting funds before dying are at their maximum.
From what I remember his 5% SWR is based on:
1. SS being a sizable part of living expenses (low expenses to begin with).
2. Picking up "side hustles" and part time jobs when/if necessary to avoid drawdowns. Even return to full time employment. Possible at 40, much less at 70.

His bond allocation is replaced by flexibility and human capital. There is nothing wrong with his math.
Ah, the usual FIRE-ers trick: I can retire on 40k/year, provided I get another 40k by continuing to work...

Either MMM needs the 5% withdrawals, or he doesn't. The fact that he makes other money via SSA, or "hustling" is immaterial.
If he does, there are solid chances money won't last. If he doesn't, why is he planning to draw 5% to begin with ?

Why do you call this a trick?
Working when one desires, probably around a hobby, is not at all the same as full time employment. Extreme FIRE require this type of flexibility, just in case.
However even a 5% withdrawal rate does not have a very large chance of failure at least based on historical data. I don't know the exact numbers but for many people a 20% chance of having to interrupt "retirement" for several years out of several tens still sounds like a good deal. The other option is working 100% percent of the time for the next decades.

Why would one plan for money s/he is going to receive through SS? SS is probably safer than any investment at least because the number of retired people voting goes up every day.

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Earl Lemongrab
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Re: Mr. Money Mustache, SWR, and equity allocation

Post by Earl Lemongrab » Tue Apr 16, 2019 8:48 pm

Thesaints wrote:
Tue Apr 16, 2019 7:18 pm
Earl Lemongrab wrote:
Mon Apr 15, 2019 8:04 pm
I never lived frugally to save. I saved because I lived frugally. I don't plan any change in lifestyle now that I'm retired.
"I never lived frugally. I don't plan any change in lifestyle."
It sounds a lot more enticing, n'est-ce pas ?
But I did live frugally. I wouldn't want to mislead folks. But certainly not maximally frugal. Just what felt comfortable to me. I spend money on things that I have decided are worth it. There just aren't that many things.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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