My theory about FIRE

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Jags4186
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Re: My theory about FIRE

Post by Jags4186 »

For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
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firebirdparts
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Re: My theory about FIRE

Post by firebirdparts »

Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
A man can dream. I got sent home and I set up my office in my shop. I am in heaven so far, but I realize that the availability of the internet has rewired my brain so that it's constantly stimilated by pointless garbage. So really, I'd rather do something more fun that just pretend to work. I thought my wife might say something about me avoiding her all day, but all she's said is "keep avoiding me."

I ask for retirement advice a lot. I think there are some real mental challenges to it. I get why everybody likes to attack and criticize it, but that angle just doesn't interest me. I like having fun, and it so happens I'm very good at it.
A fool and your money are soon partners
ncbill
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Re: My theory about FIRE

Post by ncbill »

nigel_ht wrote: Tue May 05, 2020 1:19 am
market timer wrote: Tue May 05, 2020 12:45 am
nigel_ht wrote: Tue May 05, 2020 12:13 am
Because getting to be FI is a heck of a lot easier with a high income. Very few are frugal enough to make it on lower income. I gave my kids the exact opposite advice you gave because if they can FIRE at age 35 with 33x expenses they can switch to that low income passion career and not have to worry about the financial aspect.

Starting in that low income passion career means they may not reach 33x expenses ever.
I'm not sure there is a mismatch in career choice, but rather in organizational structures. The prototypical "FIRE @ 35" is someone who excelled at school in a subject they probably enjoyed. This person's academic achievements created a certain path that was largely merit-based.
There's a large time delta when saving 50% of your salary to reach FI when making $90K+ and when making $40K. There is a set of majors for which 4 years of college can get you that kind of job. Pick one of those...do them for 20 years. Save $500K+ in a 70/30 AA and hope for a little luck. Get to 33X and THEN become a writer or whatever your low paying passion job might be.

If you have a career that makes $200K+ a year it only takes 10 years and age 35.

If your passion job makes a lot of money, go for it. My son wants to become a CRNA. It's more than 4 years education but it is currently remunerative. I told him to become a PA instead and do a direct commission. Do 20 years in the military and come out with a pension and tricare. PAs make about $90K a year in the military. At that point he can retire or do whatever. He's financially set in his mid 40's.
Yep, how old is fatFIRE? Just joining the Guard gets you inexpensive health insurance.

I have a relative who in his mid-30s took the Army's offer to attend medical school...he's now out, retired O-5, working when he wants to (not that he has to) at civilian hospitals on contract.

My kids used the military to pay for their undergraduate education and I'm begging them to stay long enough to get the pension, even if they elect to leave active duty for Guard/Reserve once their service obligation is fulfilled.
visualguy
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Re: My theory about FIRE

Post by visualguy »

Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
45 days is one thing, 45 years is a different thing entirely... I think I could handle 3 years going through my bucket list, and also just taking things really easy. That would leave a few decades beyond that. What then?

A few months ago I asked a colleague who is in his late 60s why he's still working (he certainly doesn't need the money.) He said that spending more time with his dog and his wife is simply not all that appealing. I'm planning to ask him again to see if he changed his mind after the shelter-in-place :wink:
Jags4186
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Re: My theory about FIRE

Post by Jags4186 »

visualguy wrote: Tue May 05, 2020 3:52 pm
Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
45 days is one thing, 45 years is a different thing entirely... I think I could handle 3 years going through my bucket list, and also just taking things really easy. That would leave a few decades beyond that. What then?

A few months ago I asked a colleague who is in his late 60s why he's still working (he certainly doesn't need the money.) He said that spending more time with his dog and his wife is simply not all that appealing. I'm planning to ask him again to see if he changed his mind after the shelter-in-place :wink:
I know lots of family friends who retired in the 50s with big public pensions (back when the pensions were the real deal--we're talking pensions paying $150k+). I've asked a few of them (now in their mid 70s) did they ever want to work again after retiring. They all said NO.

I just don't define myself by what I do. And I really don't want the responsibility. Of course, the flip side is that is lots of responsibility and hard work are generally required to get you to the point where you don't need to be responsible or work hard (or at all).
marcopolo
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Re: My theory about FIRE

Post by marcopolo »

visualguy wrote: Tue May 05, 2020 3:52 pm
Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
45 days is one thing, 45 years is a different thing entirely... I think I could handle 3 years going through my bucket list, and also just taking things really easy. That would leave a few decades beyond that. What then?

A few months ago I asked a colleague who is in his late 60s why he's still working (he certainly doesn't need the money.) He said that spending more time with his dog and his wife is simply not all that appealing. I'm planning to ask him again to see if he changed his mind after the shelter-in-place :wink:
I am curious what you do in your career. Does that not get mundane as well?

I think there are VERY few professions where what you are doing is so meaningful that the sense of accomplishment you get out of it far outweighs what else you could be doing with your life.

For the vast majority of jobs, i would posit that they are not really as "meaningful" as people would make them out to be. The world will go on without one's "TPS Report".

I had a career I was quite interested in, enough to pursue a PhD. I was relatively successful at it because i enjoyed it. The products I helped pioneer (numerous patents) has saved many lives. But, even that got routine after 20 a while. The thing about retirement is that you have the freedom to pursue many things. I am sure some will stick, and others I will discard. But, the idea that you need to have a paying job to find "meaning" in life seems quite odd to me.
Once in a while you get shown the light, in the strangest of places if you look at it right.
EddyB
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Re: My theory about FIRE

Post by EddyB »

visualguy wrote: Tue May 05, 2020 3:52 pm
Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
45 days is one thing, 45 years is a different thing entirely... I think I could handle 3 years going through my bucket list, and also just taking things really easy. That would leave a few decades beyond that. What then?

A few months ago I asked a colleague who is in his late 60s why he's still working (he certainly doesn't need the money.) He said that spending more time with his dog and his wife is simply not all that appealing. I'm planning to ask him again to see if he changed his mind after the shelter-in-place :wink:
Even in the past few years (while working, raising kids and pursuing my existing "hobbies"), I've found other new interests. And that's been true for any few years in my adult life. The idea that I wouldn't find interests during retirement, ones that I don't even recognize now, is pretty hard for me to believe.
Last edited by EddyB on Tue May 05, 2020 4:12 pm, edited 1 time in total.
surfstar
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Re: My theory about FIRE

Post by surfstar »

visualguy wrote: Tue May 05, 2020 3:52 pm
Jags4186 wrote: Tue May 05, 2020 3:22 pm For the past 45 days or so I have had very [very] little work but still have been getting paid. Today I did some lawn work and made a sandwich and a fancy iced coffee.

What I learned is that I'll be fine in retirement and FIRE certainly doesn't mean "retiring and doing something else", at least not to me.
45 days is one thing, 45 years is a different thing entirely... I think I could handle 3 years going through my bucket list, and also just taking things really easy. That would leave a few decades beyond that. What then?

A few months ago I asked a colleague who is in his late 60s why he's still working (he certainly doesn't need the money.) He said that spending more time with his dog and his wife is simply not all that appealing. I'm planning to ask him again to see if he changed his mind after the shelter-in-place :wink:
Great - so you don't have anything better to do than work? Feel free to donate to our FIREfund. We'll happily spend decades going new places, trying new hobbies, and generally exploring the world.

I know what my cube (and now my table-turned-standing-home-office) looks like. I know what working in various jobs is like. It is not what we choose to do on the weekends or vacations. That is what we would rather do.

I'm always left pondering: which is the worse fate? - Not liking your job/work so much that you can't wait to retire or not having something better than your job/work to retire to?
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CyclingDuo
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Re: My theory about FIRE

Post by CyclingDuo »

fatFIRE wrote: Tue May 05, 2020 11:38 am Almost every argument I've seen for teachers brings in pension one way or another.
Well, yes because it is part of the overall compensation/benefit package as it is a defined benefit plan. We teach our students who are going into education at the college where I teach all about the compensation/benefit packages of not only our state, but also the surrounding border states of which there are six. Two of those six states do not have teachers paying into Social Security. Each of the states have different formulas to determine when one qualifies for the full pension. One state is only 25 years of service, so a teacher could retire at age 47 and receive the full pension (it is in one of the states where teachers do not pay into SS). You are vested in some states as little as 3 years, some are 5 years, some are 7, some are more - although the pension amount at those vesting years would be rather small.

Thus, when talking about the traditional three legged stool for retirement income streams of pension, SS and savings/investments - that is all pointed out to our college students pursuing a career in education as preparation work for when they begin the job hunting sequence. Our business/finance professors also offer free classes to students and faculty to help prepare them for their futures. IMO - this is all rather good and certainly was not something that I recall being offered when I went through college a few decades ago. The two border states we cover in our classes that do not have teachers paying into SS typically receive a higher pension amount as a result.

The argument for public school teachers and some state university professors includes the value add of the state pension. Again, it is part of the compensation/benefit package. The majority of professors in the US do not have a pension plan and are utilizing the defined contribution plans of their employers via the 403b and a 457b plan (if available) with the the employer match. I'm under one of those plans. Those 403b and 457b plans are available for public school teachers without the match as a voluntary pre-tax or post-tax salary deduction which would be in addition to the mandatory pension deduction that comes out of every paycheck. Those plans are designed to set up an educator for retirement success where no single part of the three legged stool of retirement income is designed to cover all of a retiree's needs in retirement. The pension won't do it alone. The 403b/457b plan(s) won't do it alone. And Social Security won't do it alone. However, when all three are combined, there is plenty of potential for a financially sound retirement - especially if the household has lived below their means and is balance sheet affluent.

In our case, we are a dual income household currently in education (one in academia, the other in public schools). So we are not one of those households where one is a teacher and the other is an engineer, or accountant, or lawyer, or doctor, etc... . Just a pair of teachers. The same is true for a large portion of our social circle that comprises many couples where both spouses are teachers or professors - or a mix of one of each.
fatFIRE wrote: Tue May 05, 2020 11:38 am
- You're assuming the pension system stays the same from now until age 50+. That's a bit IF, because you not only need to factor in numbers like is the pension investing in a way that can meet its liabilities, but politics as well, i.e. will there be a vote to remove pensions in the future?
You are correct. We would advise that one should indeed weigh the health of the pension plan in a state where one is applying to teach. Our state pension plan always ranks in the top 10 in the nation for funding and has ranked that high since we have been here. We do read the annual report each year and pay attention to what legislators are saying regarding our state pension plan. In our cases, we are age 50+, so it is not far away in terms of when the pension benefit starts.
fatFIRE wrote: Tue May 05, 2020 11:38 am
- Pensions also have this terrible characteristic of locking you in place... you can't jobs, can''t change fields. I walked away from a job that paid a pension because of this.
Again, you are correct about being locked into a particular state. This is designed for teacher retention to keep the best teaching talent within a state. If one has done their research before applying for a position with a state pension, that research should easily have uncovered each of the items you mention. You can change jobs within our state and maintain your pension in a variety of ways. You can change to another school district for career advancement, or once you meet the rule of 88 in your mid-50's and qualify for the full pension - you could completely change fields, move to a different state, etc... . We have some colleagues who hit that point in their mid-50's, retire from their local district, then take a job teaching in one of our six border states to qualify for an additional pension sum from another state by working an additional number of years to be vested in that state's pension plan (as little as 3, 5 or 7 years). Especially those who live in cities/towns that are on or near one of the borders for an easy commute, it is not unheard of to utilize that strategy. We mention this to our education students as a potential future. Other colleagues we know have retired from public school teaching in their mid 50's and then taken a job at a private school (usually a Catholic school in our area).
fatFIRE wrote: Tue May 05, 2020 11:38 am- Have you actually done a back-calculation as to how much the pension income would be in terms of today's income?
A back-calculation? We know how much my spouse has contributed into her pension over the years as it is on her statement, as well as how much her employer has contributed over the years. It also lists the lump sum cash out value if she were to take that option by stopping work now as opposed to the lifetime pension payout benefit. Trust us, the lump sum payout is peanuts, but is an option. Each pension statement also lists - in today's dollars - what she would receive now, what she would receive when she hits the rule of qualifying for the full pension, as well as what additional years would add if she worked beyond that point. All in today's dollars. An estimate of what it would cost to purchase up to 5 additional years of service credits and how much the pension would be after that purchase is available as well, but the final and official figures for that are run during the paperwork filing for retirement at the end of one's career.

Currently, without purchasing additional years of service, we would have to have an additional $750K - $1.1M in our portfolio to produce the same level of income that she would get from her pension based on the 4% SWR as well as the amount depending on the year when she actually takes the pension in a few years time. If she quit this year, we would have to have the equivalent of an additional $650K in our portfolio to produce the same amount of income using the 4% SWR. She has also been contributing to her 403b and 457b plans on a pre-tax salary deduction basis. Between her two plans, my 403b defined contribution plan from college teaching, my 401k from a part-time job outside of teaching that I began two years ago, along with our Roth IRA's, tIRA's, and taxable account investing - everything remains on target - albeit, certainly not at age 35 or 45.

Again - it's not a career destined to hit one's FIRE number in the 30's or 40's in and of itself. It becomes more realistic for the mid 50's to early 60's in terms of qualifying for the full pension, having had the time to build up the balances in the voluntary 403b/457b plans by contributing on a regular basis for three decades or more, and working long enough to qualify for 35 years of paying into SS to utilize the traditional three legged stool of retirement income. A slower, longer build than someone in a career who has more income to work with so they can more than offset the pension and 35 years of paying into Social Security to retire earlier.

CyclingDuo
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HomerJ
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Re: My theory about FIRE

Post by HomerJ »

EnjoyIt wrote: Tue Apr 14, 2020 2:59 pm
meowcat wrote: Tue Apr 14, 2020 12:19 pm
BW1985 wrote: Tue Apr 14, 2020 9:31 am FIRE can mean different things to different people, there's no requirement that you retire in the traditional sense of the word and move to Florida or something. People get hung up on this.

To me FIRE means I have the choice to hop out of the rat race when ever I want, and if I choose to still work the compensation no longer needs to be a top consideration. Right now I live in a different state then my family because of compensation.
This is it, exactly. I don't equate the term "retirement" the same way many of you do. I believe if you quit your job because you're FI, but take up a more relaxing, rewarding type of work, yet still collect a paycheck, you're not retired. It doesn't matter how much you love your FI work, if you're getting paid to do a job, you are not retired. In a nutshell, MMM is definitely not retired, never has been. He has always worked for money. So that's how I define it. If you work for money, you're not retired. That's my perspective.
Is there a gray area for you?

For example, my father is retired at 78. Every now and then one of his old clients asks for help and pays him for it. It usually ends up being maybe 20-40 hours of work spanning a few weeks. It happens maybe 1-3 times a year. He doesn't need the money, but he like being needed and happily takes on the job and the money. Is he retired and then comes out of retirement 1-3 times a year?

I have another friend who loves motorcycles. He has a hobby where he buys an older bike, fixes it up, rides it for a year, and then eventually finds another project bike to work on. Fixes up the new bike and then sells his older bike since now he has a new toy. He always makes a profit on the sale. Is this person retired or is their hobby a job because he gets makes a profit. What if the same scenario but he broke even?

What about my friend's father who says he retired in his 40s. He built up a portfolio of stocks that he actively managed. This was 30 years ago, what he would do is buy a stock, wait till it went up a few thousand and sell it. He did this multiple times a year which would provide enough money for their lifestyle. Since he actively managed his portfolio, was he retired?

There is a gray area between retirement and employment. This gray area gets very contentious when discussing it on forums such as these because not everyone agrees what the gray area is. Some people believe retired means absolutely no income and that person must sit on the beach rotting away. While others will call a hobby that happens to make a few bucks here and there retirement. These people will never agree.
There is no grey area. If you NEED the money, you're not retired. You may be semi-retired, part-time, whatever.

Making money doing some work in retirement is fine.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
EddyB
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Re: My theory about FIRE

Post by EddyB »

HomerJ wrote: Tue May 05, 2020 4:34 pm
EnjoyIt wrote: Tue Apr 14, 2020 2:59 pm
meowcat wrote: Tue Apr 14, 2020 12:19 pm
BW1985 wrote: Tue Apr 14, 2020 9:31 am FIRE can mean different things to different people, there's no requirement that you retire in the traditional sense of the word and move to Florida or something. People get hung up on this.

To me FIRE means I have the choice to hop out of the rat race when ever I want, and if I choose to still work the compensation no longer needs to be a top consideration. Right now I live in a different state then my family because of compensation.
This is it, exactly. I don't equate the term "retirement" the same way many of you do. I believe if you quit your job because you're FI, but take up a more relaxing, rewarding type of work, yet still collect a paycheck, you're not retired. It doesn't matter how much you love your FI work, if you're getting paid to do a job, you are not retired. In a nutshell, MMM is definitely not retired, never has been. He has always worked for money. So that's how I define it. If you work for money, you're not retired. That's my perspective.
Is there a gray area for you?

For example, my father is retired at 78. Every now and then one of his old clients asks for help and pays him for it. It usually ends up being maybe 20-40 hours of work spanning a few weeks. It happens maybe 1-3 times a year. He doesn't need the money, but he like being needed and happily takes on the job and the money. Is he retired and then comes out of retirement 1-3 times a year?

I have another friend who loves motorcycles. He has a hobby where he buys an older bike, fixes it up, rides it for a year, and then eventually finds another project bike to work on. Fixes up the new bike and then sells his older bike since now he has a new toy. He always makes a profit on the sale. Is this person retired or is their hobby a job because he gets makes a profit. What if the same scenario but he broke even?

What about my friend's father who says he retired in his 40s. He built up a portfolio of stocks that he actively managed. This was 30 years ago, what he would do is buy a stock, wait till it went up a few thousand and sell it. He did this multiple times a year which would provide enough money for their lifestyle. Since he actively managed his portfolio, was he retired?

There is a gray area between retirement and employment. This gray area gets very contentious when discussing it on forums such as these because not everyone agrees what the gray area is. Some people believe retired means absolutely no income and that person must sit on the beach rotting away. While others will call a hobby that happens to make a few bucks here and there retirement. These people will never agree.
There is no grey area. If you NEED the money, you're not retired. You may be semi-retired, part-time, whatever.

Making money doing some work in retirement is fine.
What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
TheDDC
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Re: My theory about FIRE

Post by TheDDC »

CyclingDuo wrote: Tue May 05, 2020 4:28 pm
fatFIRE wrote: Tue May 05, 2020 11:38 am
- You're assuming the pension system stays the same from now until age 50+. That's a bit IF, because you not only need to factor in numbers like is the pension investing in a way that can meet its liabilities, but politics as well, i.e. will there be a vote to remove pensions in the future?
You are correct. We would advise that one should indeed weigh the health of the pension plan in a state where one is applying to teach. Our state pension plan always ranks in the top 10 in the nation for funding and has ranked that high since we have been here. We do read the annual report each year and pay attention to what legislators are saying regarding our state pension plan. In our cases, we are age 50+, so it is not far away in terms of when the pension benefit starts.
Incorrect. The pension stays the same for current vested membership. You cannot change a contract without consent of the members. This was also the cause in my state when the multiplier was increased as well. A pension is a deferred payment arrangement to avoid paying now, so the state instead pays later. They either pay it now or later. State/fed govt simply cannot complete at current salary levels with the private sector for the "talent" jobs without the pension. What states have been doing is to move new members to DC plans. Some states (not mine) have a COLA. Since a COLA is unearned until retirement, the COLA could presumably change without consent.

Pay attention, yes, because any silly moves by state legislators regarding contracts means that if they try to break a contract, they will go after yours (in terms of your IRAs) to pay for it anyway. It is the responsibility of all of us to keep them honest.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
EnjoyIt
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Re: My theory about FIRE

Post by EnjoyIt »

HomerJ wrote: Tue May 05, 2020 4:34 pm
EnjoyIt wrote: Tue Apr 14, 2020 2:59 pm
meowcat wrote: Tue Apr 14, 2020 12:19 pm
BW1985 wrote: Tue Apr 14, 2020 9:31 am FIRE can mean different things to different people, there's no requirement that you retire in the traditional sense of the word and move to Florida or something. People get hung up on this.

To me FIRE means I have the choice to hop out of the rat race when ever I want, and if I choose to still work the compensation no longer needs to be a top consideration. Right now I live in a different state then my family because of compensation.
This is it, exactly. I don't equate the term "retirement" the same way many of you do. I believe if you quit your job because you're FI, but take up a more relaxing, rewarding type of work, yet still collect a paycheck, you're not retired. It doesn't matter how much you love your FI work, if you're getting paid to do a job, you are not retired. In a nutshell, MMM is definitely not retired, never has been. He has always worked for money. So that's how I define it. If you work for money, you're not retired. That's my perspective.
Is there a gray area for you?

For example, my father is retired at 78. Every now and then one of his old clients asks for help and pays him for it. It usually ends up being maybe 20-40 hours of work spanning a few weeks. It happens maybe 1-3 times a year. He doesn't need the money, but he like being needed and happily takes on the job and the money. Is he retired and then comes out of retirement 1-3 times a year?

I have another friend who loves motorcycles. He has a hobby where he buys an older bike, fixes it up, rides it for a year, and then eventually finds another project bike to work on. Fixes up the new bike and then sells his older bike since now he has a new toy. He always makes a profit on the sale. Is this person retired or is their hobby a job because he gets makes a profit. What if the same scenario but he broke even?

What about my friend's father who says he retired in his 40s. He built up a portfolio of stocks that he actively managed. This was 30 years ago, what he would do is buy a stock, wait till it went up a few thousand and sell it. He did this multiple times a year which would provide enough money for their lifestyle. Since he actively managed his portfolio, was he retired?

There is a gray area between retirement and employment. This gray area gets very contentious when discussing it on forums such as these because not everyone agrees what the gray area is. Some people believe retired means absolutely no income and that person must sit on the beach rotting away. While others will call a hobby that happens to make a few bucks here and there retirement. These people will never agree.
There is no grey area. If you NEED the money, you're not retired. You may be semi-retired, part-time, whatever.

Making money doing some work in retirement is fine.
"NEED," is also a blurry word when it comes to more money.
I don't need to work and make more money, but I choose to because I would like more money and luckily I can work part time to get it. Right now in my life I would prefer to earn some money and prefer to work some to get it. Very nice and comfortable place to be.

So how do you definite "NEED?" Someone who lives on $30k/yr with $750k invested may say they need more money because the $30k does not cover enough travel as they would like to do. This person picks up some very sporadic part time work to supplement their vacation fund. What about someone living on $100k/yr with $2.5 million saved and takes on a part time contracting gig netting him $25k that they use to take their kids and grandkids on an awesome family vacation. What about a bunch of scenarios in between?

I think even "NEED" can be a grey term as well.
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CyclingDuo
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Re: My theory about FIRE

Post by CyclingDuo »

nigel_ht wrote: Tue May 05, 2020 3:15 pm
CyclingDuo wrote: Tue May 05, 2020 9:01 am We lived and worked overseas for a decade in our 30's and early 40's (kids grew up bi-lingual speaking German, skiing the Alps every season, having friends from a long list of countries) and got plenty of international experience - plus we had the summers off to travel all over continental Europe in our mini-van. We are thankful for that as well as the front end loading of "experiences" that we were able to do as a family. We wouldn't trade that for anything at this point in our lives.
That's not a normal teaching career. As I said the only one I know that has done this is someone who worked for DODEA for dependent education overseas.
True, but it is the path we chose. My wife taught at one of the American International Schools in a major European city and I have often mentioned that I was working in my respective field, but not in teaching. I didn't begin teaching at the college level until age 43 when we came back to the states. We didn't save very much outside of 15-20% during the European years as a result, but the trade off was to front end load life's experiences and take advantage of the situation of living and working overseas.
CyclingDuo wrote: Tue May 05, 2020 9:01 am One of the key issues regarding jobs such as investment banking and a lot of technology, or other high income salaried work is it usually involves living in a much higher cost of living area (metro areas). So the issue of being Income Statement Affluent (IA) vs. Balance Sheet Affluent (BA) crops up.
nigel_ht wrote: Tue May 05, 2020 3:15 pmThe $70K median starting salary for software developers is covers those from LCOL through HCOL areas. For certain starting salaries in HCOL areas are higher and for places like Google or Amazon higher still.

I lost a freshout to the financial industry and his starting salary there was only maybe $30K lower than mine. I have a freshout making really good money in out HCOL area living with their parents. HCOL areas have higher starting salaries for teachers as well but typically are still half that of software developers.

There's no issue of IA vs BA when you have the same saving mindset. Folks with higher incomes will have higher balances than folks with lower incomes and the same savings rate. Just the way math works.
The author's point I was trying to convey was you won't find too many in investment banking or high tech in Yankton, South Dakota, or Norfolk, Nebraska, or Jackson, Mississippi, or Peoria, Illinois, or Cooperstown, NY, etc... . You will, however find plenty of teachers in each of those towns. No argument that starting salaries in IB or high tech in some of the major HCOL areas such as NYC, San Francisco Bay Area, Seattle, etc... is not high enough to be an immediate IA household. After having read Stanley's book, it's not talking about a freshout (I've only heard that term related to prison), but a lifetime career in an industry that more than usual demands living in a HCOL area.
nigel_ht wrote: Tue May 05, 2020 3:15 pmIt's not theoretical. Many folks are doing it. And you haven't shown any data, just hand waved to a couple books that bear no direct relationship to FIRE.
Fair enough. Many of us are still waiting on a definitive standard definition of what FIRE means. :twisted:

Dr. McFrugal nails it here, IMO:

https://www.drmcfrugal.com/rebranding-f ... pje1y3zcQA

We are all for a high rate of savings and reaching a goal of financial independence early on, and providing options on the -RE side (which is the one side of the FIRE equation we still think remains such a broad definition that could be construed to float many types of boats).
CyclingDuo wrote: Tue May 05, 2020 9:01 amHow many are actually able to do this and reach a level of wealth by age 35 (or whatever the age number is) that will sustain one for the remaining 50-60 years providing an adequate, comfortable lifestyle? Regardless, it's obvious I am going to speak up for teachers and professors when comments are made about their balance sheets.
nigel_ht wrote: Tue May 05, 2020 3:15 pmMy dad was a professor that achieved FI. Life was frugal. Not bad, just frugal. As a software developer I achieved FI with far less effort, in less time and less frugality. And while it wasn't by 35 I also wasn't shooting for 35. Had I been I had a good chance of making it.
We grew up in very frugal households as well that had achieved FI and retired early from their main careers, but kept working on a part-time basis for many years - not for the money, but to remain engaged, challenged, and I would assume for structure and the social aspect. Kudos to you on achieving your FI with far less effort than your father.
CyclingDuo wrote: Tue May 05, 2020 9:01 am Again - all of this is well written about in Stop Acting Rich by Stanley, Hogan's Everyday Millionaire, Stanley's The Millionaire Next Door, etc...
nigel_ht wrote: Tue May 05, 2020 3:15 pmNothing written in those books invalidates anything about the FIRE community that preaches LBYM and being prodigious savers. Folks trying to FIRE aren't living rich...they are saving money like crazy.
Kudos for those that live in HCOL areas that can find housing and expenses low enough to be able to starve and stack their way to FIRE. Knowing what the rents are in Seattle, San Francisco and NYC - it has to be difficult for a young family to do this, but the authors were not in any way shooting down FIRE.
CyclingDuo wrote: Tue May 05, 2020 9:01 amIf there was anything I was trying to prove, it is that FIRE can happen at a variety of ages and from a variety of incomes - and careers. It is not a "brand" that is set in stone that it must happen in one's 30's or 40's. There are so many varieties of it that nobody is talking about the same thing.
nigel_ht wrote: Tue May 05, 2020 3:15 pmAnd as someone in their mid 50's there's a marked difference between now and being in your mid 30s. There's no need to feel bad about being a late bloomer. Frankly, I don't know any teachers that have FIRE'd. That's different than having a $1M+ family net worth.
My posts were in response to some things fatFIRE had said, and I was more or less trying to stand up for teachers/professors. We know teachers that have FIRE'd, but it didn't happen until their mid 50's.

CyclingDuo
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Re: My theory about FIRE

Post by nigel_ht »

CyclingDuo wrote: Tue May 05, 2020 5:34 pm The author's point I was trying to convey was you won't find too many in investment banking or high tech in Yankton, South Dakota, or Norfolk, Nebraska, or Jackson, Mississippi, or Peoria, Illinois, or Cooperstown, NY, etc... . You will, however find plenty of teachers in each of those towns. No argument that starting salaries in IB or high tech in some of the major HCOL areas such as NYC, San Francisco Bay Area, Seattle, etc... is not high enough to be an immediate IA household. After having read Stanley's book, it's not talking about a freshout (I've only heard that term related to prison), but a lifetime career in an industry that more than usual demands living in a HCOL area.
nigel_ht wrote: Tue May 05, 2020 3:15 pmIt's not theoretical. Many folks are doing it. And you haven't shown any data, just hand waved to a couple books that bear no direct relationship to FIRE.
Fair enough. Many of us are still waiting on a definitive standard definition of what FIRE means. :twisted:

Dr. McFrugal nails it here, IMO:

https://www.drmcfrugal.com/rebranding-f ... pje1y3zcQA
If you are "rebranding" something it implies it has a brand to begin with. The FIRE "brand" as defined by the FIRE community is millennials retiring in their early career phase. You can start your own movement with some other acronym...especially if you don't agree with the "retire early" part. There's no need to hijack theirs.
nigel_ht wrote: Tue May 05, 2020 3:15 pmNothing written in those books invalidates anything about the FIRE community that preaches LBYM and being prodigious savers. Folks trying to FIRE aren't living rich...they are saving money like crazy.
Kudos for those that live in HCOL areas that can find housing and expenses low enough to be able to starve and stack their way to FIRE. Knowing what the rents are in Seattle, San Francisco and NYC - it has to be difficult for a young family to do this, but the authors were not in any way shooting down FIRE.
You continue to mischaracterize high earners in HCOL areas as struggling to save. Not all HCOL areas are in NY, SF or Seattle and not all high wage earners live in HCOL areas. This is no better than what you accuse FatFIRE of doing about teachers.

The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers.
My posts were in response to some things fatFIRE had said, and I was more or less trying to stand up for teachers/professors. We know teachers that have FIRE'd, but it didn't happen until their mid 50's
While retiring in your 50s is early it's barely early. Folks in this age range are more just retired than retiring early since they are at a different stage of life than individuals or couples in their 30s with younger kids.
ThatGuy
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Re: My theory about FIRE

Post by ThatGuy »

EddyB wrote: Tue May 05, 2020 4:40 pm
HomerJ wrote: Tue May 05, 2020 4:34 pm There is no grey area. If you NEED the money, you're not retired. You may be semi-retired, part-time, whatever.

Making money doing some work in retirement is fine.
What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
If you regularly perform work that you wouldn't without monetary compensation, then you're not retired.

You might be Financially Independent, but you're not retired.
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Re: My theory about FIRE

Post by JediMisty »

EFF_fan81 wrote: Tue Apr 14, 2020 1:20 pm
FishTaco wrote: Tue Apr 14, 2020 3:26 am
DonIce wrote: Tue Apr 14, 2020 1:33 am
But the part I don't get is all the promising smart people (which you have to be to be able to attain FI early) that go into careers that they hate and suffer through them for a decade or two, so they can "retire early" to do something else (that's still productive). It just makes no sense to me at all. Why waste ones 20s and 30s doing something you hate so you can FIRE at ~40 (if all goes according to plan, no guarantee)?
..........
Hardly. People are different. Some people love technical/mathematical subjects, and want to be engineers/mathematicians/computer scientists. Other people hate that kind of work. Some people love helping others through medicine, psychology, etc. Others hate that kind of work. Some people want to produce art, others would hate to do that. Some people love business, trade, negotiation, and others hate it. Some people enjoy being an entrepreneur and starting a company, others hate it. Same goes for hands on trades, restaurant business, etc etc etc.
.........
People should introspect a little deeper to figure out what they want to do. By their early 20s, which is generally when the choice has to be made, people should have a decent understanding of themselves if they've spent any time seriously thinking about it.
In an effort to help you understand a different view:

I think you are downplaying the degree which your work environment and politics come into the decision to pursue FIRE and are rather focusing on the choice of training one has undertaken to achieve their position.

I work a lot with young physicians, and many of them are very interested in FIRE. Many of them are incredibly smart and hardworking, but I think a lot of them become very disillusioned with what the practice of medicine has become. I don't know of any that picked medicine because they planned to pursue FI, but rather, they decided to pursue FI when they see how dysfunctional the practice can be. And a lot of these things just can't be fully appreciated until you have immersed yourself in the field. So I actually see it the other way around- I think that if you happen to go into medicine and are smart, you figure out quickly how to put yourself in a position that will allow you practice on your own terms rather than being trapped in the field.
Well put. I am a lawyer and feel the same way. It is not that I want to quit and never earn a single penny ever again. It is also not that I want to stop using my previous skills completely. It is that as time goes on, I want to increasingly do it on my own terms.

I started my career at a large firm. Then I switched to a smaller firm. Then I switched in-house. Each time I have gotten more autonomy. My quality of life changed accordingly from abysmal to tolerable to reasonably pleasant. Now I mostly enjoy what I do and my colleagues and my biggest complain is corporate BS and politics. (The way to advance where I work is to be friends with the executive director -- quality of work is by far a secondary factor). So the next step will be to try to minimize that too. The ultimate autonomy will be running my own successful solo or very small firm practice with clients of my own choosing after obtaining financial independence (or just getting close enough and rolling the dice). The goal is not to sit on my front porch for an additional 20 years but to make sure I never again feel trapped into doing something that makes me miserable or to work with people who don't respect my contributions. For any amount of money.

I suppose one can just quit without savings and due that anyways, and many people do that. But it is hard to walk away from a high paying career, and many of us are too cautious (or maybe prudent) to do that. So we develop plans. FIRE is a method to use discipline and intelligence to have our cake and eat it too.
Every place I have ever worked had "friends in high places" as the first and most important criteria for advancement. Knowing how to promote one's self matters more than working hard. I've never had a bad review, but have languished. Any of my bosses who actually supported us with our client (federal contract) was quickly dispensed with. I'm near retirement and will probably wait another 1.5 years so I can use cobra until Medicare. If my job was just about the work and less about kissing patootie, that would be great. I don't hate it, but look forward to leaving.
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Re: My theory about FIRE

Post by HomerJ »

EFF_fan81 wrote: Wed Apr 15, 2020 10:14 am
EnjoyIt wrote: Wed Apr 15, 2020 10:02 am
smitcat wrote: Wed Apr 15, 2020 8:41 am
EnjoyIt wrote: Tue Apr 14, 2020 4:19 pm
Normchad wrote: Tue Apr 14, 2020 4:12 pm I really do wonder about the folks that give up the grind to take that minimum wage Home Depot job. For me, I can probably earn more in one year at my regular job than I could in 20 years of part time Home Depot work. So I’d just suck it up for one more year and completely retire.

I like the idea of doing nothing. I do my job now because they pay me to do it. If they didn’t pay me, I wouldn’t show up anymore. Given that I have to be paid to do it, there surely must be something better to spend my remaining life energy on.
What about taking that extra year, having enough money to retire, but afterwards working 1-2 days a week at home depot because you like helping people and socializing in home depot? Maybe not for you, but someone who loves tools and fixing things may really enjoy that kind of work.
"Maybe not for you, but someone who loves tools and fixing things may really enjoy that kind of work."
I would strongly suggest that folks test these ideas/future plans for a couple of months before committing to them.
I know a number of folks who dreamed about how these ideas would work out and were very unpleasantly surprised.
That's the beauty of being FI. They don't need the money so they can do something else. They can go back to their original profession, try something else, or sit on their keaster at home.

But, I would not make such a huge jump until FI because the grass is not always greener and one should make sure they have options if this doesn't work out.
The key is to make absolutely sure you are fully FIRE before taking the Home Depot job.

I'm not going to quit my law job at 15x expenses and "barista FIRE.". That's crazy. I'm going to hit 25x and then do one more year just to top it off and then FIRE. Then you can quit home depot anytime you like.

The point is freedom.
This.

If you NEED the Home Depot job, even part-time, you're not FIRE.

And I like the "25x and do one more year to "top it off"" statement... That's pretty good. :beer
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Re: My theory about FIRE

Post by HomerJ »

EddyB wrote: Tue May 05, 2020 4:40 pm What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: My theory about FIRE

Post by HomerJ »

EnjoyIt wrote: Tue May 05, 2020 5:32 pm "NEED," is also a blurry word when it comes to more money.
I don't need to work and make more money, but I choose to because I would like more money and luckily I can work part time to get it. Right now in my life I would prefer to earn some money and prefer to work some to get it. Very nice and comfortable place to be.

So how do you definite "NEED?" Someone who lives on $30k/yr with $750k invested may say they need more money because the $30k does not cover enough travel as they would like to do. This person picks up some very sporadic part time work to supplement their vacation fund. What about someone living on $100k/yr with $2.5 million saved and takes on a part time contracting gig netting him $25k that they use to take their kids and grandkids on an awesome family vacation. What about a bunch of scenarios in between?

I think even "NEED" can be a grey term as well.
Okay I'll give in to you too... You make some good points... :sharebeer
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Re: My theory about FIRE

Post by Normchad »

I'm probably being too literal, but here goes.... FIRE is FINANCIALLY INDEPENDENT/RETIRE EARLY

So in my mind, being financially independent means you don't have money problems or concerns. you don't need any more money, not even a little bit. You're not concerned with daily market movements.

And RETIRE EARLY means you stop working, at a fairly youngish age. Say 55 of less.

For those that are accumulating a lot of money, and decide to work Home Depot or Starbucks to make it to the end, I don't think they are FIRE. I think they are having a career change. Or trying to make ends meet despite having done well so far.

Don't get me wrong, there is nothing wrong with working. And there are lots of great, successful, interesting people that choose to keep working, despite not needing the money. There is nothing wrong with that. Those people are FI but not RE.

But, for the people who downshifted late in their careers, great for you. But don't tell me you FIREd when you're still clearly working, and likely doing it for the paycheck. You are neither FI nor are you RE.

Ditto for people working 20 hours a week on a personal finance blog collecting ad revenue. Nothing wrong with that, but be honest, you are still working, and still collecting money.
Last edited by Normchad on Tue May 05, 2020 9:51 pm, edited 1 time in total.
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Re: My theory about FIRE

Post by 22twain »

CyclingDuo wrote: Tue May 05, 2020 4:28 pm Those 403b and 457b plans are available for public school teachers without the match as a voluntary pre-tax or post-tax salary deduction which would be in addition to the mandatory pension deduction that comes out of every paycheck. Those plans are designed to set up an educator for retirement success where no single part of the three legged stool of retirement income is designed to cover all of a retiree's needs in retirement. The pension won't do it alone. The 403b/457b plan(s) won't do it alone. And Social Security won't do it alone. However, when all three are combined, there is plenty of potential for a financially sound retirement - especially if the household has lived below their means and is balance sheet affluent.
The small private college where DW and I taught doesn't have a pension plan, but it does make a generous 403b contribution which doesn't require an employee match. It was about 8.5% of salary until the Great Recession, then reduced to 7.5% because of the college's financial difficulties. This helps make up for the "missing" pension, and of course we made our own pre-tax contributions. Averaged over 32 years, the total contributions came out to about 25% of salary for me. We'll do OK with the 403b and Social Security.

It also helps that we live in a LCOL area, don't have fancy tastes in housing or cars, live within walking distance from (former) work, and aren't into luxury resort or cruise vacations. And in this county, I don't think it's possible nowadays for a couple to spend more than $50 on dinner. We did spend about $60 a few times on our anniversary, but that place closed during the Great Recession.
Last edited by 22twain on Tue May 05, 2020 9:57 pm, edited 1 time in total.
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Re: My theory about FIRE

Post by Normchad »

22twain wrote: Tue May 05, 2020 9:45 pm
CyclingDuo wrote: Tue May 05, 2020 4:28 pm Those 403b and 457b plans are available for public school teachers without the match as a voluntary pre-tax or post-tax salary deduction which would be in addition to the mandatory pension deduction that comes out of every paycheck. Those plans are designed to set up an educator for retirement success where no single part of the three legged stool of retirement income is designed to cover all of a retiree's needs in retirement. The pension won't do it alone. The 403b/457b plan(s) won't do it alone. And Social Security won't do it alone. However, when all three are combined, there is plenty of potential for a financially sound retirement - especially if the household has lived below their means and is balance sheet affluent.
The small private college where DW and I taught doesn't have a pension plan, but it does make a generous 403b contribution which doesn't require an employee match. It was about 8.5% of salary until the Great Recession, then reduced to 7.5% because of the college's financial difficulties. This helps make up for the "missing" pension, and of course we made our own pre-tax contributions. Averaged over 32 years, the total contributions came out to about 25% of salary for me. We'll do OK with the 403b and Social Security.

It also helps that we don't have fancy tastes in housing or cars, live within walking distance from (former) work, and aren't into luxury resort or cruise vacations. And in this county, I don't think it's possible nowadays for a couple to spend more than $50 on dinner. We did spend about $60 a few times on our anniversary, but that place closed during the Great Recession.
This place you live, it sounds like the kind of place I'm looking to retire to. A nice, small, walkable college town. Congratulations to you! And thank you for being an educator and spending your professional career serving and bettering others.
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Re: My theory about FIRE

Post by CyclingDuo »

22twain wrote: Tue May 05, 2020 9:45 pm
CyclingDuo wrote: Tue May 05, 2020 4:28 pm Those 403b and 457b plans are available for public school teachers without the match as a voluntary pre-tax or post-tax salary deduction which would be in addition to the mandatory pension deduction that comes out of every paycheck. Those plans are designed to set up an educator for retirement success where no single part of the three legged stool of retirement income is designed to cover all of a retiree's needs in retirement. The pension won't do it alone. The 403b/457b plan(s) won't do it alone. And Social Security won't do it alone. However, when all three are combined, there is plenty of potential for a financially sound retirement - especially if the household has lived below their means and is balance sheet affluent.
The small private college where DW and I taught doesn't have a pension plan, but it does make a generous 403b contribution which doesn't require an employee match. It was about 8.5% of salary until the Great Recession, then reduced to 7.5% because of the college's financial difficulties. This helps make up for the "missing" pension, and of course we made our own pre-tax contributions. Averaged over 32 years, the total contributions came out to about 25% of salary for me. We'll do OK with the 403b and Social Security.

It also helps that we don't have fancy tastes in housing or cars, live within walking distance from (former) work, and aren't into luxury resort or cruise vacations. And in this county, I don't think it's possible nowadays for a couple to spend more than $50 on dinner. We did spend about $60 a few times on our anniversary, but that place closed during the Great Recession.
You'll have to pony up for a bottle of wine at a restaurant in your county to get the tab over $50! We live in a similar county where it is difficult to get the check much above $30 for two (and that includes an adult beverage). We have to drive to the next county north of us to spend more.

Yes, my TIAA account when I began got an 8% match, then after the Financial Crisis it slowly ebbed lower as the faculty committee that worked with administration on that kept chipping away until it dropped to 6% for a number of years, and then finally landed at 5% the past couple of years. Doesn't look favorable going forward for those still receiving the match along with all the declining enrollments at small private colleges. My older colleagues that got to ride the 8% for the majority of their careers before retiring did quite well.

Congrats and kudos on your funded retirement - and all the years of teaching you logged! :beer
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Re: My theory about FIRE

Post by CyclingDuo »

nigel_ht wrote: Tue May 05, 2020 3:15 pmIf you are "rebranding" something it implies it has a brand to begin with. The FIRE "brand" as defined by the FIRE community is millennials retiring in their early career phase. You can start your own movement with some other acronym...especially if you don't agree with the "retire early" part. There's no need to hijack theirs.
I'm not rebranding anything or starting any sort of a movement, but just pointed to a blog post where the author raised some points that I thought were interesting. He mentioned a term that I liked using the FIRE acronym: financially independent, recreationally working. At least it sounds pretty darn refreshing compared to all of the already developed variants of the acronym that get tossed around such as LEAN FIRE, FIRE, fatFIRE, Obese FIRE, MoFIRE, Barista FIRE, Side FIRE, Fart FIRE, etc... with people arguing incessantly about what the -RE portion really means. Should we throw in the age at which one reaches the FI- portion, or the age one reaches the -RE portion to the incessant divisiveness that the author of that blog mentions?

The concept of retiring early was around long before Millennials were ever a figment of our imagination - at least regarding all of us who are their parents. Benjamin Franklin retired early at age 42. There were early retirement newspaper ads in the US to encourage a rate of high savings and retire early in 1938 (Investors Syndicate sponsored the ads).

As a just turned young teenager, one of my first encounters that I recall meeting young early retirees was back in 1974 when I went on a three week ocean kayak excursion with my Dad to Glacier Bay, Alaska. The group was led by an Alaskan tour guide, and members of the kayaking group had assembled from all over the country. Two members of the group of 17 we were touring with were what would be considered in today's concept as qualifying to be called FIRE'd. They had been accountants specializing in tax accounting up until they hit their early 40's. They had saved enough money from their careers to live on for the rest of their lives, so they both had retired in their early 40's. That was my first encounter with someone who had retired early by being FI - at least that I am aware. Nobody called it FIRE back then, we just all called it retired early. Anyway, it's hardly a new concept - no matter what anyone wants to call it.
nigel_ht wrote: Tue May 05, 2020 3:15 pmYou continue to mischaracterize high earners in HCOL areas as struggling to save. Not all HCOL areas are in NY, SF or Seattle and not all high wage earners live in HCOL areas. This is no better than what you accuse FatFIRE of doing about teachers.
Well, there you go...

Perhaps I am mischaracterizing where the majority of investment bankers live and work (fatFIRE used IB's, so I rolled with it).

Okay, let's at least address the etc... I wrote in the post you responded to after I listed NYC, SF, and Seattle. How about we fill in the etc... blank? Let's also include Boston, Miami, Honolulu, Oakland, San Diego, Los Angeles, San Jose, Washington D.C., Juneau, Portland, Hartford, Chicago, Providence, Brooklyn, New Haven, Fairbanks, Anchorage, Orange County, Alexandria, Arlington, Stamford, and many, many more. Or we could just view an assembled list to expand the top HCOL cities for North America here:

https://www.expatistan.com/cost-of-livi ... th-america

Yes, I am well aware that not all high earners live in HCOL areas.

Have you read Stanley's book? How about Hogan's?

We might have a lot more to discuss if you had. Otherwise, we'll just spin circles.
nigel_ht wrote: Tue May 05, 2020 3:15 pmThe fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers.
I'm not in disagreement that a career bringing in a higher income and living below their means can starve and stack at a quicker pace to achieve a level of FI sooner than a young teacher, or perhaps even a pair of younger teachers. You should read Stanley and Hogan's work.

I would like to say that I am not going to dispute you regarding the notion that it is far less common for the average teacher to have accumulated $1M within their employer sponsored plans (403b's and 457b's in addition to their pension). On the other hand, you might be surprised what a couple of amazing bull market runs can do when you combine the 1990's and the 2009-2020 moves that spanned the career for those Boomers who were teaching and contributing to their investments through the decades that included those bull markets. Or you might be surprised what some side hustle money can do for a teacher. You might even be surprised at the data Stanley and Hogan present regarding teachers and careers that make below $100K annually. :mrgreen:

They are not alone in presenting the material regarding teachers and professors who managed to leverage their human capital to accumulate wealth. Sometimes in out of the box thinking ways. Here are some links that cover some of the time period gap between Stanley's and Hogan's books, but also include a few out of the box thinking mindsets that allowed some teachers to hit some impressive numbers a lot earlier.

https://andrewhallam.com/2012/05/fourte ... -teachers/
http://www.futurescopes.com/dating/weal ... llionaires
https://www.fool.com/retirement/2020/04 ... llion.aspx
https://www.rd.com/advice/work-career/c ... llionaire/
https://www.tampabay.com/news/education ... e/2320189/
https://andrewhallam.com/

It shouldn't be too hard to consider what a teacher with one or more of the 403b/457b plans may have assembled having socked away into them for 30-35 years beyond their 6.x% mandatory contribution into the pension plan. If the teacher contributed each month into the 403b and or 457b plans, plus the pension, plus the 35 years of paying into Social Security - they just may have assembled a securely funded retirement from three diverse sources. Whether or not you want to consider it all in aggregate or only focus on the amount one has built in a 401k/403b plan is up to you. I won't argue that it occurs at a slower pace for a teacher on a traditional path (no side hustle, no authoring of books, no online course material sales, no coaching, etc...) than being able to retire in your 40's or earlier.
My posts were in response to some things fatFIRE had said, and I was more or less trying to stand up for teachers/professors. We know teachers that have FIRE'd, but it didn't happen until their mid 50's
nigel_ht wrote: Tue May 05, 2020 3:15 pmWhile retiring in your 50s is early it's barely early.

Well, there you go...

Rough crowd. Another one arguing with a tilt to the it doesn't qualify side since it fits into the barely category. Hey, at the end of the football game if a team barely wins with a final score of 21-20 it still counts as a win. :beer

For the majority of teachers on the traditional path, two legs of their retirement income stream stool that they will rely in their retirement take time to build: pension and Social Security (for those who don't work in one of the 15 states that teachers do not pay into SS). The third leg - risk portfolio/savings can be enhanced by saving a higher percentage of one's income, living in a dual income household to help starve and stacking to occur, taking extra work during the vacation months, investing to have rental income, authoring/performing/recording for royalties, etc... to add strength to the third leg of the retirement income stream. That leg could be rushed when compared to SS and pension of which both require the element of time to satisfy the rules for the maximum benefit.

There's another way to look at it. At this point, it's 35 years earlier than Warren Buffett. :mrgreen:

As you saw in one of my earlier posts, we have had the equivalent of 11 years of time off thanks to 4 months of vacation each and every year, plus 10 days off for Spring Breaks over the past 31 years. Just think of all the fun we have had during those 11 years. That's a different kind of money in the bank or benefit regarding experiences - especially with the family - that comes with the profession. There's something to be said for the lowered stress levels as a result.

:sharebeer
nigel_ht wrote: Tue May 05, 2020 3:15 pmFolks in this age range are more just retired than retiring early since they are at a different stage of life than individuals or couples in their 30s with younger kids.
Well there you go...

We had 4 months of vacation every year at age 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, etc... while our kids were young and growing up. Between that and a decade living and working overseas - we wouldn't trade both of those things for anything. Empty nesters now, so we spend about 9-10 hours a week on the bike seeing the scenery and chasing each other up and down hills while riding around getting our exercise during those vacation months.

Here's to enjoying the pre-retirement years!
Last edited by CyclingDuo on Wed May 06, 2020 8:56 am, edited 1 time in total.
"Save like a pessimist, invest like an optimist." - Morgan Housel
smitcat
Posts: 6490
Joined: Mon Nov 07, 2016 10:51 am

Re: My theory about FIRE

Post by smitcat »

HomerJ wrote: Tue May 05, 2020 8:22 pm
EddyB wrote: Tue May 05, 2020 4:40 pm What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
mak1277
Posts: 1569
Joined: Fri Jan 09, 2015 4:26 pm

Re: My theory about FIRE

Post by mak1277 »

smitcat wrote: Wed May 06, 2020 8:48 am
HomerJ wrote: Tue May 05, 2020 8:22 pm
EddyB wrote: Tue May 05, 2020 4:40 pm What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not! So how is that different than if I quit but took a "for fun" job at Home Depot? It's not different, sorry.

Where I do have some leeway is someone who has a hobby that ends up being monetized. If you, say, enjoy woodworking and do it for fun, then turn it into a money-maker, you can still say you're retired if you want.
smitcat
Posts: 6490
Joined: Mon Nov 07, 2016 10:51 am

Re: My theory about FIRE

Post by smitcat »

nigel_ht wrote: Tue May 05, 2020 7:17 pm
CyclingDuo wrote: Tue May 05, 2020 5:34 pm The author's point I was trying to convey was you won't find too many in investment banking or high tech in Yankton, South Dakota, or Norfolk, Nebraska, or Jackson, Mississippi, or Peoria, Illinois, or Cooperstown, NY, etc... . You will, however find plenty of teachers in each of those towns. No argument that starting salaries in IB or high tech in some of the major HCOL areas such as NYC, San Francisco Bay Area, Seattle, etc... is not high enough to be an immediate IA household. After having read Stanley's book, it's not talking about a freshout (I've only heard that term related to prison), but a lifetime career in an industry that more than usual demands living in a HCOL area.
nigel_ht wrote: Tue May 05, 2020 3:15 pmIt's not theoretical. Many folks are doing it. And you haven't shown any data, just hand waved to a couple books that bear no direct relationship to FIRE.
Fair enough. Many of us are still waiting on a definitive standard definition of what FIRE means. :twisted:

Dr. McFrugal nails it here, IMO:

https://www.drmcfrugal.com/rebranding-f ... pje1y3zcQA
If you are "rebranding" something it implies it has a brand to begin with. The FIRE "brand" as defined by the FIRE community is millennials retiring in their early career phase. You can start your own movement with some other acronym...especially if you don't agree with the "retire early" part. There's no need to hijack theirs.
nigel_ht wrote: Tue May 05, 2020 3:15 pmNothing written in those books invalidates anything about the FIRE community that preaches LBYM and being prodigious savers. Folks trying to FIRE aren't living rich...they are saving money like crazy.
Kudos for those that live in HCOL areas that can find housing and expenses low enough to be able to starve and stack their way to FIRE. Knowing what the rents are in Seattle, San Francisco and NYC - it has to be difficult for a young family to do this, but the authors were not in any way shooting down FIRE.
You continue to mischaracterize high earners in HCOL areas as struggling to save. Not all HCOL areas are in NY, SF or Seattle and not all high wage earners live in HCOL areas. This is no better than what you accuse FatFIRE of doing about teachers.

The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers.
My posts were in response to some things fatFIRE had said, and I was more or less trying to stand up for teachers/professors. We know teachers that have FIRE'd, but it didn't happen until their mid 50's
While retiring in your 50s is early it's barely early. Folks in this age range are more just retired than retiring early since they are at a different stage of life than individuals or couples in their 30s with younger kids.
"The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers."
We know many couples in our area that are made up by both having pensions , sometimes multiple pensions, that do not and will not require any funds saved in a 401K account. Police, firefighter, teacher, Fed/State/Local govt pensions which allow one to become FI without the need for outside savings. In many cases these pensions amount to more than $150K per year plus healthcare and in some cases much more than that. Some have accumulated between 2 and 6 pensions doing things that they liked to do along the way. I would say that many also have savings in addition to the pensions but they are really not necessary in any of their cases.
While we ourselves do not have any pensions it is very clear that the value of a $100K pension far exceeds the value of having saved $1 million in a 401K.
smitcat
Posts: 6490
Joined: Mon Nov 07, 2016 10:51 am

Re: My theory about FIRE

Post by smitcat »

mak1277 wrote: Wed May 06, 2020 8:55 am
smitcat wrote: Wed May 06, 2020 8:48 am
HomerJ wrote: Tue May 05, 2020 8:22 pm
EddyB wrote: Tue May 05, 2020 4:40 pm What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not! So how is that different than if I quit but took a "for fun" job at Home Depot? It's not different, sorry.

Where I do have some leeway is someone who has a hobby that ends up being monetized. If you, say, enjoy woodworking and do it for fun, then turn it into a money-maker, you can still say you're retired if you want.
I really have no dog in this fight nor do I care what label is applied ...but I found these labels to be a constraint of general conversation on this site in the past.
What typically happened in past posts may happen again here with this posts.

"The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not!"
OK - so we worked give or take about 20 hours a week between the two of us for the last number of years. We could and did take vacations any time we decided to with 2017 totaling 8 vacations of one week or longer. We owned our own business's which we generally enjoyed doing for a majority of the time. Are we full time working? Are we retired? Are we FI?

"Where I do have some leeway is someone who has a hobby that ends up being monetized."
How does this apply to the above situation?
We sold our business's a couple of months back but we still do some consulting in the same space and receive income for that. What has changed? We work less hours in the same space for less income but we still do not require the income? IS it a hobby when we get to a certain amount of hours per week/month/year? If yes what might that threshold be?
I also will be doing some random mechanical work which I will get paid for - what will that be characterized as?
mak1277
Posts: 1569
Joined: Fri Jan 09, 2015 4:26 pm

Re: My theory about FIRE

Post by mak1277 »

smitcat wrote: Wed May 06, 2020 9:12 am
mak1277 wrote: Wed May 06, 2020 8:55 am
smitcat wrote: Wed May 06, 2020 8:48 am
HomerJ wrote: Tue May 05, 2020 8:22 pm
EddyB wrote: Tue May 05, 2020 4:40 pm What if you could happily retire at, say, 4% of your current portfolio, adjusted for inflation, but having considered warnings that 4% may not be safe, you work at a "fun" job? Is that an example of "NEED[ing]" the money? :-)
Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not! So how is that different than if I quit but took a "for fun" job at Home Depot? It's not different, sorry.

Where I do have some leeway is someone who has a hobby that ends up being monetized. If you, say, enjoy woodworking and do it for fun, then turn it into a money-maker, you can still say you're retired if you want.
I really have no dog in this fight nor do I care what label is applied ...but I found these labels to be a constraint of general conversation on this site in the past.
What typically happened in past posts may happen again here with this posts.

"The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not!"
OK - so we worked give or take about 20 hours a week between the two of us for the last number of years. We could and did take vacations any time we decided to with 2017 totaling 8 vacations of one week or longer. We owned our own business's which we generally enjoyed doing for a majority of the time. Are we full time working? Are we retired? Are we FI?

I have no idea if you're FI or not, how could I? I would say you work part time.

"Where I do have some leeway is someone who has a hobby that ends up being monetized."
How does this apply to the above situation?
We sold our business's a couple of months back but we still do some consulting in the same space and receive income for that. What has changed? We work less hours in the same space for less income but we still do not require the income? IS it a hobby when we get to a certain amount of hours per week/month/year? If yes what might that threshold be?
I also will be doing some random mechanical work which I will get paid for - what will that be characterized as?

Motivation matters. Why are you doing consulting work? Why would you be doing paid mechanical work? Is it for fun? Is it for money? Would you do either of those things for free? I can't answer those questions for you. I think really it's a question of whether a random person off the street would agree or disagree with someone's assertion that they are "retired".
smitcat
Posts: 6490
Joined: Mon Nov 07, 2016 10:51 am

Re: My theory about FIRE

Post by smitcat »

mak1277 wrote: Wed May 06, 2020 9:35 am
smitcat wrote: Wed May 06, 2020 9:12 am
mak1277 wrote: Wed May 06, 2020 8:55 am
smitcat wrote: Wed May 06, 2020 8:48 am
HomerJ wrote: Tue May 05, 2020 8:22 pm

Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not! So how is that different than if I quit but took a "for fun" job at Home Depot? It's not different, sorry.

Where I do have some leeway is someone who has a hobby that ends up being monetized. If you, say, enjoy woodworking and do it for fun, then turn it into a money-maker, you can still say you're retired if you want.
I really have no dog in this fight nor do I care what label is applied ...but I found these labels to be a constraint of general conversation on this site in the past.
What typically happened in past posts may happen again here with this posts.

"The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not!"
OK - so we worked give or take about 20 hours a week between the two of us for the last number of years. We could and did take vacations any time we decided to with 2017 totaling 8 vacations of one week or longer. We owned our own business's which we generally enjoyed doing for a majority of the time. Are we full time working? Are we retired? Are we FI?

I have no idea if you're FI or not, how could I? I would say you work part time.

"Where I do have some leeway is someone who has a hobby that ends up being monetized."
How does this apply to the above situation?
We sold our business's a couple of months back but we still do some consulting in the same space and receive income for that. What has changed? We work less hours in the same space for less income but we still do not require the income? IS it a hobby when we get to a certain amount of hours per week/month/year? If yes what might that threshold be?
I also will be doing some random mechanical work which I will get paid for - what will that be characterized as?

Motivation matters. Why are you doing consulting work? Why would you be doing paid mechanical work? Is it for fun? Is it for money? Would you do either of those things for free? I can't answer those questions for you. I think really it's a question of whether a random person off the street would agree or disagree with someone's assertion that they are "retired".
It really is completely subjective, that is what has become apparent over many posts and time.
fatFIRE
Posts: 346
Joined: Sat Feb 15, 2020 10:44 pm

Re: My theory about FIRE

Post by fatFIRE »

smitcat wrote: Tue May 05, 2020 3:21 pm The point was that % savings based on gross income do not get easier as income rises due to the larger rise in % of taxes.
That is why basing savings rates on gross income is likely not a productive metric for most folks.
Basing savings rate % on what your expenses are estimated to be in retirement is likely the best followed by % savings rate after taxes.
No, you're still wrong. Perhaps we are not talking the same stuff, I realized I was talking about the effective MARGINAL tax rate, whereas you were referring to talk about the effective tax rate.

But in considering savings rate as one income increases, it only make sense to talk about the effective MARGINAL tax rate, as that is the delta in taxes for the extra earned income.

At $100k income - 24% federal, 7.65% FICA, effective marginal is 31.65%
At $200k income - 32% federal, 1.45% FICA, effective marginal is 33.45%
At $300k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $400k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $500k income - 35% federal, 1.45% FICA, effective marginal is 36.45%

As I said, effective MARGINAL tax rate is effectively flat >$100k. Moving from 100k to 200k income only increases it by 2%, and moving to 300k income only increases it by 3%, and it stays there until 500k income.

So throw away this idea that "don't earn more because you'll get taxed more". It's really a bad statement that doesn't belong here.
fatFIRE
Posts: 346
Joined: Sat Feb 15, 2020 10:44 pm

Re: My theory about FIRE

Post by fatFIRE »

CyclingDuo wrote: Wed May 06, 2020 1:01 am
nigel_ht wrote: Tue May 05, 2020 3:15 pmYou continue to mischaracterize high earners in HCOL areas as struggling to save. Not all HCOL areas are in NY, SF or Seattle and not all high wage earners live in HCOL areas. This is no better than what you accuse FatFIRE of doing about teachers.
Well, there you go...

Perhaps I am mischaracterizing where the majority of investment bankers live and work (fatFIRE used IB's, so I rolled with it).

Okay, let's at least address the etc... I wrote in the post you responded to after I listed NYC, SF, and Seattle. How about we fill in the etc... blank? Let's also include Boston, Miami, Honolulu, Oakland, San Diego, Los Angeles, San Jose, Washington D.C., Juneau, Portland, Hartford, Chicago, Providence, Brooklyn, New Haven, Fairbanks, Anchorage, Orange County, Alexandria, Arlington, Stamford, and many, many more. Or we could just view an assembled list to expand the top HCOL cities for North America here:

https://www.expatistan.com/cost-of-livi ... th-america

Yes, I am well aware that not all high earners live in HCOL areas.

Have you read Stanley's book? How about Hogan's?

We might have a lot more to discuss if you had. Otherwise, we'll just spin circles.
Run the numbers. I have, it doesn't support your claim. I too was reluctant to move to a HCOL area, but then I did the math and realized the extra income is worth the HCOL, because I could ultimately save more. Of course this is city+industry specific. For example, tech in DC is a bad deal the salaries are below average and DC is HCOL. But there are other city+industry specific combos that can be a jackpot.
CyclingDuo wrote: Wed May 06, 2020 1:01 am
Well, there you go...

Rough crowd. Another one arguing with a tilt to the it doesn't qualify side since it fits into the barely category. Hey, at the end of the football game if a team barely wins with a final score of 21-20 it still counts as a win. :beer

For the majority of teachers on the traditional path, two legs of their retirement income stream stool that they will rely in their retirement take time to build: pension and Social Security (for those who don't work in one of the 15 states that teachers do not pay into SS). The third leg - risk portfolio/savings can be enhanced by saving a higher percentage of one's income, living in a dual income household to help starve and stacking to occur, taking extra work during the vacation months, investing to have rental income, authoring/performing/recording for royalties, etc... to add strength to the third leg of the retirement income stream. That leg could be rushed when compared to SS and pension of which both require the element of time to satisfy the rules for the maximum benefit.

There's another way to look at it. At this point, it's 35 years earlier than Warren Buffett. :mrgreen:

As you saw in one of my earlier posts, we have had the equivalent of 11 years of time off thanks to 4 months of vacation each and every year, plus 10 days off for Spring Breaks over the past 31 years. Just think of all the fun we have had during those 11 years. That's a different kind of money in the bank or benefit regarding experiences - especially with the family - that comes with the profession. There's something to be said for the lowered stress levels as a result.

:sharebeer
CyclingDuo wrote: Wed May 06, 2020 1:01 am
Well there you go...

We had 4 months of vacation every year at age 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, etc... while our kids were young and growing up. Between that and a decade living and working overseas - we wouldn't trade both of those things for anything. Empty nesters now, so we spend about 9-10 hours a week on the bike seeing the scenery and chasing each other up and down hills while riding around getting our exercise during those vacation months.

Here's to enjoying the pre-retirement years!
I'm in agreement that retiring in 50s is barely early. I would say mid-40s is the latest one can declare to be FIREd, and I'm working my best to reach that, which is NOT easy considering I was a very late starter.

I have nothing against teachers, but the slow rate still makes it very hard for teachers to FIRE. While the pension is nice (assuming it actually works), it will likely come too late (after mid-40s). Personally (and this is a preference), your descriptions of pension further reinforces my claims that teaching is simply too inflexible. It's like doing SCV tilt... if you're a teacher, you MUST commit it to life to get your pension. That's never a good idea, because it reduces your option. In any other non-pension job, if that industry implodes, like say the travel industry right now... you always have the option to rebrand yourself and move into another field. If you're a teacher, you're screwed. Didn't have enough income to give you the financial buffer or ability to move vs remain trapped to see that eventual pension. It sounds like a terrible life. Perhaps the only one thing that I value as much as TC in my job, is OPTIONS. I have been in situations where I had no options and only one job offer, it was the worst thing in the world.

I don't know why you keep selling the "4 mth vacation" as a perk in teaching. I see it as you are only paid 75% of the year, or you are unemployed 25% of the time... It's not something to boast about.
Last edited by fatFIRE on Wed May 06, 2020 5:09 pm, edited 2 times in total.
smitcat
Posts: 6490
Joined: Mon Nov 07, 2016 10:51 am

Re: My theory about FIRE

Post by smitcat »

fatFIRE wrote: Wed May 06, 2020 10:47 am
smitcat wrote: Tue May 05, 2020 3:21 pm The point was that % savings based on gross income do not get easier as income rises due to the larger rise in % of taxes.
That is why basing savings rates on gross income is likely not a productive metric for most folks.
Basing savings rate % on what your expenses are estimated to be in retirement is likely the best followed by % savings rate after taxes.
No, you're still wrong. Perhaps we are not talking the same stuff, I realized I was talking about the effective MARGINAL tax rate, whereas you were referring to talk about the effective tax rate.

But in considering savings rate as one income increases, it only make sense to talk about the effective MARGINAL tax rate, as that is the delta in taxes for the extra earned income.

At $100k income - 24% federal, 7.65% FICA, effective marginal is 31.65%
At $200k income - 32% federal, 1.45% FICA, effective marginal is 33.45%
At $300k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $400k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $500k income - 35% federal, 1.45% FICA, effective marginal is 36.45%

As I said, effective MARGINAL tax rate is effectively flat >$100k. Moving from 100k to 200k income only increases it by 2%, and moving to 300k income only increases it by 3%, and it stays there until 500k income.

So throw away this idea that "don't earn more because you'll get taxed more". It's really a bad statement that doesn't belong here.
"So throw away this idea that "don't earn more because you'll get taxed more". It's really a bad statement that doesn't belong here."
Never said that so please do not misquote me.
Here is the statement once again...
"When you get to the larger incomes the taxes often take much larger %'s making 50% savings improbable."

You also quoted me above on what is important in my opinion....
"That is why basing savings rates on gross income is likely not a productive metric for most folks.
Basing savings rate % on what your expenses are estimated to be in retirement is likely the best followed by % savings rate after taxes."

And you has posted in this thread that effective tax rates is what is important. Below are the effective tax rates once again along with a link to figure out your own states tax if that is relevant to your situation.

"I have to nitpick, that this is untrue."
No, not when you calculate them.
Effective Tax in our state for a single contributing to 401K would be:
18% = Income of $50K
26% = 100K
31% = 150K
35% = 300K
Effective tax rate includes FICA taxes. That's an extra 7-8% tax until the 30%+ bracket. So effective rate at 24% federal bracket is going to be close to 32%.

Should also clarify I did not factor in state tax, since that's variable and some states have no state tax.
In order to figure taxes and savings rates on income you must figure on all income taxes and state taxes - what is the option?
This was my original statement on gross savings and taxes...
"When you get to the larger incomes the taxes often take much larger %'s making 50% savings improbable."
The difference between 18% total effective tax rate and 35% total effective rate is huge.

"Effective tax rate includes FICA taxes. That's an extra 7-8% tax until the 30%+ bracket."
7.65% up to incomes of $132,900 where it becomes 1.45% on up.
Not to mention that we have been self employed for nearly 20 years where these FICA figures are doubled even though that is not what I have used for any calculations on this post.

Here is a quick tax calculator that you can use for any state you prefer to evaluate...
https://smartasset.com/taxes/income-taxes
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CyclingDuo
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Re: My theory about FIRE

Post by CyclingDuo »

smitcat wrote: Wed May 06, 2020 9:01 am
nigel_ht wrote: Tue May 05, 2020 7:17 pm "The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers."
We know many couples in our area that are made up by both having pensions , sometimes multiple pensions, that do not and will not require any funds saved in a 401K account. Police, firefighter, teacher, Fed/State/Local govt pensions which allow one to become FI without the need for outside savings. In many cases these pensions amount to more than $150K per year plus healthcare and in some cases much more than that. Some have accumulated between 2 and 6 pensions doing things that they liked to do along the way. I would say that many also have savings in addition to the pensions but they are really not necessary in any of their cases.

While we ourselves do not have any pensions it is very clear that the value of a $100K pension far exceeds the value of having saved $1 million in a 401K.
^^^
22% of the US labor force will receive a pension, and the public sector is a large portion of that percentage. You are correct that many of those careers you mentioned will not require a large portfolio (or as large a portfolio) to fund their retirement expenses when their pension income stream(s) is/are combined with their Social Security income stream(s). Most require working into their 50's to achieve the full pension benefits.
"Save like a pessimist, invest like an optimist." - Morgan Housel
surfstar
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Re: My theory about FIRE

Post by surfstar »

CyclingDuo wrote: Wed May 06, 2020 12:02 pm
smitcat wrote: Wed May 06, 2020 9:01 am
nigel_ht wrote: Tue May 05, 2020 7:17 pm "The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers."
We know many couples in our area that are made up by both having pensions , sometimes multiple pensions, that do not and will not require any funds saved in a 401K account. Police, firefighter, teacher, Fed/State/Local govt pensions which allow one to become FI without the need for outside savings. In many cases these pensions amount to more than $150K per year plus healthcare and in some cases much more than that. Some have accumulated between 2 and 6 pensions doing things that they liked to do along the way. I would say that many also have savings in addition to the pensions but they are really not necessary in any of their cases.

While we ourselves do not have any pensions it is very clear that the value of a $100K pension far exceeds the value of having saved $1 million in a 401K.
^^^
22% of the US labor force will receive a pension, and the public sector is a large portion of that percentage. You are correct that many of those careers you mentioned will not require a large portfolio (or as large a portfolio) to fund their retirement expenses when their pension income stream(s) is/are combined with their Social Security income stream(s). Most require working into their 50's to achieve the full pension benefits.
Note that pensions have drastically changed in recent years. In particular 2014+ hires are likely to have a much smaller multiplier and require an older age and/or more working years to retire.

I have a great, local pension, with a 2011 start date. I currently contribute 11.5% of gross to my pension. Maxing my 457 takes another 25%+ off my gross. No 457 match, no SS.
I do not want to work until I'm 62+, so we save heavily, live frugally, and hope to be done at 50 +/-

Unless you are safety (police/fire) you are not retiring in your 50s off of a pension alone. If you're currently 50, started working at 20 with a pension, sure you could still be able to. Going forward, this will no longer be the case for more recent hires.
EnjoyIt
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Re: My theory about FIRE

Post by EnjoyIt »

mak1277 wrote: Wed May 06, 2020 9:35 am
smitcat wrote: Wed May 06, 2020 9:12 am
mak1277 wrote: Wed May 06, 2020 8:55 am
smitcat wrote: Wed May 06, 2020 8:48 am
HomerJ wrote: Tue May 05, 2020 8:22 pm

Heh, okay, you got me.

In my mind, you're not FIRE unless you can quit any time you want, and not worry about finding another job.

If you can quit, but you'll start looking fairly soon to be safe, you're not really FIRE. You're in a very good position, but you're really not retired if you're still worrying about money.
I have always been confused by this one as well - if we say we do not need anymore income but are still working and receiving income we get tow opposing opinions/posts:
1. you are not FIRED until you stop all work for income
2. you are FIRED since you do not need anymore income to pay expenses
Not that we really care much but the overall opinions on this differ so much within the same posts almost every time.
The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not! So how is that different than if I quit but took a "for fun" job at Home Depot? It's not different, sorry.

Where I do have some leeway is someone who has a hobby that ends up being monetized. If you, say, enjoy woodworking and do it for fun, then turn it into a money-maker, you can still say you're retired if you want.
I really have no dog in this fight nor do I care what label is applied ...but I found these labels to be a constraint of general conversation on this site in the past.
What typically happened in past posts may happen again here with this posts.

"The problem with #2 is that anyone who is financially independent can then say they're retired. I could quit my job anytime I want to and never work another day in my life. Do I get to say I'm retired? Of course not!"
OK - so we worked give or take about 20 hours a week between the two of us for the last number of years. We could and did take vacations any time we decided to with 2017 totaling 8 vacations of one week or longer. We owned our own business's which we generally enjoyed doing for a majority of the time. Are we full time working? Are we retired? Are we FI?

I have no idea if you're FI or not, how could I? I would say you work part time.

"Where I do have some leeway is someone who has a hobby that ends up being monetized."
How does this apply to the above situation?
We sold our business's a couple of months back but we still do some consulting in the same space and receive income for that. What has changed? We work less hours in the same space for less income but we still do not require the income? IS it a hobby when we get to a certain amount of hours per week/month/year? If yes what might that threshold be?
I also will be doing some random mechanical work which I will get paid for - what will that be characterized as?

Motivation matters. Why are you doing consulting work? Why would you be doing paid mechanical work? Is it for fun? Is it for money? Would you do either of those things for free? I can't answer those questions for you. I think really it's a question of whether a random person off the street would agree or disagree with someone's assertion that they are "retired".
Who cares what you want to call it and why on earth does anyone need to prove anything to internet strangers.

The only person that needs proving to is themselves.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
smitcat
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Re: My theory about FIRE

Post by smitcat »

CyclingDuo wrote: Wed May 06, 2020 12:02 pm
smitcat wrote: Wed May 06, 2020 9:01 am
nigel_ht wrote: Tue May 05, 2020 7:17 pm "The fact is that some majors and careers make more than others and it is far easier to become FI in them. It is relatively common for engineers and developers in their fifties to have $1M in their 401Ks. It is far less common for teachers."
We know many couples in our area that are made up by both having pensions , sometimes multiple pensions, that do not and will not require any funds saved in a 401K account. Police, firefighter, teacher, Fed/State/Local govt pensions which allow one to become FI without the need for outside savings. In many cases these pensions amount to more than $150K per year plus healthcare and in some cases much more than that. Some have accumulated between 2 and 6 pensions doing things that they liked to do along the way. I would say that many also have savings in addition to the pensions but they are really not necessary in any of their cases.

While we ourselves do not have any pensions it is very clear that the value of a $100K pension far exceeds the value of having saved $1 million in a 401K.
^^^
22% of the US labor force will receive a pension, and the public sector is a large portion of that percentage. You are correct that many of those careers you mentioned will not require a large portfolio (or as large a portfolio) to fund their retirement expenses when their pension income stream(s) is/are combined with their Social Security income stream(s). Most require working into their 50's to achieve the full pension benefits.
I thought it was higher than 22%? Maybe its the way you play with the timing of the folks receiving the pension. Here is one link that had me thinking it was higher.
https://www.newretirement.com/retiremen ... u-compare/
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CyclingDuo
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Re: My theory about FIRE

Post by CyclingDuo »

fatFIRE wrote: Wed May 06, 2020 11:06 amRun the numbers. I have, it doesn't support your claim. I too was reluctant to move to a HCOL area, but then I did the math and realized the extra income is worth the HCOL, because I could ultimately save more. Of course this is city+industry specific. For example, tech in DC is a bad deal the salaries are below average and DC is HCOL. But there are other city+industry specific combos that can be a jackpot.
Without seeing your itemized budget and monthly cash flow to view your chosen lifestyle while you starve and stack, it is what it is - a choice you have made to reach your goals early. We do have one child (and several relatives) who do/did live in the highest cost of living areas in the US when it comes to working for mega-corp technology companies and are paid a healthy salary (San Francisco and Seattle). We know what their cost of rent, taxes, transportation, food and lifestyle choices can be (I do my children's taxes, so know all the cash flow). The math can be difficult (which is what was pointed out in the Stanley and Hogan books) for many, but they were not books focused on FIRE. They were focused on accumulating wealth throughout your working career to achieve millionaire status. Having a house, a car, children, taking vacations, saving for your children's college educations, balancing life with saving for retirement. If that meant achieving a particular FI goal later than one's mid 40's, so be it. Stanley did, however, spend a lot of time in the book discussing data as to what can happen when lifestyle gets out of whack with one's salary and the impact of that happening in a HCOL area. BH forum member White Coat Investor has made tremendous strides at overcoming some of those trappings for the medical doctor profession (a group highlighted in Stanley's book). Obviously, since you are focused on FIRE I would doubt you would fall for some of the same trappings that were highlighted in Stanley's book.

As I said, we all would imagine that you are living on the very frugal side of the equation - as in not paying $4k for monthly rent, not eating out several times a week, not owning and operating a car in the city, not wearing expensive suits to look the part, not drinking Grey Goose, or high priced wines, wearing a Rolex, keeping up with the neighbors, etc... while starving and stacking your way to your goal of FIRE. That certainly is a goal we would champion as we have nothing against a high rate of savings and accumulating wealth. We did it in HCOL cities (NYC, Houston, San Francisco) for 7 years before we had children, and are now once again in a very high rate of savings mode as empty nesters because our expenses are low enough where we live that we can live off of one salary and save the other.

According to the cost of living calculators, to maintain our current lifestyle, salary, and standard of living, we would need to make between $275K - $314K if we lived in San Francisco. I doubt we would be compensated at our level of teaching if we lived in San Francisco to bring in a combined income of $275K-$311K to have the same lifestyle and standard of living. I would imagine teachers do a lot of commuting in San Francisco and New York City rather than live within their school districts in an effort to make ends meet.

Where we live, this is what the cost of living comparison shows when compared to San Francisco:

Groceries are 26% less where we live
Housing is 79% less where we live
Utilities are 27% less where we live
Transportation is 27% less where we live
Health Care is 25% less where we live

That covers the big three or four items we all face of housing/transportation/food and health care. The housing is the kicker in places like San Francisco, Seattle, and New York City (we have a child in NYC as well). Obviously, for somebody who is single, finding a roommate or two is about the only way to navigate your way through that - depending on your income level. That's what we did to live in a more frugal manner as I attacked my student loan debt aggressively and paid it off before we got married. Our children live with roommates in two of the more absurdly overpriced housing markets in the US to keep costs lower. Amazing that even paying 1/3 or a 1/4 of the apartment rent still is more than a mortgage payment (PITI) would be in our neck of the woods.

We moved to a LCOL area for the first time in our careers about 17 years ago, after having been saving and investing what we could while living in nothing but HCOL cities the prior 18 years. The drop in cost of living immediately allowed us to save more than we were saving prior. The result, we live in a 3900 Square Foot home that is paid off. We own and drive two new cars we paid cash for when we bought them two years ago. We paid for our kids college educations and graduate degrees. We live off of one salary and save the other each year to add to the nest egg. Since teachers usually reach their peak earning years at the latter end of their career when the nest is empty, you can starve and stack a lot easier in the catch up years.
fatFIRE wrote: Wed May 06, 2020 11:06 amI'm in agreement that retiring in 50s is barely early. I would say mid-40s is the latest one can declare to be FIREd, and I'm working my best to reach that, which is NOT easy considering I was a very late starter.
You keep changing the target that qualifies as retiring early on me. In a prior post you said 55 and younger qualifies. Now you've moved the goal back to mid-40's? This stipulation makes the FIRE crowd a tough crowd to please. :shock: That's cool, we're happy where we are and what we have achieved financially.
fatFIRE wrote: Wed May 06, 2020 11:06 amI have nothing against teachers, but the slow rate still makes it very hard for teachers to FIRE. While the pension is nice (assuming it actually works), it will likely come too late (after mid-40s). Personally (and this is a preference), your descriptions of pension further reinforces my claims that teaching is simply too inflexible. It's like doing SCV tilt... if you're a teacher, you MUST commit it to life to get your pension. That's never a good idea, because it reduces your option. In any other non-pension job, if that industry implodes, like say the travel industry right now... you always have the option to rebrand yourself and move into another field. If you're a teacher, you're screwed. Didn't have enough income to give you the financial buffer or ability to move vs remain trapped to see that eventual pension. It sounds like a terrible life. Perhaps the only one thing that I value as much as TC in my job, is OPTIONS. I have been in situations where I had no options and only one job offer, it was the worst thing in the world.
Yes, the retention stipulation by state and government pensions to reward those who work their entire career within that particular pension system is part of the deal. Either you sign up for it, or you don't. Missouri requires 25 years to qualify, so one could hit that at age 47 if they began right out of undergraduate school teaching in that state. Our state has three formulas known as the rule of 88, 62/20, or hit the age of 65. That means you could start early and be done by age 55. You could start at age 42 and be done by age 62. Or you could start later and be done at age 65. Other neighboring states have similar 25-30 or even 35 year commitments if you want to have the maximum pension benefit for life when you meet the rule. The same applies for police, fire, state employees, government employees, etc... . They all have to pay into the system and work for the required number of years to receive the full pension benefit. If one lives to age 90, even if you grind away to get the full pension benefit, you still have a combined 55 - 70 years before and after teaching where you were not working for it. :D
fatFIRE wrote: Wed May 06, 2020 11:06 amI don't know why you keep selling the "4 mth vacation" as a perk in teaching. I see it as you are only paid 75% of the year, or you are unemployed 25% of the time... It's not something to boast about.
Because it is a pretty amazing benefit and there are some congruencies with your pursuit. In the case of Nigel, he had reported having a heart attack at age 55. Not sure of his exact underlying situation, but there is something to be said for a lower stress way of life where you do have the benefit of 3-4 months vacation each and every year. It's a great time for the mind and body to destress and is an added excellent health benefit (mental and physical). So I will continue to boast about it. :mrgreen:

You mention the time value add of working hard for 20-25 years and saving as much as you can so in your mid 40's you can pull the plug and never have to work again in your life as you live off of your savings and enjoy your new found freedom. We've gotten to enjoy that freedom for, on average, 4 months out of every year during our entire careers. We get to pull the plug and enjoy the stress free freedom every year. We already know what it feels like to be retired because we get to experience it 4 months out of every year. Ask us how amazing it was to have the same time off as our kids so we could travel together on family trips, go to all of their baseball games and soccer matches, see their performances at summer camp, travel all throughout Europe every summer for a decade, and on and on. We had no visions of focusing on retiring early during those years as we only get one journey in this life, so enjoying it together as a family was nothing short of amazing. It's been a great benefit. So I will continue to boast. :mrgreen:

Teachers paychecks are spread out over the entire 12 months of the year, so the cash flow and contributions into your 403b/457b accounts does keep rolling along during the mini-retirement months. Yes, the choice is absolutely there to take on a second job, a side hustle or two, or gig during those months if one feels the need to starve and stack additional amounts.

It's only one career. Many are surprised that it (teachers/professors) lands on the list as one of the top careers for becoming a millionaire. I was just pointing out some of the reasons why that is via the combination of dual income, pension, SS, savings/investments. If it doesn't meet the qualifications of FIRE because too much of the retirements occur after age 55, then so be it. For those pursuing things quicker and at a younger age - best of luck and kudos. We hope you reach your goals.

In the meantime, the semester is over and summer vacation has arrived!!!

CyclingDuo
Last edited by CyclingDuo on Thu May 07, 2020 9:34 am, edited 2 times in total.
"Save like a pessimist, invest like an optimist." - Morgan Housel
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CyclingDuo
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Re: My theory about FIRE

Post by CyclingDuo »

surfstar wrote: Wed May 06, 2020 2:17 pm Note that pensions have drastically changed in recent years. In particular 2014+ hires are likely to have a much smaller multiplier and require an older age and/or more working years to retire.

I have a great, local pension, with a 2011 start date. I currently contribute 11.5% of gross to my pension. Maxing my 457 takes another 25%+ off my gross. No 457 match, no SS.
I do not want to work until I'm 62+, so we save heavily, live frugally, and hope to be done at 50 +/-

Unless you are safety (police/fire) you are not retiring in your 50s off of a pension alone. If you're currently 50, started working at 20 with a pension, sure you could still be able to. Going forward, this will no longer be the case for more recent hires.
What state are you in? Kudos on your rate of savings beyond the mandatory pension contribution. Yes, yours is higher since your state does not have you paying into Social Security. I don't think there are too many pension plans for teachers that are designed to be the sole source of income in retirement, although those 15 states that do not have teachers paying into SS do tend to pay out larger pension amounts for the years of service formula than others. I have only studied Missouri and Illinois in the past in terms of their formulas, but haven't looked at Illinois too closely in the past year. Do you save in a Roth IRA or a taxable account as well?

Our state pension and those of neighboring states for teachers that I follow have not changed very much. Each state pension page has a history of all the changes made on their websites, so it is easy to access and view. Occasionally, the contribution rates will fluctuate. My spouse's rate went up to 6.61% last year for about a year, and drops back to 6.41% come this July. The employer's contribution also rose last year to 9.91% and falls back to 9.61% come July of this year. Those are usually based on an annual actuarial valuation being used to determine rates. There have been a few fluctuations like that up and down along the way over the years.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
nigel_ht
Posts: 1237
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Re: My theory about FIRE

Post by nigel_ht »

CyclingDuo wrote: Wed May 06, 2020 2:41 pm
nigel_ht wrote: Tue May 05, 2020 3:15 pmI have nothing against teachers, but the slow rate still makes it very hard for teachers to FIRE. While the pension is nice (assuming it actually works), it will likely come too late (after mid-40s). Personally (and this is a preference), your descriptions of pension further reinforces my claims that teaching is simply too inflexible. It's like doing SCV tilt... if you're a teacher, you MUST commit it to life to get your pension. That's never a good idea, because it reduces your option. In any other non-pension job, if that industry implodes, like say the travel industry right now... you always have the option to rebrand yourself and move into another field. If you're a teacher, you're screwed. Didn't have enough income to give you the financial buffer or ability to move vs remain trapped to see that eventual pension. It sounds like a terrible life. Perhaps the only one thing that I value as much as TC in my job, is OPTIONS. I have been in situations where I had no options and only one job offer, it was the worst thing in the world.
nigel_ht wrote: Tue May 05, 2020 3:15 pmI don't know why you keep selling the "4 mth vacation" as a perk in teaching. I see it as you are only paid 75% of the year, or you are unemployed 25% of the time... It's not something to boast about.
I wrote neither of these things. Please quote correctly.
JustinR
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Re: My theory about FIRE

Post by JustinR »

Not sure what everyone's arguing about. The definitions for FIRE are pretty straightforward and not subjective at all:


FI - Financially Independent. You have enough savings and passive income to never work another day in your life. This means that your annual expenses are less than or equal to 4% of your savings/investments, although many suggest reaching a lower percentage like 3.5% or 3%. You either are or aren't financially independent.

RE - Retire Early. You're retiring earlier than the typical person. Obviously retiring at 35 means more than retiring early by 2 years.

FIRE - You retired early because you're financially independent. If you're FI but not RE, you haven't FIREd yet.

LeanFIRE - You FIREd on the bare minimum to survive without working. Some people move to a lower cost of living country overseas to make this work better.

FatFire - You can live large after FIREing because you saved much more than the bare minimum. For example, your bare minimum expenses are $50,000 but you're able to withdraw $100,000 a year.

BaristaFire - You FIREd but are doing a small side job. This can either be because you're LeanFIRE and want to get a little extra cash, or you just want the social interaction or routine that comes with a side job.
Last edited by JustinR on Wed May 06, 2020 4:46 pm, edited 1 time in total.
surfstar
Posts: 2247
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Re: My theory about FIRE

Post by surfstar »

CyclingDuo wrote: Wed May 06, 2020 3:01 pm
surfstar wrote: Wed May 06, 2020 2:17 pm Note that pensions have drastically changed in recent years. In particular 2014+ hires are likely to have a much smaller multiplier and require an older age and/or more working years to retire.

I have a great, local pension, with a 2011 start date. I currently contribute 11.5% of gross to my pension. Maxing my 457 takes another 25%+ off my gross. No 457 match, no SS.
I do not want to work until I'm 62+, so we save heavily, live frugally, and hope to be done at 50 +/-

Unless you are safety (police/fire) you are not retiring in your 50s off of a pension alone. If you're currently 50, started working at 20 with a pension, sure you could still be able to. Going forward, this will no longer be the case for more recent hires.
What state are you in? Kudos on your rate of savings beyond the mandatory pension contribution. Yes, yours is higher since your state does not have you paying into Social Security. I don't think there are too many pension plans for teachers that are designed to be the sole source of income in retirement, although those 15 states that do not have teachers paying into SS do tend to pay out larger pension amounts for the years of service formula than others. I have only studied Missouri and Illinois in the past in terms of their formulas, but haven't looked at Illinois too closely in the past year. Do you save in a Roth IRA or a taxable account as well?

Our state pension and those of neighboring states for teachers that I follow have not changed very much. Each state pension page has a history of all the changes made on their websites, so it is easy to access and view. Occasionally, the contribution rates will fluctuate. My spouse's rate went up to 6.61% last year for about a year, and drops back to 6.41% come this July. The employer's contribution also rose last year to 9.91% and falls back to 9.61% come July of this year. Those are usually based on an annual actuarial valuation being used to determine rates. There have been a few fluctuations like that up and down along the way over the years.

CyclingDuo
We're in CA. PEPRA was the big change for state/local employees - 2013 it looks like, I was off a year.

I luckily fell in love with and married a Fed - so we have pension diversification. She pays in/gets SS also, plus a 5% TSP match. My pension calculation is more favorable for FIRE (earliest is age = 50), so it is basically a wash, as far as how much each of us will contribute to FIRE potential. Her pension will be less % and not kick in until 57, while mine can start w/o penalty at 50. Golden handcuffs for sure, though, as it increases a large % each year until age 57, but we should have plenty of money saved by age 50 that we wouldn't have a need to work - if our plans play out!

We do also max our Roths. Might have enough to start a taxable account this year, but there' s now a chance for pay-cut/furlough in the next FY also...
nigel_ht
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Re: My theory about FIRE

Post by nigel_ht »

smitcat wrote: Wed May 06, 2020 9:01 am
nigel_ht wrote: Tue May 05, 2020 7:17 pm While retiring in your 50s is early it's barely early. Folks in this age range are more just retired than retiring early since they are at a different stage of life than individuals or couples in their 30s with younger kids.
We know many couples in our area that are made up by both having pensions , sometimes multiple pensions, that do not and will not require any funds saved in a 401K account. Police, firefighter, teacher, Fed/State/Local govt pensions which allow one to become FI without the need for outside savings. In many cases these pensions amount to more than $150K per year plus healthcare and in some cases much more than that. Some have accumulated between 2 and 6 pensions doing things that they liked to do along the way. I would say that many also have savings in addition to the pensions but they are really not necessary in any of their cases.

While we ourselves do not have any pensions it is very clear that the value of a $100K pension far exceeds the value of having saved $1 million in a 401K.
The only pension that kicks in fast enough to FIRE is the military one and I've advised my kids this. Not everyone makes it to 20 though even if they wanted to and many don't want to.

Pensions are a great deal if you can get one and stay at that one job for a long time. But if you're going to work to 67 anyway there are many paths to a good retirement if you are moderately frugal and save.

Amusingly I have a ridiculously small pension coming my way. I don't bother counting it. My wife will have a far larger one and that's just a safety net. It's the health insurance benefit she wants to keep and her pension will cover that and more.

However, this isn't the 50s anymore. The social contract between employer and employee for a good retirement is gone. This is true even in higher ed...there are a lot of tenured professors learning that to their detriment much less their untenured colleagues who have always had to worry. Colleges and Universities (many in LCOL areas) have closed or downsized non-producing departments in recent years and those tenure positions have dissappeared. Recently non-tenured professors are losing both job and health insurance because of Covid. I've been an adjunct...fortunately just for fun. I'd hate to have to depend on that while looking for a tenure track slot.

It isn't NEARLY as rosy as some here would like folks to believe. Ive told my kids that I wasn't going to pay for a humanities degree and to avoid academia. Colleges and universities don't create many tenure positions but instead have staffed classes with adjuncts. And we've been graduating scads of humanities PhDs. Get an engineering PhD if you want to teach. At least those departments might have viable career paths since all the good engineers are getting hired by industry. Many of the engineering adjuncts are like me...not looking for tenure and just doing it for fun. Plan B would be to get a real job in industry, make a lot of money and FIRE as quickly as possible and THEN go teach.

Even in the K-12 education field it really depends on where you are...I know a county where the teachers hadn't gotten a COLA adjustment in years because the union had negotiated away the ability to strike. Oops. Many teachers pay for school supplies out of pocket. In the good schools the PTA will reimbursed a lot of this but there are a lot of schools without a good PTA. Many teachers have to work summers to make ends meet.

The motivation for FIRE is very understandable.
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Re: My theory about FIRE

Post by H-Town »

JustinR wrote: Wed May 06, 2020 3:29 pm Not sure what everyone's arguing about. The definitions for FIRE are pretty straightforward and not subjective at all:


FI - Financially Independent. You have enough savings and passive income to never work another day in your life, due to a combination of savings, investments, and passive income. You either are or aren't financially independent.

RE - Retire early. You're retiring earlier than the typical person. Obviously retiring at 35 means more than retiring early by 2 years.

FIRE - You retired early because you're financially independent. If you're FI but not RE, you haven't FIREd yet.

LeanFIRE - You FIREd on the bare minimum to survive without working. Maybe you moved to a lower cost of living country overseas to make this work better.

FatFire - You can live large after FIREing because you saved much more than the bare minimum. For example, your bare minimum expenses are $50,000 but you're able to withdraw $100,000 a year.

BaristaFire - You FIREd but are doing a small side job. This can either be because you're LeanFIRE and want to get a little extra cash, or you just want the social interaction or routine that comes with a side job.
FITE - Financially Independent, Travel Everywhere. My job then will be planning travel itinerary, finding good local food, training for hiking/climbing and outdoor activities, learning historical and cultural aspects of the places. I'm telling you, it takes a lot of my time.
nigel_ht
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Re: My theory about FIRE

Post by nigel_ht »

H-Town wrote: Wed May 06, 2020 4:18 pm
JustinR wrote: Wed May 06, 2020 3:29 pm Not sure what everyone's arguing about. The definitions for FIRE are pretty straightforward and not subjective at all:


FI - Financially Independent. You have enough savings and passive income to never work another day in your life, due to a combination of savings, investments, and passive income. You either are or aren't financially independent.

RE - Retire early. You're retiring earlier than the typical person. Obviously retiring at 35 means more than retiring early by 2 years.

FIRE - You retired early because you're financially independent. If you're FI but not RE, you haven't FIREd yet.

LeanFIRE - You FIREd on the bare minimum to survive without working. Maybe you moved to a lower cost of living country overseas to make this work better.

FatFire - You can live large after FIREing because you saved much more than the bare minimum. For example, your bare minimum expenses are $50,000 but you're able to withdraw $100,000 a year.

BaristaFire - You FIREd but are doing a small side job. This can either be because you're LeanFIRE and want to get a little extra cash, or you just want the social interaction or routine that comes with a side job.
FITE - Financially Independent, Travel Everywhere. My job then will be planning travel itinerary, finding good local food, training for hiking/climbing and outdoor activities, learning historical and cultural aspects of the places. I'm telling you, it takes a lot of my time.
You just violated the first and second rule of the club.
fatFIRE
Posts: 346
Joined: Sat Feb 15, 2020 10:44 pm

Re: My theory about FIRE

Post by fatFIRE »

smitcat wrote: Wed May 06, 2020 11:15 am
fatFIRE wrote: Wed May 06, 2020 10:47 am
smitcat wrote: Tue May 05, 2020 3:21 pm The point was that % savings based on gross income do not get easier as income rises due to the larger rise in % of taxes.
That is why basing savings rates on gross income is likely not a productive metric for most folks.
Basing savings rate % on what your expenses are estimated to be in retirement is likely the best followed by % savings rate after taxes.
No, you're still wrong. Perhaps we are not talking the same stuff, I realized I was talking about the effective MARGINAL tax rate, whereas you were referring to talk about the effective tax rate.

But in considering savings rate as one income increases, it only make sense to talk about the effective MARGINAL tax rate, as that is the delta in taxes for the extra earned income.

At $100k income - 24% federal, 7.65% FICA, effective marginal is 31.65%
At $200k income - 32% federal, 1.45% FICA, effective marginal is 33.45%
At $300k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $400k income - 35% federal, 1.45% FICA, effective marginal is 36.45%
At $500k income - 35% federal, 1.45% FICA, effective marginal is 36.45%

As I said, effective MARGINAL tax rate is effectively flat >$100k. Moving from 100k to 200k income only increases it by 2%, and moving to 300k income only increases it by 3%, and it stays there until 500k income.

So throw away this idea that "don't earn more because you'll get taxed more". It's really a bad statement that doesn't belong here.
In order to figure taxes and savings rates on income you must figure on all income taxes and state taxes - what is the option?
Move to a state with no state tax?
smitcat wrote: Wed May 06, 2020 11:15 am This was my original statement on gross savings and taxes...
"When you get to the larger incomes the taxes often take much larger %'s making 50% savings improbable."
The difference between 18% total effective tax rate and 35% total effective rate is huge.
No, that's the wrong way of doing it. You cannot use effective tax rate, you have to use effective MARGINAL tax rate.

The statement should be: "When you get to the larger incomes (specifically starting from the 24% bracket), the taxes do not increase significantly, making 50% savings possible...". I save >50% of my income FYI.
fatFIRE
Posts: 346
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Re: My theory about FIRE

Post by fatFIRE »

nigel_ht wrote: Wed May 06, 2020 3:20 pm
CyclingDuo wrote: Wed May 06, 2020 2:41 pm
nigel_ht wrote: Tue May 05, 2020 3:15 pmI have nothing against teachers, but the slow rate still makes it very hard for teachers to FIRE. While the pension is nice (assuming it actually works), it will likely come too late (after mid-40s). Personally (and this is a preference), your descriptions of pension further reinforces my claims that teaching is simply too inflexible. It's like doing SCV tilt... if you're a teacher, you MUST commit it to life to get your pension. That's never a good idea, because it reduces your option. In any other non-pension job, if that industry implodes, like say the travel industry right now... you always have the option to rebrand yourself and move into another field. If you're a teacher, you're screwed. Didn't have enough income to give you the financial buffer or ability to move vs remain trapped to see that eventual pension. It sounds like a terrible life. Perhaps the only one thing that I value as much as TC in my job, is OPTIONS. I have been in situations where I had no options and only one job offer, it was the worst thing in the world.
nigel_ht wrote: Tue May 05, 2020 3:15 pmI don't know why you keep selling the "4 mth vacation" as a perk in teaching. I see it as you are only paid 75% of the year, or you are unemployed 25% of the time... It's not something to boast about.
I wrote neither of these things. Please quote correctly.
My bad... fixed it.
fatFIRE
Posts: 346
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Re: My theory about FIRE

Post by fatFIRE »

CyclingDuo wrote: Wed May 06, 2020 2:41 pm
fatFIRE wrote: Wed May 06, 2020 11:06 amRun the numbers. I have, it doesn't support your claim. I too was reluctant to move to a HCOL area, but then I did the math and realized the extra income is worth the HCOL, because I could ultimately save more. Of course this is city+industry specific. For example, tech in DC is a bad deal the salaries are below average and DC is HCOL. But there are other city+industry specific combos that can be a jackpot.
Without seeing your itemized budget and monthly cash flow to view your chosen lifestyle while you starve and stack...

Where we live, this is what the cost of living comparison shows when compared to San Francisco:

Groceries are 26% less where we live
Housing is 79% less where we live
Utilities are 27% less where we live
Transportation is 27% less where we live
Health Care is 25% less where we live

...

We moved to a LCOL area for the first time in our careers about 17 years ago, after having been saving and investing what we could while living in nothing but HCOL cities the prior 18 years. The drop in cost of living immediately allowed us to save more than we were saving prior. The result, we live in a 3900 Square Foot home that is paid off. We own and drive two new cars we paid cash for when we bought them two years ago. We paid for our kids college educations and graduate degrees. We live off of one salary and save the other each year to add to the nest egg. Since teachers usually reach their peak earning years at the latter end of their career when the nest is empty, you can starve and stack a lot easier in the catch up years.
The only real number is rental price. Utility, transportation and food prices are about the same whether HCOL or LCOL, or even if they are different it's not going to make much of a difference at the end of the day.

My core expenditure (rent, food, utilities) in a HCOL is $27k/yr. My supplemental expenditure is $15k/yr. My point is that there's only so low you can cut, but there is less of a limit of how much you can earn. When I was living in MCOL to LCOL my core expenditure was $17k/yr. Supplemental expenditure is the same at $15k/yr, and obviously can be cut to around $5k/yr min, which is for auto expenses and basic supplies.
CyclingDuo wrote: Wed May 06, 2020 2:41 pm
fatFIRE wrote: Wed May 06, 2020 11:06 amI'm in agreement that retiring in 50s is barely early. I would say mid-40s is the latest one can declare to be FIREd, and I'm working my best to reach that, which is NOT easy considering I was a very late starter.
You keep changing the target that qualifies as retiring early on me. In a prior post you said 55 and younger qualifies. Now you've moved the goal back to mid-40's? This stipulation makes the FIRE crowd a tough crowd to please. :shock: That's cool, we're happy where we are and what we have achieved financially.
Age 55 is like min-requirement to FIRE. Age 45 is like standard age from interacting with people in this community. Age 35 is gold standard.
CyclingDuo wrote: Wed May 06, 2020 2:41 pm
fatFIRE wrote: Wed May 06, 2020 11:06 amI have nothing against teachers, but the slow rate still makes it very hard for teachers to FIRE. While the pension is nice (assuming it actually works), it will likely come too late (after mid-40s). Personally (and this is a preference), your descriptions of pension further reinforces my claims that teaching is simply too inflexible. It's like doing SCV tilt... if you're a teacher, you MUST commit it to life to get your pension. That's never a good idea, because it reduces your option. In any other non-pension job, if that industry implodes, like say the travel industry right now... you always have the option to rebrand yourself and move into another field. If you're a teacher, you're screwed. Didn't have enough income to give you the financial buffer or ability to move vs remain trapped to see that eventual pension. It sounds like a terrible life. Perhaps the only one thing that I value as much as TC in my job, is OPTIONS. I have been in situations where I had no options and only one job offer, it was the worst thing in the world.
Yes, the retention stipulation by state and government pensions to reward those who work their entire career within that particular pension system is part of the deal. Either you sign up for it, or you don't. Missouri requires 25 years to qualify, so one could hit that at age 47 if they began right out of undergraduate school teaching in that state. Our state has three formulas known as the rule of 88, 62/20, or hit the age of 65. That means you could start early and be done by age 55. You could start at age 42 and be done by age 62. Or you could start later and be done at age 65. Other neighboring states have similar 25-30 or even 35 year commitments if you want to have the maximum pension benefit for life when you meet the rule. The same applies for police, fire, state employees, government employees, etc... . They all have to pay into the system and work for the required number of years to receive the full pension benefit. If one lives to age 90, even if you grind away to get the full pension benefit, you still have a combined 55 - 70 years before and after teaching where you were not working for it. :D
Yeah, so it's a life long commitment. It's good for the type of people who can accept this.

And also if you're doing a life long commitment, there are probably better options out there if it works for you. For example, I've heard that police officers are great. Because their pensions are based on the last few years of income, just before they retire, you just do massive overtime, and I've heard you can get $200k/yr pensions! SUPER SWEET. I'm a couch potato so I won't ever be a police officer... but just saying, if you want to give life long commitment, why not analyze all options out there?

Also if you have enough money, you can get a SPIA which can be your pension (to manage longevity risk).
CyclingDuo wrote: Wed May 06, 2020 2:41 pm
fatFIRE wrote: Wed May 06, 2020 11:06 amI don't know why you keep selling the "4 mth vacation" as a perk in teaching. I see it as you are only paid 75% of the year, or you are unemployed 25% of the time... It's not something to boast about.
Because it is a pretty amazing benefit and there are some congruencies with your pursuit. In the case of Nigel, he had reported having a heart attack at age 55. Not sure of his exact underlying situation, but there is something to be said for a lower stress way of life where you do have the benefit of 3-4 months vacation each and every year. It's a great time for the mind and body to destress and is an added excellent health benefit (mental and physical). So I will continue to boast about it. :mrgreen:

You mention the time value add of working hard for 20-25 years and saving as much as you can so in your mid 40's you can pull the plug and never have to work again in your life as you live off of your savings and enjoy your new found freedom. We've gotten to enjoy that freedom for, on average, 4 months out of every year during our entire careers. We get to pull the plug and enjoy the stress free freedom every year. We already know what it feels like to be retired because we get to experience it 4 months out of every year. Ask us how amazing it was to have the same time off as our kids so we could travel together on family trips, go to all of their baseball games and soccer matches, see their performances at summer camp, travel all throughout Europe every summer for a decade, and on and on. We had no visions of focusing on retiring early during those years as we only get one journey in this life, so enjoying it together as a family was nothing short of amazing. It's been a great benefit. So I will continue to boast. :mrgreen:

Teachers paychecks are spread out over the entire 12 months of the year, so the cash flow and contributions into your 403b/457b accounts does keep rolling along during the mini-retirement months. Yes, the choice is absolutely there to take on a second job, a side hustle or two, or gig during those months if one feels the need to starve and stack additional amounts.

....CyclingDuo
I used to think like you. Serious! I wanted to be a professor because I liked the idea of tenure, a job forever. No worries! But what I've learned is that
- I don't want to be miserable for another 10 years before I can start enjoying my life, as of last year I've added $400/mth of pure play money... and it took me 10 years to get here. Do I want to wait until my mid-40s before I can enjoy my life???
- Having money today gives me more security and peace of mind than the stability (be it real or perceived) of a job
- I was also upset that I would only get paid 9mths. That means I have to find my own money to supplement another 3mths. And the spread the 9mth over 12mth is really a joke... call it how you like, it's still 25% unemployment.

Also, I hated my colleagues in that field who had no passion for money. When I told my professor I wanted to go work in industry because I wanted financial security and to FIRE, he disowned me, and before that we had very good relationship. Then, I moved to a govt job, and was surrounded by the same 'loser mentality' colleagues. So yeah, I left. Yes, this is personal to me, but I find much more happiness now when working with high-powered motivated people.

There will be a time when I will be the ultimate slacker. But that time has not come yet... we've not climbed the mountain all the way yet!!!
EFF_fan81
Posts: 404
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Re: My theory about FIRE

Post by EFF_fan81 »

market timer wrote: Tue May 05, 2020 12:45 am
nigel_ht wrote: Tue May 05, 2020 12:13 am
DonIce wrote: Tue Apr 14, 2020 12:47 am Getting to financial independence at a young age makes sense as it alleviates financial worries that one might have and gives one a great sense of security.

But the part I don't get is all the promising smart people (which you have to be to be able to attain FI early) that go into careers that they hate and suffer through them for a decade or two, so they can "retire early" to do something else (that's still productive). It just makes no sense to me at all. Why waste ones 20s and 30s doing something you hate so you can FIRE at ~40 (if all goes according to plan, no guarantee)? Instead, do what you love from the beginning, even if it pays less money. In almost any career, people that are passionate about their work will excel and make more than enough to lead a life that is not limited in happiness by their financial means.
Because getting to be FI is a heck of a lot easier with a high income. Very few are frugal enough to make it on lower income. I gave my kids the exact opposite advice you gave because if they can FIRE at age 35 with 33x expenses they can switch to that low income passion career and not have to worry about the financial aspect.

Starting in that low income passion career means they may not reach 33x expenses ever.
I'm not sure there is a mismatch in career choice, but rather in organizational structures. The prototypical "FIRE @ 35" is someone who excelled at school in a subject they probably enjoyed. This person's academic achievements created a certain path that was largely merit-based. When this person enters the working world, perhaps after obtaining an advanced degree in their mid/late 20s, there is often a noticeable lack of merit in reward and advancement. This person's work output is owned by the company. In a well-established company (e.g., a top law firm, bank, tech company, hospital, or consulting firm), the output of high-achievers is a commodity. The person at the top of the class has become a cog in the machine, with no real identity or autonomy. Advancement is due to luck or politics. The path forward is no longer merit-based.

After a few years working as a cog in a machine, realizing most of your value creation is going to shareholders or equity partners, and most of your income is going to taxes and rent, you might try to figure out how to reclaim some of your autonomy and keep more of the value you generate. You want to get back on the path where your actions can take you in many different directions, where you have some control again.

So I don't think it is the choice of subject that leads to burn out among high earning professionals. Many were passionate about their choice of subject. Rather, there is a desire to steer their own boat.
My biggest disappointment after almost perfect SAT score, almost perfect LSAT, double ivy with honors, top law firm representing the largest private equity firms in the world was:

1. What people really wanted me to do is frantically shuffle thousands of form documents and disclosure schedules as quickly as possible for an ungodly number of hours a week.
2. My billing rate + hours worked generated $1-2 million for the firm every year and a little more than 1/10 of that for me.
3. Nobody could sit down in my office late at night with a bottle of whiskey and say "you know, it sucks now but one day you will see that it will all be worth it." Because that would be very unlikely to be true.

I remember being so frustrated at the time about how I would keep on hearing among the talking heads how the economy desperately needed knowledge workers but on the ground nobody actually seemed interested in actually using my knowledge or helping me acquire more. My biggest frustration was how NON-substantive so much of it is was. Things improved after a while but the lesson was learned and it sparked in me a fierce desire to quickly accumulate enough money that at any point I could tell someone to take the job and shove it (which I have never exercised, I've always lined up graceful exits, but do hold in my back pocket) and to steadily accumulate enough money to call my own shots on my life sometime between 40-50 (on pace).

None of this relates to a lack of work ethic or desire to to just sit from 35 on and never do anything again. But there's no way I'm ever going to take that crap from anyone again and I'm part of the FIRE movement to give myself the cards in my back pocket to back that declaration up.
Last edited by EFF_fan81 on Wed May 06, 2020 6:20 pm, edited 1 time in total.
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